From E-Invoicing to Automated Tax Audits: What Will Public Finance Reform Mean for Montenegro’s Business Sector?

Montenegro is expected to take another step towards the digitalisation of public finances by 2031, which will also have a direct impact on the business sector. The Draft Public Finance Management Reform Programme for the period 2027–2031 envisages the introduction of an e-invoicing system, more advanced tax risk analysis, greater use of administrative data, the digitalisation of customs procedures, and improvements to the public procurement system.

One of the specific innovations will be the establishment of an e-invoicing system, which should become operational by the end of 2028. The Tax Administration has been designated as the responsible institution, while EUR 500,000 has been earmarked for the implementation of this activity from a World Bank loan and the state budget of Montenegro. The system is expected to comply with European Union standards and legislation.

For companies, this means further digitalisation of invoicing and financial administration processes, but also a change in the way data on business transactions will be made available to the tax administration. The e-invoicing programme is not presented as an isolated measure, but as part of a broader plan to digitalise the revenue management system.

A particularly significant part of the reform concerns the development of a tax risk analysis system. The Tax Administration plans to expand its data storage system and analytical tools, while incorporating additional data sources from various administrative systems. The goal is to develop automated risk analysis and more precisely target inspection and control activities. EUR 1 million has been earmarked for this activity.

The Programme also envisages strengthening capacities to detect undeclared income and analyse the origin of assets. At the same time, cooperation between the Tax Administration, law enforcement authorities and the judiciary is planned to be improved.

In other words, the reform envisages a shift away from a model that relies heavily on traditional controls towards a system in which taxpayers and transactions will be analysed through a larger number of interconnected data sources. The Programme also envisages a risk-based approach to taxpayers and further expansion of the use of administrative data after 2028.

For the business sector, this means that the quality, consistency and timeliness of financial and tax data will become an increasingly important part of doing business.

The introduction of e-invoicing is accompanied by plans to establish a system for international administrative cooperation in taxation, while the Customs Administration will work on implementing EU-compatible IT systems, including AES, ICS2 and EMCS. A total of EUR 3.1 million has been earmarked for these three systems.

These changes are particularly significant for companies operating internationally, involved in cross-border flows of goods, or being part of international business chains.

The Programme envisages further development of digital infrastructure after 2028, including e-invoice systems and platforms for international administrative cooperation, with the aim of achieving the long-term alignment of the revenue management system with EU standards.

Changes are also expected in public procurement, which is of direct interest to companies doing business with the state and public institutions.

The electronic public procurement system, CEJN, is expected to introduce functionality for automatically detecting risks, i.e. “red flags”. The activity is planned for 2027 and is estimated at EUR 200,000. The Programme also envisages improved use of data from public procurement procedures and stronger mechanisms for identifying irregularities.

One of the competition indicators is the target of increasing the average number of bidders per procedure from three in 2026 to 3.2 in 2031. The share of appeals resolved is expected to increase from 94% to 97%.

For businesses participating in tenders, this means that processes will increasingly rely on electronic data processing and analytical tools for monitoring irregularities.

The Programme pays particular attention to fiscal risks arising from the operations of state-owned companies.

The Ministry of Finance has already begun developing a methodology for assessing these risks and preparing an aggregate report on the operations of state-owned companies. The report is planned to be regularly updated, with the scope of data expanded. State-owned enterprises should have clearer reporting obligations, including the submission of annual and multi-year financial plans and regular reports on their operations to the Ministry of Finance.

The development of an information system for collecting and processing the financial data of these companies is also planned, as is the strengthening of capacities for financial analysis and the assessment of fiscal risks.

Another reform that could have a long-term impact on the business environment is the transition of the public sector from cash-based to accrual accounting.

The introduction of accrual accounting should improve the transparency and quality of financial reporting, particularly through better information on assets, liabilities and fiscal risks. A new information system for public sector accounting is being prepared, and its development should be accompanied by testing and gradual implementation among public sector entities.

At the same time, the Programme warns that existing public finance information systems are not yet fully interoperable. Their fragmentation currently limits the exchange of financial data between institutions and comprehensive analysis of public spending.

At least EUR 19 million has been estimated for the implementation of the Action Plan for 2027 and 2028. The largest share relates to the second pillar of the reform – budget execution, for which around EUR 11 million has been estimated for information systems. Around EUR 6.7 million has been earmarked for accounting, monitoring and financial reporting, also primarily for the development of digital systems.

The Programme thus shows that the next phase of public finance reform will rely heavily on digitalisation, data integration and automated analysis.

For the business sector, the key message is that companies’ relationship with the state is gradually shifting towards a digital model – from issuing and processing invoices, through tax reporting and customs procedures, to participation in public procurement. At the same time, greater use of data and risk analysis should enable the Tax Administration and other institutions to carry out more targeted controls and monitor business compliance more efficiently.