Montenegro

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ABOUT MONTENEGRO

Montenegro at a Glance

Montenegro is located in Southeast Europe at the Adriatic coast, bordering Croatia to the west, Bosnia and Herzegovina to the northwest, Serbia to the northeast, Kosovo to the east and Albania to the southeast. It’s wider regional market includes the overseas Mediterranean market. Trade connectivity is important for Montenegro as a business destination since the domestic market is relatively small.

Montenegro boasts the lowest headline personal income tax and corporate income tax rates in Europe, both pegged at a flat 9%.

Since regaining independence in 2006, Montenegro has adopted an investment framework to encourage growth, employment, and exports.  Although the continuing transition has not eliminated all structural barriers, the government recognizes the need to remove impediments, ensure business-friendly policies,improve transparency, and open the economy to foreign investors.

Montenegro makes no distinction between domestic and foreign companies.  Foreign companies can own 100 percent of a domestic company, and their profits and dividends can be repatriated without limitations or restrictions.  Exceptions to this policy are the small number of cases dealing with defense-related industries.

 

Population: 642 550
Form of government: Unitary dominant-party parliamentary constitutional republic
Official & spoken languages: Montenegrin
Currency: Euro
Time zone: CET (UTC+1) summer CEST (UTC+2)
GDP (PPP): $11.381 billion
GDP (PPP)/per capita: $18,261
Average salary: 400 euro
Unemployment: 17,7%
Major trading partners: Serbia, Hungary, Bosnia and Herzegovina, Italy, Slovenia, Albania, China, Greece

 

 

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Doing Business in Montenegro

Advantages of doing business in Montenegro

1 .Incorporating a Montenegro LLC can be fast and uncomplicated it only requires:

  • One shareholder of any nationality and residency who can be an individual or a body corporate
  • One individual director of any nationality and residency
  • A paid-up share capital of EUR 1
  • Does not needed to travel to Montenegro to complete company formation.

Montenegro an attractive jurisdiction for doing business because:100% foreign ownership of legal entities is permitted

  • The country offers the lowest income tax rates in Europe at a flat rate of 9%
  • Montenegro has concluded more than 40 double tax treaties that may help reduce or eliminate withholding tax with global jurisdictions including China, Malaysia, France, Germany, Switzerland among others
  • Montenegro presents very competitive tax rates with respect to other countries in Europeart=”3″>

Investors and entrepreneurs in Montenegro will enjoy government incentives including

  • Vat exemptions on constructions of high-end hotels, food production and energy-production facilities
  • An 8-year tax exemption of up to 200 000 for companies newly incorporated in underdeveloped municilipaties
  • Reduced VAT levied at the rates of 7% on purchase of IT equipment and 0% on other selected basic products
  • Resident entities are entitled to a foreign tax credit on taxes levied on income realized abroad, but not exceeding the amount that would have been paid locally

 Disadvantages of doing business in Montenegro

  • Entrepreneurs looking to incorporate a public limited company will have to present a minimum share capital of 25 000€ at incorporation
  • Montenegro can be unattractive for investments because:
    • Corruption is endemic in Montenegro with the country being ranked amongst the most corrupt in Europe by Transparency International
    • Money laundering and organized criminal groups are prevalent in Montenegro and have significant influence in both the private and public sectors
    • Montenegro has a very weak judicial system that continues to discourage foreign investments
    • Montenegro has a small market size, with a population of just 600 000 inhabitants with very little purchasing power.
  • Other challenges of doing business in Montenegro include:
    • The country lacks proper infrastructure due to absence of investments and/or maintenance in the past decade
    • Country has no presence of international banks
    • The country does not offer tax incentives to investments in sectors including agriculture, shipbuilding, transport and steel, among other sectors
    • Montenegro was hit hard by the global downturn and has experienced a significant contraction in its service and industry sectors. Recovery has been steady but slower than other nations in Eastern Europe.

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The World Bank “Ease of doing Business -ranking”

Overall rank 2016: rank 42
– Starting a business: rank 60
– Dealing with construction permits: rank 78
– Getting electricity: rank 127
– Registering property: rank 76
– Getting credit: rank 12
– Protecting minority investors: rank 51
– Paying taxes: rank 70
– Trading across borders rank 44
– Enforcing contract: rank 42
– Resolving Insolvency: rank 37

READ MORE: MONTENEGRIN COMPANY FORMATION SERVICES & FEES

Residency and Moving to Montenegro

Tax Resident in Montenegro

TAX RESIDENCY – INDIVIDUALS:

  • Tax Resident of Montenegro is individual that has Montenegro residency or Montenegro is center of his business and personal interest.
  • Tax Resident of Montenegro is individual that spends in Montenegro above 183 days during calendar year
  • Both income gained in Montenegro and worldwide tax will be subject to taxation

Income that is NOT CONSIDERED AS taxable income:

  • Pensions
  • Income from insurance
  • Income from Social welfare
  • Income from Games of Chances

TAX RESIDENCY – BUSINESS:

  • Tax Residents of Montenegro is business that is registered in Montenegro OR  has actual management and control unit in Montenegro
  • Tax Resident of Montenegro is nonresident business that has actual management and control unit outside of Montenegro but has branch in the country.
  • Subject of taxation for residents is gained income in Montenegro as well as Worldwide.

Income that is gained in Montenegro by nonresident business is taxed in Montenegro

  • Taxable source of income are:
  • Income from selling of goods and services
  • Interest gained in Montenegro
  • Dividends paid by resident companies
  • Income related to real estate

RESIDENCE AND CITIZENSHIP – BENEFITS AND ADVANTAGES

Montenegro Citizenship-by-Investment Program is closed but maybe in the near future, will be also another option which will allow payment to Government Fund, after first obtaining permanent residency. Montenegro offers also low tax policy for established businesses and individual incomes , visa-free travels in more than 99 countries such as European Union, Russian Federation and Switzerland. Montenegro is an official future candidate for EU and NATO membership and a full member of UN and WTO organizations

Taxation in Montenegro

Taxes in Montenegro

Residence: A company that is registered in Montenegro or that has its management and control there is deemed to be resident for tax purposes

Basis: Resident companies are taxed on worldwide income, nonresidents re taxed only on Montenegro-source income

Taxable income: Taxable income is based on accounting profit, adjusted for tax purposes by nondeductible expenses, nontaxable income, tax depreciation, etc.

Taxation of dividends: Dividends paid between residents are subject to withholding tax, but are not included in taxable income. Dividends received from abroad are included in taxable income, but a resident taxpayer can claim a tax credit for foreign tax paid.

Capital gains: Capital gains are included in taxable income and are subject to the normal corporate tax rate of 9%. Capital gains are calculated in accordance with the tax rules and may be offset only against capital losses.

LossesTax losses(including capital losses) may be carried forward for five years. The carryback of losses is not permitted.

Foreign tax creditAn ordinary tax credit is available for foreign income tax paid . The credit is limited to the amount of Montenegro tax attributable to the foreign-source profits.

Participation exemptionSee Taxation of dividends

Taxable income: 9%
Taxation of dividends:
VAT registration: Taxpayers with revenue in excess of EUR 18 000 must register for VAT purposes
– VAT Rates: The standard rate of VAT is 21%. A reduced rate of 7% is levied on the supply of certain goods and services. Exports are zero-rated and exemptions exist for financial services, the sale of land, etc
Surtax: No
Alternative minimum tax: No
Withholding tax (general):
– From Dividends  A 9% withholding tax is levied on dividends paid to a nonresident (unless the rate is reduced under a tax treaty) and on dividends paid to a resident.
– From Royalties Royalties paid to a nonresident are subject to withholding tax of 9%, unless the rate is reduced under a tax treaty.
– From Interests A 9% withholding tax is levied on interest paid to a nonresident entity (a 5% rate applies to interest paid to a nonresident individual), unless the rate is reduced under a treaty.nterest paid on a loan from a nonresident is subject to a 10% withholding tax, unless the rate is reduced under a tax treaty. A loan granted for 10 years or more is exempt from withholding tax
Transfer tax: A transfer tax of 3% is levied on the transfer of immovable property.
Capital gains tax: Capital gains are taxable at a rate of 9%
Real property tax: Property tax is levied on the ownership/use of property at rates ranging from 0,25% to 1%. Limited tax exemptions exist for construction companies.
Social security: The employer is required to make social security contributions at a rate of 10,3% of an employee’s salary. The contribution comprises pensions (5,5%), health (4,3%) and unemployment (0,5%). The maximum base for contributions in the calendar year is EUR 5 000€
Payroll tax: The municipal authorities levy a surtax of up to 15% on an employee’s salary. In addition, labor fund contributions are levied on the gross salary, at a rate of 0,2%.
Stamp duty: No
Capital duty: No
Tax treaties: Montenegro continues to apply the tax treaties signed by the former Yugoslavia and Union of Serbia and Montenegro until Montenegro signs new treaties. Certain new treaties have been signed and others are being negotiated.
Anti-avoidance rules:
– Transfer pricing Transactions between related parties (as defined) must be at arm’s length. The comparable uncontrolled price method may be used, but in the absence of any direct comparables, the taxpayer may use the cost-plus or the resale price method.
– Thin capitalization rule There are no specific thin capitalization rules, but interest paid to a nonresident (whether or not related) must be on arm’s length terms.
– Disclosure requirements No

Compliance for corporation:

Tax year: Calendar year.

Consolidated returns: Consolidated returns are not permitted; each company must file separate return.

Filling requirements: The tax return must be filed within three months after the year-end.

Penalties: A penalty of 0,03% per day is imposed for late payment-

Rulings: No.

Tax authorities: The tax authorities are organized within the Ministry of Finance and the municipal level.

Personal Taxation in Montenegro 2018

Personal taxation basis:

Residents individuals are taxed on their worldwide income: nonresidents are taxed only on Montenegro-source income.

Tax Residence:

An individual is resident if he/she is in Montenegro for 183 days or more in a calendar year or if his/her center of vital interest is in Montenegro.

Filling status:

Joint returns are not permitted.

Income tax rates in Montenegro:

Taxable income comprises income from employment, business and professional income, investment income ( dividends, interest and royalties ) and income from immovable property.

Social security payments in Montenegro:

Social security contributions due by an employee are levied at a rate of 24%. These include contributions for pensions (15%), health (8,5%) and unemployment (0,5%). The employer also must make a contribution. The maximum base for contributions in the calendar year is EUR 50 000. Benefits provided to employees in addition to the basic salary are exempt from social security contributions.

Inheritance/estate tax in Montenegro:

A 3% tax is levied on the inheritance of real estate. An exemption is available for the transfer of property as a gift or inheritance to children, parents or a spouse.

Net wealth/net worth tax in Montenegro:

No

Tax year:

Calendar year

PLEASE CONTACT US TO SCHEDULE A MEETING WITH THE NOVASIGMA CONSULTANT

 

OUR OFFERS IN MONTENEGRO

 

  • business planning, tax consulting by Novasigma
    BUSINESS CONSULTING FROM 125€/h
  • MONTENEGRO-COMPANY FORMATION FROM 1390€
  • TAX PLANNING FOR PRIVATE PERSONS FROM 850€
  • TAX CONSULTING FOR CORPORATIONS FROM 2.490€

 

NOVASIGMA IN MONTENEGRO

Consulting & advisory services for Montenegrin entities

  • Due diligence process
  • Foreign Market entry & Supplier search
  • Business Plans & Descriptions
  • Development & Capital Advisory
  • International Tax Planning
  • Funding & Investor Search
  • Business Restructuring via Offshore entities
  • Exit Strategy & IPO
  • Problem solving in Montenegro | by Novasigma Accounting & Law partner office

PLEASE CONTACT US TO SCHEDULE A MEETING WITH THE NOVASIGMA CONSULTANT

Incorporation, administration & business services in Montenegro

Incorporation services in Montenegro

  • New company formations in Montenegro
  • E-Gaming licenses in Montenegro
  • Forex broker licenses in Montenegro
  • Financial company licenses in Montenegro
  • Company Closures and liquidations in Montenegro

Company administration in Montenegro

  • Legal registration address service for a Montenegrin company
  • Company secretarial service for a Montenegrin company

READ MORE: MONTENEGRO COMPANY FORMATION SERVICES & FEES

Additional business services in Montenegro (by Novasigma Certified Partners)

  • Virtual office services in Montenegro
  • Hosting services
  • Real estate in Montenegro (offices, trade facilities, industrial)

Accounting, bookkeeping & audit for a Montenegrin entity

Some of the common domestic accounting services we provide in Montenegro include

  • Bookkeeping and accounting
  • Invoicing and payments
  • Annual accounts
  • Monthly Reconciliation
  • Monthly financial statements (including balance sheet and income statement)
  • Payroll services
  • Income and tax return
  • Management accounts

Value Added Tax (VAT)

  • VAT registration
  • Advice on VAT scheme options
  • VAT returns and declarations

Audit

  • Annual accounts in view of an annual audit and attend accounting audits

READ MORE: ACCOUNTING AND BOOKKEEPING SERVICES & FEES IN MONTENEGRO

Legal services for Montenegrin companies and business owners

Legal services in Montenegro for all Novasigma Clients including companies and their owners and directors

Novasigma has built in Montenegro a team of lawyers, associates and legal advisers to assist our clients with a business and tax planning, overseas business operations, risk management and other legal matters. Primarily focused on business transactions, Novasigma Accounting & Law corporate attorneys are a great asset to a small and large businesses. With a background on corporate law, our corporate lawyers and legal advisers have an in depth knowledge on the transactions that may put your business at risk of litigation. These include contracts and negotiations, taxation laws, business structuring, buy/sell agreements, and intellectual property, among others.

PLEASE CONTACT US FOR MORE INFORMATION ABOUT LEGAL SERVICES IN MONTENEGRO

Banking, financial and insurance services in Montenegro

Banking services in Montenegro

  • Business bank accounts
  • Personal bank account
  • Payment service providers
  • Investment solutions
  • Alternative banking solutions

Financial services in Montenegro

  • Debt collection services
  • Invoice funding & cash flow solutions
  • Factoring
  • Leasing
  • Wealth management

Insurance services in Montenegro

  • Insurances for corporations
  • Insurances for business owners and their families

PLEASE CONTACT US FOR MORE INFORMATION ABOUT BANKING & FINANCIAL SERVICES IN MONTENEGRO

Tax residencies & Immigration services

  • Meeting with Novasigma before applying Montenegrin residency
  • Assistance in applying a tax residency from Montenegro
  • Personal bank account in Montenegro
  • Address service available for Novasigma business clients

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NEWS AND BUSINESS OPPORTUNITIES IN MONTENEGRO

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  • Offshore Banking in Montenegro- Everything you need to know

Interested in Montenegro? Please leave us a message and we will come back to you shortly.

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