Doing Business in Montenegro

General Overview

Montenegro is generally a good place for doing business, with several benefits, but of course, it’s not perfect. For example, starting a business is easy and there are no entry barriers for foreign individuals or companies. In addition, Montenegro has a national treatment of foreign corporate owners, which means they have the same rights as domestic citizens. Besides fully owning a company, foreigners have indefinite property ownership in Montenegro. As a result of the open economic policy, there are over 13,000 foreign-owned companies in Montenegro, with owners from more than 100 different countries.

Montenegro is a parliamentary democracy and it is a safe and stable society. The Government is business-oriented, with an accent on economic development and improving quality of life. The county is a NATO member since 2017 and the most prominent European Union candidate. In addition, Montenegro is also a member of WTO as well as the CEFTA trade agreement.

Although increased from January 2022, Montenegro has low corporate tax rates. In addition, foreign-owned companies can use several business and tax incentives. However, the banking system is a bit tight. Montenegrin economy heavily relies on tourism, so there are low and high liquidity periods. When it comes to administration, Montenegro is not the best, but not the worst also. You’ll find some procedures very easy, but some will be long and will require a bunch of unnecessary documentation. Although Montenegrin law has the same principles as EU regulations, occasionally you’ll find some inconsistencies in regulations.

Montenegro Tax System

Montenegro has a reputation as a low-tax destination because it has lower taxes than most European Union countries. Although some taxes are very low, we believe there is more space for decreasing taxes. However, our clients often want to become tax residents of Montenegro in order to lower the taxes they pay for their business. As a result, we have many inquiries about relocating small businesses to Montenegro.

Here is the basic breakdown of Montenegro’s tax system:

Personal taxes

• Personal (including freelancing) income: 9-15%;
• Dividend or capital gains tax: 15% (or less, depending on your home country);
• Real estate property tax: 0,1-1% per year, depending on area and type of property;
• Real estate transfer tax: 3% (except for first-time sold apartments where VAT is applied);
• Inheritance tax for first of kin: 0%;
• Inheritance tax for second of kin on non-relatives: 3%.

 Corporate taxes

• VAT: 21%, 7% and 0%;
• Exporting goods or services VAT: 0%;
• Importing VAT: 0-21%;
• Corporate profit tax: 9-15% (depending on profit amount);
• Corporate dividend tax: 15% (or less);
• Profit reinvestment abroad: 0%.

For a more detailed tax plan in Montenegro contact us.

Starting a Business in Montenegro

It is very easy and cost-effective to start a business in Montenegro. In addition, the monthly maintenance cost is fairly low, although the cost will incur even if the company doesn’t have any turnover. The registration process is easy and takes only up to five workdays from the moment you submit the founding documents to the Montenegro Company Register.

The basic requirements for every company are a CEO, at least one registered employee (it can be the CEO), an office address, a bookkeeper, and a corporate bank account. Everything up from that point is optional. The usual form of company registration is a Limited Liability Company, which only takes €1.00 of founding capital. However, some investors decide to open shareholding companies, for which the minimal founding capital is €25,000.

Basic LLC foundation fees:

• Founding capital: minimum €1.00
• Tax administration fee: €5.00
• Official business gazette: €3.00
• Company stamp: cca. €20.00
• Digital signature certificate: €110.00

For more detailed information and offers for starting a business in Montenegro, visit our Company Registration page.

Keeping a Business in Montenegro

If you register a company in Montenegro, depending on the company’s activity, you will have some minimal monthly maintenance costs. That includes office rent (it can be just a nominal address), bookkeeper, one minimal net salary and taxes and social contributions for one salary. From January 2022, Montenegro raised minimal net salary to €450.00 (cca. $510-520.00), but lowered salary taxes and contributions. Therefore, the salary taxes and contributions account for only around 26% of a net salary (for a minimal salary), down from 68% previously. As a result, if you are the only employee of your company, the monthly company cost decreased significantly.

Minimal monthly costs for an LLC:

• Office rent – €100.00 or more (if a company needs only a nominal address, Like a Bird offers a €50.00 price included in one of our service packages);
• Licensed bookkeeper – €100.00 or more (included in our package);
• One minimal net salary – €450.00 (this is basically what you pay to yourself);
• One salary tax and surtax – €117.00.

Closing a Business

Closing a business in Montenegro is not as easy as opening one and it takes some more time. However, if you don’t have any outstanding debts, the process is not very complicated. Depending on the situation, you can close a business through voluntary liquidation or bankruptcy liquidation.

If you don’t have any company debt, you can enter the voluntary liquidation process which will take up to one month. In this period, you will need to obtain proof that the company paid all taxes, salaries and social contributions. However, even if you had an LLC company, you will be liable for possible company debts with your personal assets for the next three years. This is for cases when people decide to close the company but hide the debt.

In cases where there is an outstanding company debt, you can go into the bankruptcy liquidation process. This process is more expensive and takes 3-6 months to complete. The minimal court fees, in this case, are €550.00. Once the procedure starts, the court appoints a liquidation manager of the company. Before conclusion, he needs to liquidate the assets (if any) and notify the debtors about the bankruptcy. In this case, the owner is not liable for personal assets.

Employing Workers

Depending on your business activity, you will be able to find both highly qualified and low-skill workers in Montenegro. Certainly, a large improvement has been made in the last couple of years. In short, you will be able to source a quality workforce in Montenegro. Depending on your needs and business activity, a number of HR agencies can help you source the talent you need. Every worker you employ you must register with the tax authorities and besides net salary, it is the employer’s obligation to pay salary taxes and social contributions.

The salary taxes and contributions depend on the net salary amount and they account for an additional 26-49% of the net salary. As Montenegro decided to have some progressive rates, the percentage of social contributions is higher for higher net salaries. The minimal net salary in Montenegro is €450.00 (cca. $510-520.00) and the social contributions for the low wages are around 26%. This means that the employer pays another €117.00 in salary taxes and contributions for every minimal salary.

The official working week is up to 40 hours, which means you can register a worker for a maximum of 8 hours per day. If you agree to longer working hours, you would need to pay overtime. In addition, you can hire workers via service contracts, but in that case, you pay full salary taxes and social contributions if the worker is not already registered as an employee of another company. All net salaries are paid to the employee’s bank accounts.

Any company can freely employ foreign workers (although there are yearly quotas for some activities) and the same rules for registration, net salary and social contributions apply.

Like a Bird offers accounting and workers’ registration services and we can make a detailed salaries and contributions plan for your business. Feel free to contact us or visit our services.

Buying a Property

Foreigners can freely buy, own and develop real estate in Montenegro. The only limitation is the ownership of agricultural land, as foreigners can own only up to 5,000m². Montenegro is actually known as a property hotspot in the Mediterranean with large investments in this sector. The coastal region is the most popular one, but in the last couple of years, we are seeing increased interest and development in Podgorica and the Northern region.

As a foreigner, you can buy and own the property personally or through a company. In both cases, if you are the buyer you have to pay property transfer tax which amounts to 3% of the property price. In the case, you are buying a newly built apartment and you are the first buyer then you pay basic VAT – 21%. The agency fees are usually included in the property prices and are covered by the seller. In addition, it is customary that the buyer covers the public notary fees, but sometimes the buyer and seller split the fee. Once the transaction is concluded and notarized it takes up to one month to officially change the ownership in the property registry.

Business Subsidies and Incentives

Montenegro offers a number of business subsidies and tax incentives, depending on the business activity and the number of employees. Around 40 different incentives are available to both foreign-owned and domestic companies. Considering that the biggest part of Montenegrin economy is in services, the Government allows strong incentives for production companies. In addition, incentives for innovative industries are also very good. Profit tax exemptions, salary taxes and contributions exemptions, low land lease fees and communal tax exemptions for buildings are some of the most important incentives available. Moreover, for some activities, there are VAT exemptions. You can find the full list of business incentives in Montenegro at the Montenegro Investment Agency website.

Business Zones

As part of investment development programs, some municipalities in Montenegro created special business zones with incentives. The zones usually favor production businesses but others can apply also. The main incentives in business zones are low land lease fees, communal tax exemptions for building facilities, salary tax exemptions, and profit tax exemptions. There are certain terms a company needs to fulfill so it can use the benefits of a business zone. However, it usually comes down to the number of Montenegrin employees that the company will have. The most prominent business zones are the ones in Podgorica, as the Capital City is the administrative center and well connected.

In addition, there is a free customs zone in the Port of Bar in which it is possible to register a trading or production company. It can be favorable for the assembly and export business.