Entrepreneurship Based on Actual Income: What You Need to Know?

An entrepreneur who is taxed based on actual income is a natural person who performs out activities and reports their income based on the actual earnings they achieve. This taxation model requires the entrepreneur to keep records of all income and expenses, with taxes calculated based on net income.

KEY CHARACTERISTICS

• One Owner: One entrepreneurial activity cannot have more than one owner.
• Unlimited Responsibility: The owner is both personally responsible and authorized without restrictions.
• No Founding Capital: There is no minimum founding capital required, simplifying the process of starting a business.

LIABILITY AND ASSETS

The owner is responsible for the obligations of the business with their entire property. This means that if the entrepreneur has any debts, creditors can collect from the entrepreneur's assets, including personal property, bank account funds, vehicles, real estate, and more.

REGISTRATION AND ACTIVITY

The entrepreneur can only perform the activity for which they are registered—there is only one activity for which they can register.

IMPORTANT: THERE ARE NO LIMITATIONS REGARDING TURNOVER AND ACTIVITIES.

HOW CONTRIBUTIONS ARE CALCULATED

Contributions on the owner's salary are calculated based on the turnover of the business, the entrepreneur's income, and the average salary in Montenegro. Depending on the average salary from the previous year and the entrepreneur's turnover, the amount of tax and contributions on the owner's salary will vary.

The minimum contributions on the owner's salary are €127.32 per month for activities that operated at a loss or had income (the difference between income and expenses) up to €8,400. If the income exceeds €8,400, the contributions will be higher and depend on the income level.

INCOME TAX

The entrepreneur generates income and pays income tax: The tax return for individual income tax must be submitted, and the obligation for income tax must be paid by April 30, 2025, for the year 2024, i.e., by April 30 of the current year for the previous one.

TRANSFER OF FUNDS

One advantage of entrepreneurs based on actual income is the ability to transfer the entire income to a personal bank account without paying taxes, provided all debts have been settled. The owner has no obligation to pay any tax if they wish to transfer funds from the business to their personal account. The entrepreneur's income, after settling all debts, is considered the owner's profit.

Entrepreneurship based on actual income offers significant opportunities for flexibility and tax optimization but also carries responsibilities that should not be overlooked.

If you are considering starting or improving your business, the colleagues at Perfectum agency are here to assist you every step of the way.

Contact us today to find out how we can ease your business administration and contribute to your success!

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