Montenegro lowers value-added tax for solar panels

The Parliament of Montenegro has adopted the amendments to the Law on Value-Added Tax and the Law on Planning and Construction, reducing VAT and simplifying procedures for the installation of solar power plants.

Montenegro previously announced that VAT on solar panels would be abolished. However, it is now reduced from 21% to 7% for sales, installation and imports.

Milutin Đukanović, chairman of the board of directors of state-owned power utility Elektroprivreda Crne Gore (EPCG), said the amendments bring two changes: urban-technical conditions for solar power plants of up to 1,000 kW are abolished, and VAT on solar equipment was reduced from 21% to 7%.

Đukanović: The cost of installation of solar panels will be reduced by 12%

The move significantly simplifies the procedure of building solar power plants and reduces their price by about 12%, said Đukanović.

EPCG is very interested in making the installation of solar panels easy and cheaper because it is the main installer of such facilities in Montenegro. The company recently announced a public call to continue its Solari project.

The suspension of VAT on solar panels was the proposal of the Democratic Front, which brings together the parties New Serbian Democracy, Democratic People’s Party and Workers’ Party. They demanded that the tax be reduced to zero in order to make it easier for citizens and businesses to install photovoltaic facilities amid the energy crisis and rising electricity prices in the European market.

The Government of Montenegro did not support the initial proposal

But the Government of Montenegro and the Ministry of Finance did not support the initiative to scrap VAT in the segment. It argued that the European Union’s directives envisage the possibility of a lower rate, but not its abolition. The second reason was to preserve budget revenues in 2023.

After that, the proponents of VAT abolition decided to change the proposal and ask for a reduction from 21% to 7%.

The government also didn’t support the amendments to the Law on Planning and Construction, claiming they wouldn’t simplify and facilitate the construction of solar power plants.