Benefits to Register a Comapny in Montenegro

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.

In economically underdeveloped municipalities, the Law on Corporate Income Tax provides that a newly established legal entity does not pay corporate income tax for the first eight years of operation. Moreover, the Law on Personal Income Tax stipulates that the tax calculated on the taxpayers' personal income for the first eight years of operation is reduced by 100%. Some sectors are excluded from these exemptions, including the sector of primary production of agricultural products, transport, fisheries and steel production. It is also worth noting that the tax relief is applicable only if the total amount of taxes does not exceed the amount of €200,000 for the first eight years of operation.

Montenegro's gross domestic product (GDP) rose by a real 4.4% year-on-year in the first quarter of 2024, after expanding by 6% in 2023. The January-March GDP reached 1.354 billion euro in current prices, up from 1.232 billion euro in the first three months of 2023. In May, the European Commission lifted its 2024 GDP forecast on Montenegro to 3.4% from the previously projected 2.7%. Also in May, the European Bank for Reconstruction and Development (EBRD) slashed by 0.2 percentage points to 3.5% its projections for Montenegro's 2024 economic growth. In January, the government in Podgorica said it is targeting average annual economic growth of 3.2% from 2024 to 2026, mainly driven by domestic demand.

Montenegro is connected by direct flights with almost all European business centres (London, Rome, Moscow, Vienna, Istanbul, Paris, Berlin, Brussels, Dubai, Munich, etc.). In addition to its two international airports, four seaports, as well as developed road and railway infrastructure, the implementation of the Bar-Boljare highway construction project has begun, which will place Montenegro among the top investment destinations in the region.

When starting a business, foreign investors have the same rights and obligations as Montenegrin citizens. Furthermore, in addition to owning a business, they have the right to own real estate, as well as to obtain economic citizenship. The state guarantees full protection of foreign investors. Within a single process, you can obtain a certificate of incorporation, PIB number, VAT number and customs number, while, after this registration, a bank account can be opened in just 30 minutes. Montenegro’s company registration process is easy and straightforward. The Central Registry of Business Entities (CBRE) of the Tax Administration collects corporate documentation and issues a tax-identification number as well as a VAT tax number.

Montenegro offers various funding options for startups, ranging from government grants to private investment. These options aim to support the growth and development of new businesses in the country. Here’s an overview of the primary funding sources available to startups in Montenegro:

Government and Public Funding

1. Montenegrin Investment Development Fund (IDF)
- Description: The IDF provides financial support to startups and SMEs through loans, guarantees, and equity investments.
- Programs: The fund offers various programs tailored to different stages of business development, including startup capital and expansion loans.
- Eligibility: Startups must meet certain criteria and demonstrate potential for growth and job creation.

2. Government Grants and Subsidies
- Purpose: These are aimed at promoting entrepreneurship, innovation, and economic development in specific sectors such as technology, tourism, and agriculture.
- Application: Startups need to submit detailed business plans and proposals to apply for grants.
- Examples: Grants may cover a portion of the costs related to R&D, equipment purchase, or workforce training.

3. EU Funding Programs
- Horizon Europe: Provides funding for research and innovation projects, including startup initiatives that contribute to scientific and technological advancements.
- COSME: Supports small and medium-sized enterprises (SMEs) by improving access to finance and markets.
- Erasmus for Young Entrepreneurs: Offers new entrepreneurs the chance to learn from experienced business owners in other EU countries through exchange programs.

Private Investment

1. Venture Capital (VC) and Private Equity
- Description: Venture capital firms and private equity investors provide funding in exchange for equity stakes in startups with high growth potential.
- Focus Areas: Technology, fintech, and other innovative sectors are often the primary focus for VC investors.
- Process: Startups must present a compelling business model and growth strategy to attract venture capital investments.

2. Angel Investors
- Description: Angel investors are typically wealthy individuals who invest their personal funds into early-stage startups.
- Network: Startups can connect with angel investors through networking events, pitch competitions, and online platforms.
- Benefits: In addition to funding, angel investors often provide mentorship and industry connections.

Alternative Funding Options

1. Crowdfunding
- Platforms: Startups can raise funds through online platforms such as Kickstarter, Indiegogo, or local crowdfunding sites.
- Advantages: Crowdfunding not only provides capital but also helps validate business ideas and build a customer base.
- Types: Reward-based, equity-based, or donation-based crowdfunding models are available.

2. Business Incubators and Accelerators
- Description: These programs offer startups a combination of funding, mentorship, and resources to accelerate their growth.
- Examples: Digital Den, Startup Academy, and Innovation Hub are some of the programs available in Montenegro.
- Support: In addition to funding, incubators and accelerators provide networking opportunities, office space, and access to industry experts.

3. Bank Loans and Microfinance
- Options: Startups can apply for bank loans or microfinance from local financial institutions, though this may require collateral and demonstrate financial viability.
- Microcredit: Designed for small businesses and startups, microcredit offers smaller loan amounts with flexible terms.

Strategic Partnerships and Collaborations

1. Industry Partnerships
- Startups can form partnerships with established companies to access resources, expertise, and potential funding.
- Such collaborations can help startups scale their operations and enter new markets.

2. University and Research Institution Collaborations
- Partnering with universities and research institutions can provide startups with access to funding for innovation and R&D projects.
- These partnerships can also facilitate technology transfer and commercialization of research outcomes.

General Tax Benefits for Startups

1. Corporate Income Tax Holiday
- Duration: Newly established companies may be eligible for a corporate income tax holiday for the first three years of operation.
- Eligibility: This incentive typically applies to startups operating in specific industries or regions, such as technology, innovation, or economically underdeveloped areas.

2. Reduced Corporate Income Tax Rates
- Startups operating in designated underdeveloped areas may benefit from reduced corporate income tax rates to encourage economic development and job creation.

Value Added Tax (VAT) Benefits

1. Simplified VAT Procedures
- Startups with annual turnover below a certain threshold (EUR 18,000) may be exempt from VAT registration, simplifying their administrative processes and reducing costs.
- VAT exemptions apply to exports and certain services, which can benefit startups engaged in international trade.

Employment and Social Security Incentives

1. Reduction in Social Security Contributions
- Startups hiring specific target groups, such as young graduates or the long-term unemployed, may qualify for reductions in social security contributions.
- This can significantly lower the cost of employment for startups, enabling them to allocate resources to other areas of growth.

2. Employment Subsidies
- Government programs may offer financial support or subsidies for startups that create new jobs, particularly in priority sectors or regions.

Research and Development (R&D) Incentives

1. Tax Deductions for R&D Activities
- Startups investing in research and development can benefit from tax deductions or credits, reducing their overall tax liability.
- This incentive is designed to encourage innovation and technological advancement within the startup ecosystem.

2. Grants and Funding
- The Montenegrin government and various EU programs provide grants and funding opportunities for startups engaged in innovative projects or R&D activities.

Sector-Specific Incentives

1. Technology and Innovation
- Startups in the technology sector may benefit from specific incentives, such as access to innovation hubs, incubators, and accelerators.
- These incentives often include mentorship, networking opportunities, and financial support.

2. Green Energy and Environmental Projects
- Startups focusing on renewable energy or environmentally friendly projects may qualify for additional benefits, such as tax exemptions or reduced duties on imported equipment.

Access to Free Zones

- Benefits of Free Zones
- Startups operating within designated free zones in Montenegro can enjoy several advantages, including:
- Exemption from customs duties and VAT on imports and exports.
- Simplified customs procedures.
- Potential tax incentives and reductions.

Montenegro offers a diverse range of funding options for startups, including public and private sources, as well as alternative financing methods. Startups should explore these opportunities and tailor their funding strategies to align with their business goals and growth stages. Engaging with local advisors, attending networking events, and participating in startup ecosystems can further enhance the chances of securing funding and support for business development.

Montenegro provides as well several tax benefits and incentives to support startups and encourage entrepreneurship. These incentives aim to reduce the financial burden on new businesses, promote innovation, and stimulate economic growth.

The supportive environment for startups through a combination of tax incentives, financial support, and access to resources are provided. These benefits are designed to reduce the initial financial burden on startups, foster innovation, and promote economic growth. Startups considering establishing operations in Montenegro should explore these incentives in detail and consider seeking guidance from local advisors to fully leverage the available benefits and ensure compliance with local regulations. Additionally, staying informed about any changes in government policies or new incentive programs can help startups maximize their opportunities for success. Working with our experts can help streamline this process, providing valuable insights and tailored strategies to ensure successful outcome. Don’t hesitate any longer. Apply to become a client today to work with our experts on legal strategies to overcome barriers.

Indotco International

Getting Started - Benefits to Register a Comapny in Montenegro