WHY INVEST IN MONTENEGRO?
Since regaining its independence in 2006, Montenegro has been increasingly attractive to foreign investors. Its development is centered around attracting FDI through a competitive business environment, striving to become the business hub of South-East Europe. It offers many rewarding investment opportunities and impressive natural potential along with continuous improvements in the business climate intended to attract foreign investors.
Montenegro recorded the fastest growing GDP in the region up until the decrease in the growth rate in 2009, which occurred largely due to the global economic crisis, but the country has since successfully recovered. The euro is used as Montenegrin legal tender, which is one of the reasons why it is favorable for businesses.
Due to Montenegro’s EU membership aspirations, many reforms have already taken place. They were driven by the EU reform agenda and the goal of developing an investment-friendly environment. Changes that can be observed are, for instance, reduction of some taxes and social contributions, simplification of tax procedures, improvements in the legal framework for bankruptcy procedures, a reduction of the cost and some modifications in the procedures for obtaining construction permits. Improvements in the regulatory environment proved to be necessary to ensure legal security and reducing the regulatory burden on businesses.
There is a trend of significant trade liberalization and rising competitiveness in the Montenegrin economy in general. In many reports issued by various international organizations from year to year Montenegro has been demonstrating constant improvement. For instance, Montenegro improved its position from 47th place in the Doing Business report to 46th for 2016. However, we are also expecting further progress and more developments in order to achieve even better rankings.
“Montenegro’s economy is small but open, and focused on encouraging new businesses. It is recognized as an emerging economy with significant growth potential.”
When presenting the opportunities for doing business in Montenegro, one should start with what is immediately evident – the strategic geographic location and natural potential of Montenegro. Being situated in South-East Europe in the Central Mediterranean area, Montenegro is certainly among the most interesting spots in the world. It has diverse climate features and diverse landscapes that offer so many different possibilities.
Investment potential has so far been identified within several sectors: tourism, energy, infrastructure and agriculture (with tourism and energy singled out as key sectors of growth in the past year).
REGISTERING YOUR BUSINESS:
Only three documents are required in order to register a business: a founding decision; the bylaws; and the registration form for the particular type of company. Registration takes only four days and the Central Register of the Commercial Court is in charge of business registration. It has an electronic database of all registered business entities, contracts on financial leasing and pledges. Among the many steps taken by the Montenegrin Government, with the goal to stimulate and facilitate investment, is the launch of the one-stop-shop principle for company registration. New business entities can register a company, apply for general tax registration and obtain a VAT, excise and customs code all in one place. This means that it is not necessary to go to several different institutions, since everything can be done with the Central Register of the Commercial Court, which saves time and money.
The development of business zones represents a project of the Government of Montenegro which has the goal of stimulating business development and creating more attractive investment opportunities. A business zone represents a developed area in construction terms, which is fully equipped with utility infrastructure and directed at production activities and favorable conditions for investment.
The beneficiaries of business zones will have more encouraging work conditions in terms of lower costs and resolved infrastructural problems. Such benefits are intended for small and medium-sized enterprises engaged in light industries which do not harm the environment. These include industrial branches whose production is focused on the means of consumption (food, textiles, tobacco, furniture and electronics industries and the finishing and assembling of final products).
Business incentives offered by the zones are:
- Developed land with all the necessary permits
- Lower lease prices of business premises
- Reduced administrative costs
- Integration of complementary business activities
- Other business incentives
Some municipalities have already recognized the importance of business zones and used the concept to make attractive business environments in order to attract foreign and domestic investors.
Average customs rate in Montenegro:
The average customs rate on the import of goods amounts to 6.28% for countries with which Montenegro has not signed an agreement on free trade. Customs rates for countries with which Montenegro has signed an agreement on free trade change annually. Import duties are set by the Customs Tariff as part of the Customs Tariff Law, which is based on the Commodity Description and Coding System (HS System) and coordinated with the EU Combined Tariff.
Montenegro has signed several free trade agreements:
- CEFTA (Central European Free Trade Agreement)
- Free Trade Agreement with EFTA (European Free Trade Association) – signed in 2011
- Free Trade Agreement with Russia –concluded in 2000
- Preferential Trade Agreement with the European Union
- Free Trade Agreement with Turkey – signed in 2008
According to Montenegrin law, it is possible to establish six types of companies:
- Entrepreneur (minimum capital required: none, registration fee: €10)
- Limited Liability Company (minimum capital required: €1, registration fee: €10)
- Joint Stock Corporation (minimum capital required: €25,000 , registration fee: €50)
- General Partnership (minimum capital required: none, registration fee: €10)
- Limited Partnership (minimum capital required: none, registration fee: €10)
- Part of a foreign company (minimum capital required: none, registration fee: €10)
Principal Taxes in Montenegro:
- Personal Income Tax – 9% (11% for gross personal income above €720)
- Corporate Income Tax – 9%
- Value Added Tax – 19% (reduced to 7% for tourism and 0% for some basic products)
- Withholding Tax – 9% on dividends/profit distribution, capital gain, royalties, intellectual property rights, rental income, consulting, marketing and auditing services
- Social Security Contributions – 33.8%
(Source: Montenegrin Foreign Investors Council)
ADDITIONAL INFORMATION REGARDING PURCHASE PROCESS
Citizen of any country has the right to buy a Real estate in Montenegro.
The process of buying property in Montenegro:
- The notary will prepare a contract of sale and conclude a deal.
- At the signing, a deposit of 5% will be asked, which is the “Reservation” for the property you buy.
- Payment of the full value, as in correlation to the terms of the contract. Payment can be done by bank transfer or any other agree form of payment (as defined in the contract). t and the nature of the property. For further actions, the presence of a buyer in Montenegro is not necessary. They are performed by the agent of the operator.
- “Clausula Istabulandi” – Notary confirmation of the payment, and consent to the transfer of property.
- The notary registers a new owner in the Montenegrin Cadastre
COSTS WHEN BUYING:
- In case of purchasing of secondary real estate, a tax of 3% of the total value of the property
- Payment for interpreter services (oral) about 35 euros / hour – usually 50-70 euros
- Further – translation of the contract written – 20 euros / page – about 140-200 euros
- Transfer of documents to the Cadastre for registration – 23 euros
- Property Title – 8 euros
- 60.001-80.000 – 357,00 euros
- 80.001-120.000 – 350,00 euros
- 120.001-135.000 – 360,00 euros
- 135.001-150.000 – 370,00 euros
The additional tariff is +€50 for every €50.000 over 150.000.
- Signing the contract – submission for registration by the notary
- Final settlement of the contract, and a stamped receipt of the transaction.
- The Registration (Ownership change) will be ready in a period of 1 to 2 months.
- The Title of property will be back in (Usually within 8 days), after the release of the Decision.
Temporary residence permit (residence permit)
- In order to receive it, you will need;
- Certificate of ownership of real estate (list nepokretnosti)
- Confirmation of funds (3650 euros per family member per year) in your bank account
- Passport with a validity of at least 1 year and copies of all pages and translation of first page in the local language
- Signed certification of no past convictions
- A copy of the annual international medical insurance
- “Visa” – registration in the tourist organization of Montenegro, within 24 hours upon arrival in the country
- We have our partner agency whom can sort the whole process for the client if desired. Usual cost is around €150 for the residence permit.