Why invest in Montenegro

Investment

Montenegro is a small and highly open economy that fits perfectly into the global FDI trends, and in that sense it offers a favorable investment climate. Attracting foreign investments is one of the primary objectives, aiming on the positive effects like accelerating the growth of the production sector and, consequently, creating new jobs by opening new businesses and companies.

Foreign direct investments (FDIs) represent one of the most important instruments for a national economy to stimulate its production sector, import know-how, increase employment, develop its infrastructure, increase national welfare and individual wealth.

One milestone that Montenegro has already achieved, through many and diverse FDIs attracted so far, is that it has become a serious competitor in the global market of capital investments.

Why invest in Montenegro? Because Montenegro has:

  • - Political, monetary and macroeconomic stability
  • - Easy START UP
  • - Liberal economic foreign trade regime,
  • - Favorable tax policy: 9 % Profit Tax, 7% / 21% VAT, Income Tax 9 %
  • - International Accounting Standards
  • - Commercial liberty
  • - Geography and climate

On the basis of principles of the WTO, Montenegro has signed free trade agreements with the EU, CEFTA, Russia, Ukraine and Turkey, which allows duty-free access to a market of almost 800 million consumers.

A foreign investor may be a foreign natural or legal person, a domestic company in which the share of foreign capital is more than 25%, a Montenegrin citizen with the permanent or temporary residence abroad for more than a year and a company which a foreign person established in Montenegro.

A foreign investor:
- Can establish a company (either alone or with other investors), invest in companies, buy a company or a part of it.
- Is taxed in the same way as domestic investors.
The share of a foreign investor may be in money, goods, services, property and securities.

Taxes

Income tax rate - 9%
Tax rate on corporate profit - 9%
Value added tax rate - 21% and 7%
Taxes and contributions on personal income
Income tax 9%
Total contributions paid by the employer 9.8%
Total contributions paid by employees 24.0%
Total contributions for compulsory pension insurance 20.5%
Total contributions for compulsory health insurance 12.3%
Total contributions for unemployment insurance 1.0%

Support to investors

The incentives at the national level include tax incentives for investments in underdeveloped parts of the country, namely:

1. Exemption from profit tax
The newly established legal entities in underdeveloped municipalities, which perform productive activities, are exempted from profit taxes for the first eight years. The tax exemption does not apply to a taxpayer who operates in the sector of primary production of agricultural products, transport or shipyards, fishing and steel.

2. Tax on personal income
A taxpayer who starts manufacturing activities in an underdeveloped municipality is exempt from income tax for the first eight years. This tax exemption does not apply to a taxpayer who operates in the sector of primary production of agricultural products, shipyards, fishing and steel.

Subsidies for the employment of unemployed persons of certain categories. The subsidies may be used by an employer who hires:
- Persons of the age of 40 years and older;
- Unemployed Roma, Ashkali and "Egyptians" (RAE);
- Persons being in the records of the Employment Agency since more than five years;
- Persons being employed in public works;
- Persons which are employed indefinitely after the traineeship;
- Persons whose services are no longer needed (techno-economic surpluses), and who are registered in the Registry of the Employment Agency;
- Persons employed as seasonal workers;
- Unemployed persons who had been working over 25 years and who receive money allowances;
- Persons in business zones.

For the above listed categories of the unemployed, the employer does not pay:
- Contributions for the mandatory social insurances on wages (pension and disability insurance, health insurance contributions, contributions for unemployment insurance, contributions for the Labour Fund);
- Tax on personal income.

Calculated and suspended from the employee's salary are as follows:
- Contribution for a pension and disability insurance at the rate of 15.0%;
- Health insurance contribution at the rate of 8.5%;
- Contribution for unemployment insurance at the rate of 0.5%;
- Surtax;
- The employer pays these contributions in the calculated amount including the tax on personal income. The employer pays the calculated surtax. The basis to calculate the contributions is the gross income of an employee. Taxes and contributions are to be paid by the employer at the same time when the salaries are paid.

Financial support

During the past two years, the Investment and Development Fund (IDF) has supported 394 investment projects of over EUR 32 million, and banks supported its implementation and evaluation of projects with around EUR 7 million.

The main IDF objectives are encouraging and accelerating the economic development. The Fund grants loans and issues guarantees, performs tasks related to the sales of capital in the Fund's portfolio. The most important areas of activity are:
- Support of SMEs (credit and warranty support);
- Support of infrastructure and environmental projects;
- Incentives for exports and employment;
- Privatization of the rest of the social capital.
The support granted to SMEs and entrepreneurs is realized through direct loans, loans through banks, special credit lines, guarantees and factoring.

The credit conditions stipulate interest rates ranging from 4.5% to 6.5% with a grace period of 2 years and a repayment period of 8 years. Special benefits are defined on the basis of the implementation of projects in the northern municipalities and in less developed towns (Cetinje and Ulcinj), for entities which hire during the implementation of a project five or more new persons and those entities which as collateral submit a bank guarantee. The MIDAS project which is being implemented in cooperation with the Ministry of Agriculture and Rural Development is carried out through the IDF as well. The credit line for financing of the project headed by women, and a credit line for young people in business (from 21-35 years) are available at the interest rate of 4.5%.

Source: Chamber of Economy Montenegro