Foreign legal and natural persons have the right to establish a company in Montenegro under the same conditions as nationals. The most common forms of companies are:
- a) limited liability company (LLC);
- b) joint stock company (JSC).
All regulations regarding the establishment, operation and taxation system are compliant with European standards with benefits for foreign investors. The deadline for registration with the Commercial Court is a maximum of 4 days, while other duties (statistics – company registration number, entry into the tax records, opening a current account, registration in customs records) are completed within a maximum of 3 days.
The process of establishing a limited liability company (LLC) is defined by the Law on Business Organizations (http://www.mipa.co.me/en/legislation/) When registering an LLC, it is necessary to download and submit the following to the Central Registry of Business Entities (http://www.crps.me/):
- Step 1. Develop Articles of Incorporation of the company, download an example of articles of incorporation for a single-member company (if the company is founded by one founder);
- Step 1.1. Download an example of Articles of Incorporation for a multi-member company (if the company is established by several founders);
- Step 2. Draw up a Decision on the establishment of the company (if the company is established by one founder), download an example of the Decision on the Establishment;
- Step 2.1. Develop an incorporation agreement (if the company is established by several founders), download an example of the incorporation agreement;
- Step 3. Pay 00 euro into the account of the Tax Administration, account number: 832-3161-26, payment purpose: registration of LLC. Payment slip example on the website of CRBE;
- Step 4. Pay 00 euro into the account of the Official Gazette of MNE, account number: 520-941100-57, payment purpose: registration of LLC. Payment slip example on the website of CRBE;
- Step 5. Certify the decision/agreement in 2 copies at the court, or by a notary;
- Step 6. Extract from the Central Depository Agency. When taking over the extract, it is needed to submit a copy of the identity card of the founder or a certified copy of the passport if the founder is a foreigner and a payment slip in the amount of €5.08 paid to the bank account of CDA: 510-8092-14, payment purpose: extract fee. Payment slip example on the website of CRBE;
- Step 7. A copy of the identity card (if the founder is a Montenegrin national) or a certified copy of passport (if the founder is a foreign national). Certify at the court or by a notary;
- Step 8. Fill in the application of the company to start registration, download the registration form – PS 01; Tariff number – if the company wants to import and export products, when filling in the PS-01 form, it is necessary to mark the column numbered 15.4. Customs Register on the back page, in order for the company to be registered at the Customs Administration, on the occasion of which a tariff number is received;
- Step 9.0. If the company wants to apply for registration of taxpayers for value added tax (VAT), the PR VAT – 1 form will be filled in and submitted together with other documents required for setting up a businesses;
- Step 9.1. If the company wants to apply for registration into the register of excise duty payers, the AKC – P form will be filled in and submitted together with other documents required for setting up a businesses;
- Step 10: Submit the collected and certified documents (Articles of Incorporation, certified decisions/agreements in 2 copies, CDA’s decision, copy of the ID or certified passport in 2 copies, payment slips and the application for registration, form pr pdv-1/akc-p) to the Central Registry of Tax Administration, Marka Miljanova 54, 81000 Podgorica, Tel: +382 (0) 20 230 858, e-mail: email@example.com, working hours 08:30 – 12:00;
- When submitting documents, a certificate will be issued including the number of the decision, to be presented together with an identification document upon the collecting the certificate of registration, seven days from the date of filing the application.
After obtaining the company registration certificate, it is necessary to do the following:
- make a seal;
- open a bank account;
- register workers at the Tax Administration.
The incorporation agreement states the founding stake (which may be in cash, goods and rights), as well as the percentage ratio of the founders in the management and distribution of profits. The founding stake for the establishment of an LLC is at least €1.00.
The process of establishing a joint-stock company (JSC) is defined in the Law on Business Organisations (http://www.mipa.co.me/en/legislation/). When registering a joint-stock company, it is necessary to download and submit the following to the Central Registry of Business Entities (http://www.crps.me/):
- Step 1. Develop Articles of Incorporation of the company, download articles of incorporation for a joint-stock company;
- Step 2. Develop a founding act of the joint stock company and certify it at the court, or by a notary. Download an example on the incorporation agreement of the joint-stock company;
- Step 3. Develop a decision on the appointment of the Board of Directors, auditors, secretary and executive director;
- Step 4. Take out a decision of the Securities Commission (minimum founding stake is €25,000.00);
- Step 5. Pay to the account of the Tax Administration 50.00 euro, bank account: 832-3161-26;
- Step 6. Pay to the account of the Official Gazette of MNE 12.00 euro, bank account: 520-941100-57;
- Step 7. Fill in the registration form PS01, download an example of the PS01 form;
- Step 8. Submit the collected and certified documents (Articles of Incorporation, certified decisions/agreements in 2 copies, certified copies of the ID or passport, application for registration in 2 copies, decision of the Securities Commission, founding act, payment slips) to the Central Registry of the Commercial Court, Marka Miljanova 54, 81000 Podgorica, Tel: +382 (0) 20 230 858, e-mail: firstname.lastname@example.org, working hours 08:30 – 12:00;
- When submitting documents, a certificate will be issued including the number of the decision, to be presented upon the collecting the certificate of registration, seven days from the date of filing the application.
After obtaining the company registration certificate, it is necessary to do the following:
- make a seal;
- open a bank account;
- register workers at the Tax Administration.
- If the company wants to apply for registration as a payer of value added tax (VAT), the PR PDV-1 form will be filled in, and then submitted together with other documents required for registration;
- If the company wants to apply for entry into the register of excise duty payers, the AKC-P form will be filled in, and then submitted together with other documents required for registration.
The founding stake for the establishment of a JSC is at least €25,000.00 and these funds are deposited by the founders with a commercial bank until the establishment of the company. After establishment of the company the funds are used for the company’s operations.
A limited liability company can be transformed into a joint-stock company.
To enhance utilization of major resources and bring in new investments, the tax reform policy introduced fiscal incentives for the investments in the following sectors: high-end tourism – hotels with 5 or more stars; food production, except primary agricultural production, and capital investments in the energy sector.
The Law on VAT stipulates zero VAT rate on the delivery of products and services for the construction and furnishing of any hospitality establishment with 5 or more stars, construction of energy-generation facilities with more than 10 MW installed capacity or of food production plants categorized within sector C group 10 under the Law on Business Activity Classification (Official Gazette of MNE 18/11), if the investment exceeds €500,000.
With the aim to eliminate business barriers and incentivize high-end tourism, the Law Amending the Law on Real Estate Tax allows local governments to set a higher tax rate of 2%-5.5% of the market value of the real estate for the hospitality establishments with up to 3 stars situated at priority tourism sites, depending on the category of the establishment; local governments are also allowed to lower the tax rate for the hospitality establishments that operate throughout the year by up to 30% for the 4-star ones and up to 70% for those with more than 4 stars.
The tax system in Montenegro includes:
- Corporate Income Tax;
- Personal Income Tax;
- Value Added Tax (VAT);
- Real Estate Transfer Tax;
- Social security contributions;
- Excise duties;
- Customs duties.
The tax system for foreign investors is the same as for local business entities.
Corporate income tax amounts to 9%. The tax rate on personal income is 9% i.e. 11% on gross wages higher than € 720. Upon payment of corporate income tax, business entities operating in Montenegro have the possibility to transfer funds to their accounts abroad at the end of the year.
Two positive VAT rates are applied, namely the standard rate of 19% and the reduced rate of 7% (for basic foodstuffs, such as milk, bread, lard, cooking oil and sugar; medicines and some medical devices; books, textbooks and teaching aids; potable water; feed; fertilizers and breeding livestock; plant protection products and propagation material; some services, such as: accommodation; food and beverage services in the hotels with at least 4 stars in the northern region and at least 5 stars in the central or coastal regions (becomes effective as of 1 Jan 2018);
public passenger transport; public hygiene; funeral services; copyright and services from the field of education, literature or art; use of sports facilities for non-profit causes; copyright in science or related to artefacts, collections and antiquities, and some of the services which involve charging of tickets for cultural or sports events).
The zero rate applies to export transactions and delivery of medicines and medical devices that are funded by the National Health Insurance Fund.
Real estate transfer tax rate is proportional and amounts to 3% of the tax base.
Foreign companies in Montenegro are guaranteed equal legal treatment as local ones. Foreign investor can operate in Montenegro either as a legal entity or as a natural person. The term “foreign investor” applies to a company that has been set up in Montenegro by a foreigner, or foreign legal entity, whose share of investment capital is higher than 25% of total capital invested.
There is no limit on the amount of capital invested in Montenegro. Foreign investors are encouraged to invest freely within any industry and to transfer all assets, including profits and dividends. Foreign investors can acquire rights to real estate, such as commercial property, office space, residential space or land for construction. All major insurance companies around the globe insure investment projects in Montenegro.
The rate of corporate income tax is 9% and it is one of the lowest in Europe, while the personal income tax rate is 9% and 11% (applicable on gross monthly wages above €751). Value Added Tax (VAT) standard rate is 21%, while the reduced rate is 7%.
As at 1 January 2018, Montenegro has 44 effective double taxation conventions on income and capital.
In economically underdeveloped municipalities in Montenegro, whose development index is below 75, the Law on Corporate Income Tax provides that a newly established legal entity does not pay corporate income tax for the first eight years of operation. Also, the Law on Personal Income Tax stipulates that the tax calculated on the taxpayer’s personal income for the first eight years of operation is reduced by 100%.
Tax exemption does not apply to taxpayers operating in the sector of primary production of agricultural products, transport or shipyards, fisheries and steel. These laws defined the tax relief for investors, in the form of exemption from taxes if their total amount does not exceed the amount of €200,000 for the first eight years of operation.
Where the amount of tax liability (output tax) in the VAT period is less than the amount of input VAT which may be deducted by the taxpayer in the same VAT period, the difference is recognized as a tax credit for the following VAT period, or refunded upon request within 60 days from the date of filing the VAT return.
The VAT difference is refunded to taxpayers who mainly export goods and to taxpayers that indicate a surplus of input VAT in more than three successive VAT returns, within 30 days from the date of filing the VAT return. If the taxpayer’s deadline for the payment of other taxes has expired, the difference by virtue of VAT shall be reduced by the amount of the tax debt.
The need for constant stimulation and strengthening of the sector of small, medium and large enterprises has been recognized in several strategic documents as one of the key pillars of accelerated economic development for which it is necessary to create conditions and incentives in order to improve their competitive ability and, therefore, the competitiveness of the economy as a whole. Based on the previous experience in the implementation of various support programs for this sector, the Ministry of Economy will consolidate all existing programs aimed at developing entrepreneurship and business sectors, which are within the competence of several Directorates, into a single program – Program for improving the competitiveness of the economy, consisting of 10 program lines. The new Program also foresees the redirection of the budget within the program lines up to 50%, with the program line cannot exceed the amount of 70% of the total approved budget of the entire Program. In addition, we will shorten the procedures and administrative steps in evaluating the applications themselves, extend the deadlines for the consumed funds so that all eligible users can implement their activities. The program will define, through 10 program lines, activities and measures for realization of financial and non-financial support to potential and existing entrepreneurs, micro, small, medium and large enterprises, as well as clusters in order to increase competitiveness on the national and international market, to improve development and business performance, modernization of the industry, development of innovative potentials, affirmation of entrepreneurship and crafts, and implementation of international standards in the field of product improvement, business processes, methods, techniques, management strategies and marketing. The above Program and measures of financial and non-financial support do not apply to users of the Program of Economic Citizenship.
The program for improving the competitiveness of the economy for 2019 envisages the implementation of six Program lines of financial support:
1. Program line for innovation enhancement,
2. Program line for the international standards implementation,
3. Program line for the modernization of the manufacturing industry,
4. Program line for cluster development,
5. Program line for direct investments incentives,
6. Program line for craft development,
two Program lines of non-financial support:
7. Program line for providing mentoring services,
8. Program line for entrepreneurship development,
as well as two program lines, which will be simultaneously promoted and implemented:
9. The Business Zones Regulation, and10. Promotion of increasing the competitiveness of products and services.
The total budget allocated for the implementation of the Program for improving the competitiveness of the economy is 1,640 million €, while the individual amounts, as well as the manner and dynamics of the allocation of support are defined by the individual program lines.
The following institutions are responsible for the formulation, implementation of SME policies and financing:
- Ministry of Economy of Montenegro – Directorate for investments, development of SMEs and management of the EU funds.
- Chamber of Commerce of Montenegro
- Investment Development Fund
- Government public institutions, stakeholders and ministries depending on the specific sector of economy in which business activities are planned to be carried out.
- Micro credit institutions (Alter Modus DOO Podgorica, Klikloan DOO Podgorica, Monte Credit DOO Podgorica, Montenegro Investments Credit DOO Podgorica, Ozmont DOO Podgorica).
The business zone is a unique entity in the area of local self-government, partly or fully equipped with infrastructure, which provides potential investors with additional tax and administrative facilities from the state and local levels in addition to common space and infrastructure.
At the session held on November 17, 2016, the Government of Montenegro adopted a Regulation on business zones, which defines the model of classification, establishment, management and filling of business zones, facilities for users, with the aim of attracting new investments, increasing employment especially in less developed areas of the country and overcoming regional differences.
On the basis of the Decree, the Decree on Amending the Regulation on Business Zones (15.06.2018) was adopted, which refers only to the deadline for harmonization with the Regulation. The deadline for existing business zones to adjust business is extended from 6 months to 18 months.
The Regulation envisages a series of facilities and benefits that local self-government units have made to individual decisions for business entities that register their business in a business zone, in accordance with the laws that apply to this area.
Business zones development project: https://www.bizniszona.me/en/
There are two categories of Business Zones:
- Business Zone of Strategic Importance, designated and managed by the Government of Montenegro,
- Business Zones of Local Importance, designated and managed by the local governments.
Investors in both categories of Business Zones will be granted national and local-level incentives.
National-level incentives – the employers who hire staff to work in a Business Zone are exempt from the contribution for compulsory insurance paid to salaries and from personal income tax.
Local-level reliefs include: Lower utility and other fees; Favourable lease/purchase of premises within the business zone; Lower or zero surtax to PIT; Lower real estate tax rate; Opportunity to define a favourable public-private partnership model; Access to utilities, where required.
In addition to the reliefs described above, which are available only in the Business Zones, the investors operating on these sites have access to other national- and local-level reliefs, such as subsidies under the Decree on fostering direct investment, Investment and Development Fund (IDF) loans and similar support programmes, all in line with state aid rules.
Nine local governments have identified Business Zones of Local Importance to date, enabling the investors to invest under favourable terms in Berane, Bijelo Polje, Kolašin, Mojkovac, Cetinje, Nikšić, Podgorica, Ulcinj and Rožaje.
The Government of Montenegro continuously provides support to entrepreneurs, MMSPs, as well as large enterprises through financial and non-financial support, which is available through various economic development programs implemented by competent ministries and institutions.
Ministry of Economy of Montenegro – Directorate for investments, development of SMEs and management of EU funds – Program for improving the competitiveness of the economy (www.mek.gov.me/en/ministry)
Ministry of Science of Montenegro – Grant Program for Innovative Projects 2018-2020, Program for grants for scientific research and development projects and co-financing of partners from the economy, EUREKA PROGRAM (http://www.mna.gov.me/en/ministry?alphabet=lat)
Ministry of Agriculture and Rural Development – A Program for the Development of agriculture and rural areas of Montenegro within IPARD II 2014-2020 (IPARDII Program), IFAD 2017-2022 (International Fund for Agricultural Development), MIDAS II – Institutional development and strenghthening of agriculture in Montenegro (http://www.minpolj.gov.me/en/ministry)
Ministry of Sustainable Development and Tourism – Program of incentive measures in tourism
Ministry of Labour and Social Welfare – Program of incentives for employment of persons with disabilities (PWD) (www.mrs.gov.me/en/ministry)
Ministry of Defence – Program for allocation of company (entity) markings NCAGE and NSN (NATO warehouse number) for products, Technical support to domestic entrepreneurs for obtaining NATO standards STANAG (www.mod.gov.me/en/ministry)
Chamber of Commerce of Montenegro – (www.privrednakomora.me/en)
Investment and Development Fund – Credit Lines and Financial Support (lending-credit programs for students, technological surpluses, for women in business, development of entrepreneurship, beginners in start-up business, young people in business, agroindustry and food production, hotels and spa industry, tourism infrastructure, catering, production and manufacture, companies in the wood industry, modernization of the industry, funding the ICT sector, culture and art, infrastructure projects and water supply, greenfield and brownfield investments, environmental protection projects. (www.irfcg.me/en)
Other government ministries which support SMEs in their jurisdiction domain (Ministry of Agriculture and Rural Development, Ministry of Science, Ministry of Sustainable Development and Tourism, Ministry of Transportation and Maritime Affairs, etc.)
Montenegro is a secure, economically viable and politically stable country, with a significant potential to continue its further economic growth. As a NATO member state, we are positioned high on the list of safe countries. The openness of the economy is one of our key values. Investors, domestic and foreign, can invest in any sector of the industry and make free transfer of capital, profits and dividends. Although the government implements fiscal consolidation measures related to tax increases, none of them is linked to an increase in taxes and investors taxes, nor in any way represents a burden on investors. Through a competitive environment for business, with significant potentials in the field of energy, tourism and agriculture, Montenegro offers numerous benefits for investments.
The website www.investmentlocations.me provides detailed information on investment opportunities for specific locations in all 23 municipalities of Montenegro. The website also contains information on the overall investment environment and incentives and financial reliefs available to investors, including relevant contacts.
The website www.bizniszona.me provides detailed information about the locations declared as Business Zones in Montenegro, including their real estate and infrastructure potential and incentives offered to prospective businesses.
- Active promoter of good neighbourly relations and participant in regional cooperation
- Member of NATO since June 2017
- Candidate for membership of the EU (prospective membership by 2025)
- Member of the World Trade Organisation (WTO), signatory of Trade Facilitation Agreement
- The Euro (€) is the national currency
- Enjoying access to a market of around 800 million consumers thanks to WTO membership and free trade agreements with EU (Stabilization and Association Agreement), CEFTA, EFTA, Russia, Turkey and Ukraine
- “The Gateway to the Balkans”, thanks to its favourable geographical location at the Adriatic / Mediterranean Sea (convenient access for trade via Port of Bar, good railway and road connection to Eastern and Central Europe) and stimulating business environment
- Agreements on economic cooperation in force with following countries: Austria, Bulgaria, Czech Republic, Greece, Croatia, Hungary, Germany, Slovenia, Spain, Romania, Slovakia, Albania, Argentina, Azerbaijan, Qatar, China, Macedonia, Serbia, Turkey and UAE, as well as with Italian region Abruzzo.
- Signed agreements on the mutual promotion and protection of investments with: Republic of Austria, Slovakia, the Republic of Serbia, the Czech Republic, the Republic of Finland, the Kingdom of Denmark, the State of Qatar, the Belgium-Luxemburg Economic Union, the Republic of Macedonia, Malta, France, the Hellenic Republic, the Netherlands, Israel, Cyprus, Romania, Ukraine, Hungary, Germany, Poland, Spain, the Republic of Turkey, the Swiss Confederation, the Republic of Azerbaijan, Moldova, and the United Arab Emirates.
- Signed treaties with on income and property, which regulate double taxation: Albania, Belgium, Belarus, Bosnia and Herzegovina, Bulgaria, Czech Republic, Denmark, Egypt, Finland, France, Greece, Netherlands, Croatia, India, Italy, China, Cyprus, Kuwait, Latvia, Hungary, Moldova, Germany, Norway, Poland, Romania, Russia, Slovakia, Slovenia, Sri Lanka, Switzerland, Sweden, Turkey, Ukraine, United Kingdom, Ireland, Serbia, UAE, Azerbaijan, Austria.
- Business-friendly environment (ranked 42nd out of 190 countries in the 2018 World Bank Doing Business Report – improved by 9 places compared to the 2017 ranking)
- Foreign companies enjoy the same treatment as national companies
- Foreign investors may invest in any industry and are free to transfer funds, assets and other goods, including profit or dividend
- Competitive tax system (general corporate profit tax and personal income tax is 9%)
- Incentives and tax reliefs for investment on both national and local levels, including in purposefully established Business and Free Trade Zones
- Simple procedure for creating a company (four days and founding capital of €1)
- Quality banking sector, with 15 private banks (no commercial state-owned banks)
- The workforce is qualified and English is widely spoken across professions and trades
- Relatively low wages (Average gross earning €761 / net €508)
- Increasingly popular tourism and lifestyle destination (“Wild Beauty” and “the Pearl of the Adriatic”) – One of fastest travel destinations in the world, second fastest growing travel destination in Europe in 2017
- Favourable climate with annual average of 240 sunny days
- Geographical location with good accessibility – 2 international airports with year round and seasonal flights with most European capitals and towns and increasing number of flight connections with different regions of the world
- Popular nautical / cruising / yachting destination (Port of Kotor, Port of Bar, Porto Montenegro, Marina Budva, Marina Bar…)
- Investment destination for investors coming from over 100 countries from around the world
- Fairly liberal visa regime: http://www.mvp.gov.me/en/sections/consular-affairs/visa-regimes-for-foreign-citizens/