Service contract (ugovor o djelu) in Montenegro 2026: 15% tax on 70% of the fee, 10% contribution, gross to net, pension record and what the contract should say

From 1 January 2026, a fee paid under a service contract (ugovor o djelu) in Montenegro is subject to income tax at 15%, but on a base of 70% of the gross fee, because standard expenses of 30% are allowed without proof. The tax therefore comes to 10.5% of the gross fee. If the contractor is not liable for contributions on another basis, for example because they are not employed, a pension and disability contribution of 10% is also due on the same base. From a gross fee of 1,000 euros, a contractor with no other insurance keeps 825 euros and an employed contractor keeps 895 euros.

This guide explains what a service contract is, how much tax and contribution are due, how to work out the net amount, who pays the tax, whether the contract counts towards your pension record and what the contract should contain.

What is a service contract (ugovor o djelu)?

• Under a service contract the contractor agrees to carry out a specific job, such as making or repairing a thing or doing physical or intellectual work, and the client agrees to pay a fee for it.
• For tax purposes the fee is income from occasional self-employed activity, unless it is taxed on another basis; an author's contract, for example, follows separate rules for copyright income.
• A service contract does not create an employment relationship: the parties agree on a specific job and a fee for it.
• The Labour Act regulates temporary and occasional work separately: an employer may sign that contract in writing only with a person registered as unemployed with the Employment Agency, for work that lasts no more than 120 working days in a calendar year.
• An employee who works full time may also sign a supplementary work contract for up to half of full working time.

How much tax and contribution is due?

• The agreed fee is a gross amount: it includes the tax and the contribution that the contractor pays.
• The pension and disability contribution on an agreed fee has been 10% since 1 October 2024; before that it was 20.5%.
• The health insurance contribution has not been charged since 1 January 2022, and the unemployment insurance contribution does not apply to an agreed fee.
• The contribution is due only if the contractor is not liable for contributions on another basis, for example through employment or as a sole trader.
• The Contributions Act does not mention pensioners separately, so a pensioner can check the calculation with the Tax Administration before signing.

Gross to net: what is left of the fee?

• A contractor with no other insurance keeps 82.5% of the gross fee, and an employed contractor keeps 89.5%.
• To get the gross amount, divide the net by 0.825 or by 0.895: for a net fee of 500 euros the gross is 606.06 euros or 558.66 euros.
• In Podgorica and Cetinje the surtax on a tax of 105 euros can reach 15.75 euros.

Who pays the tax and when?

• When a company or a sole trader pays the fee, the payer calculates, withholds and pays the tax on each payment.
• The payer calculates and pays the contribution by the 15th of the month for the previous month.
• When a private individual pays the fee, the contractor pays tax of 15% on 70% of the income with the annual income tax return, by the end of April of the following year.
• For income on which tax was withheld at source, the contractor does not file an annual return on that basis.

Does a service contract count towards your pension record?

• A person working under a service contract who is not insured on another basis is insured as a self-employed person.
• The insurance record includes the period for which the contractor received a fee on which the contribution was paid.
• The record is calculated proportionally: the base on which the contribution was paid is divided by the average wage in Montenegro in the previous year.
• The average gross wage in 2025 was 1,206 euros, so a base of 700 euros gives about 0.58 of a month of insurance record.
• No contribution is paid for an employed contractor under a service contract, and their record continues through employment.

What should a service contract contain?

The Obligations Act does not prescribe a form for a service contract, but a written contract makes the tax calculation and proof easier. It is useful to include:

1. The contractor's name, address and personal ID number, and the client's name and tax number (PIB).
2. An exact description of the work and the result to be delivered.
3. The deadline and the consequences of delay.
4. The gross fee, the payment deadline and the bank account.
5. Who supplies the materials and how the work is inspected and accepted.

The Obligations Act also sets these rules:

• The client may supervise the work and give instructions when that suits the nature of the job.
• The contractor does not have to do the work personally unless the contract or the nature of the job requires it, but remains responsible for it.
• The client inspects the work as soon as possible; a hidden defect must be reported no later than one month after it is discovered, and after two years from acceptance of the work the client can no longer rely on defects.
• The client does not have to pay the fee before inspecting and approving the work, unless agreed otherwise.
• Until the work is finished the client may terminate the contract, but owes the fee reduced by the costs the contractor did not incur and by what the contractor earned elsewhere.
• If you want to add a contractual penalty for delay, RoNa Legal explains what a Montenegrin court enforces.

Tax and contributions on a salary are explained in our guide to salary tax, and registration and tax for sole traders in our guide to sole traders. The annual return is covered in our guide to the annual tax return, and pension conditions in our guide to pensions.

Frequently asked questions

How much tax is due on a service contract in Montenegro in 2026? The tax is 15% on a base of 70% of the gross fee, which equals 10.5% of the gross fee.

Are contributions due on a service contract? Yes, a pension and disability contribution of 10% on 70% of the gross fee is due if the contractor is not liable for contributions on another basis, while health and unemployment contributions are not charged.

What is the net amount of a 1,000 euro gross fee? A contractor with no other insurance keeps 825 euros, and an employed contractor keeps 895 euros.

Does a service contract count towards the pension record? Yes, if the contribution was paid, and proportionally: the base is divided by the average wage of the previous year.

How long can a service contract last? The law sets no duration because the contract covers a specific job, while a contract for temporary and occasional work can cover at most 120 working days a year.

Who pays the tax on a service contract? The payer withholds the tax when it is a company or a sole trader, and when a private individual pays, the contractor pays the tax with the annual return.

Sources

Tax on occasional self-employed activity and standard expenses are set by the Personal Income Tax Act (Articles 16, 20, 43 and 48a), as amended by Official Gazette 160/2025 with effect from 1 January 2026. Liable persons, the base and the contribution rates are set by the Compulsory Social Insurance Contributions Act (Articles 4, 5, 9, 15 and 21); the abolition of the health contribution and the payment deadline come from the 2021 amendments, 145/2021, and the 10% rate from the 2024 amendments, 94/2024. Insurance and the record under a service contract are governed by the Pension and Disability Insurance Act (Articles 11 and 65), and the contract itself by the Obligations Act (Articles 60 and 669 to 698). The surtax is set by the Local Government Financing Act (Article 8), and the 2025 average wage was published by Monstat. The information was checked on 27 September 2026. Fijaka is a classifieds platform; this text is not tax advice.