Investing in Montenegro

Investing in Montenegro

Its Economic Model

Investing in Montenegro is investing in one of Europe’s fastest-growing emerging economies. Montenegro offers a dynamic and business-oriented economic framework with clear strategic objectives. Understandably, they want to develop a sustainable economic model based on three pillars:

1. Authentic and high-end development of its tourism sector
2. Net export of (renewable) electric energy
3. Agribusiness in the rural part.

Since its independence in 2006, Montenegro has made major progress towards social and economic development. In its dual goal of EU integration and swift economic development, it has proven to be a safe and incredibly politically stable spot in this part of the world.

What are Montenegro’s achievements so far, you might ask?

• Advanced Candidate status for EU membership
• NATO member since 2017
• WTO member since 2012
• 90% of state-owned companies privatized
• World Bank and IMF member
• 4.7% GDP growth in 2019
• GDP per capita PPP $17,278
• Human Development Index 49th

source: tradingeconomics.com 

Montenegro’s Investment Landscape

Economic Growth Sectors

Montenegro’s GDP has been dramatically going up, from 10,000$ per capita in 2004 to over 17,000$ in 2019. Major infrastructure projects like the Bar-Boljare motorway that will connect it to the European motorway network via Serbia, and large energy and tourism investments showed to edge up economic growth indicators. Especially programs with the goal of eliminating barriers to new investment projects and creating a more positive business environment became imperative. In this context, the adoption of new laws, harmonized with the EU standards, and the implementation of long-needed institutional reforms in the fiscal and financial sectors helped towards a notable improvement of the business environment in the Republic of Montenegro. 

Tourism is growing

Favorable tax rates and investment incentives supported by a pro-business political climate have allowed Montenegro to become one of the world’s fastest-growing tourist destinations. In 2019 it hosted more than 2 million foreign tourists, which are up more than 10% from the prior year. 

Trade and Transport 

The Trade sector is growing complementary to tourism with 6.3% in the first eight months of 2019. The growth was also recorded in the transport sector, where 9.5% more airport passengers were registered at the airports compared to 2Q 2019 / 2Q 2018.

Agribusiness

37% of Montenegro’s total territory is agricultural land. Agriculture in Montenegro is very diverse, from the cultivation of olives and citruses in the coastal belt, vegetables, and viticulture in the central part, to extensive livestock breeding, especially in the northern part of Montenegro. Federal and local governments together with the EU will give ample support to this sector, and there will be export opportunities for food production.

Construction and Real Estate

Positive GDP growth was also registered in the construction sector, wherein 2019 the value of finalized construction works increased by 12.3% in comparison to 2018. The economic activity has picked up since the second quarter of 2016, driven primarily by large-scale infrastructure projects.

There are excellent investment opportunities in Montenegro’s property sector. Since the country features one of the most dramatic coastlines of the world, it will always attract affluent buyers from abroad. Here are the key points:

• Most prime property and major developments are along Montenegro’s Adriatic coast.
• Podgorica the capital city is dominated by domestic buyers
• There are developments in the mountainous northern region mostly related to winter tourism resorts
• The property transfer tax is only 3%
• Property income is taxed at 9%
• Excellent opportunities in the vacation rental market
• Foreigners can own real estate, just as locals (except for land which needs to be bought via a company)

Montenegro in Numbers

Treatment of Foreign Investors

The good news for foreigners wanting to invest in Montenegro is that they enjoy exactly the same freedoms as the domestic ones. They are allowed to fully own companies, buy land for development or agriculture, may invest in every industry, and free to transfer and distribute dividends and assets.

Montenegro’s Visa Regime

Visitors to Montenegro must obtain a visa from one of the Montenegrin diplomatic missions unless they come from one of the countries for which a visa is not needed. In case there is no embassy or consular representations of Montenegro, foreigners may obtain them from (depending on the country) diplomatic or consular representations of Serbia, Bulgaria, and Croatia.

Citizens and holders of passports of the following 97 countries and territories can enter Montenegro without a visa up to 90 days:

Nationals of any country may visit Montenegro without a visa for up to 30 days if they hold a passport with visas issued by Ireland, a Schengen Area member state, the United Kingdom or the United States or if they are permanent residents of those countries. Residents of the United Arab Emirates do not require a visa for up to 10 days if they hold a return ticket and proof of accommodation.

Investment Incentives

Incentive measures at the national level include the tax incentives for investing, such as: exemption from corporate tax, taxes on personal income, the subsidies for employment of certain categories of unemployed persons.

The government of Montenegro allows investors who implement investment projects that create jobs and further Montenegro’s economic development financial incentives. Both resident and non-resident legal entities can apply for investment incentives, but only entities with a registered office in Montenegro can receive them. 

There is the possibility of an 8-year corporate income tax break for newly-established companies in the underdeveloped municipalities of Montenegro. These regions are mostly in its not so affluent North. The maximum amount a company can claim is 200.000 Euros.

So, if you as a taxpayer make a choice for these underdeveloped municipalities to place your production units in, you can become exempt from income tax for the first eight years. 

Direct Investments

Montenegro’s direct investment incentive is supporting businesses that will employ at least 10 people in Montenegro’s North over the course of three years from the date of completing the investment contract and a minimum investment sum of 250,000€. An investment of 500,000€ and the employment of 20 people is required in the capital Podgorica and in the South of Montenegro. 

For each newly-employed worker, you can claim between 3,000€ and 10,000€ in benefit money. from the State of Montenegro.

Note: As a beneficiary of incentive money, you need to keep the number of newly-employed workers steady for 3 years after completion of the project (Small and Medium-Sized Enterprises) and 5 years (Large Companies).

For large capital investments larger than 10 million Euros that will employ 50 workers or more, you can claim incentives of up to 17% of the total investment sum, without any scoring required. The costs of infrastructure investment related to the project can also be reimbursed.

Allocation of incentive benefits:

Business Zones

Business zones are organized structurally and formally in a way to facilitate the production and distribution of goods and services by offering a favorable investment climate. Companies are gathered in a distinct area that features modern infrastructure, access to utilities, and business services.

Additional tax and administrative benefits are available at the local and national level to increase production capcaity and exports. Companies in business zones also obtain easier credit lines with institutions for the development sector.

In a federal manner, the business zones are organized either at the state level (Business Zones of Strategic Importance) or municipal level (Business Zones of Local Importance)

Incentives are available both at the local and national level, local-level incentives include:

• Lower utility and other fees;
• Favourable lease/purchase options;
• Lower or zero surtax to PIT (Personal Income Tax);
• Lower real estate tax rate;
• Opportunity to define a favourable public-private partnership model;

National-level incentives eliminate compulsory social security contributions paid by the employer over the course of five years.

There are 9 Business Zones in Montenegro in: Berane, Bijelo Polje, Kolašin, Mojkovac, Cetinje, Nikšić, Podgorica, and Ulcinj.