How ideal is Montenegro from the point of view of business?
What is better in Montenegro compared to others?
The corporate tax in Montenegro is 9%, and it is one of the lowest ones in Europe.
In France, it’s 33.3%, in England 30%, in Slovenia 25%, in the Czech Republic 25%, in Croatia 20%, in Hungary 9%, in Macedonia 15%, in Serbia 10% and in Montenegro 9%.
The profit of the company (gain) is due to the company owner that he can transfer to his own foreign bank account.
The owner may draw the profit after the final settlement at the end of the year (it shall be submitted to the national tax authority of Montenegro until 28 February)
For example, if the company produces a profit of 10 000 euros, and the owner wishes to draw or transfer the amount for himself after the passing of the final account, he may do it in the following way: For 10 000 euros, the tax is 9%, which is 900 euros; the local tax rate is 15% (15% payable for 900 euros), which is € 135, thus actually the owner can account for himself 8965 euros and it can be used for bank transfer anywhere, in Montenegro or on a foreign bank account. If the owner does not draw the profit, but he wishes to invest it into his sector, in this case, he does not have to pay tax for it.
Montenegro is the only country, which is not the member of the European Union, and is allowed to use the euro – with the permission of the European Commission. It is possible to withdraw money from cash machines. According to these, a unique situation has evolved: you can benefit from Europe’s advantages. There is no risk of local currency inflation.
Investment motives in Montenegro
Foreign companies, which wish to do business in Montenegro, have the same rights as the national enterprises. As for the establishment procedure – it is fast and simple. In case of company registration, foreign individuals shall comply with the same requirements as national entrepreneurs.
The business language is English, the local currency is the Euro, the tax system is one of the most competitive ones in Europe, and the country has qualified workforce. The country is democratic and politically stable, it is an EU candidate state and Montenegro is, without a doubt, the next country in the region to join the Union after Croatia. It is a 2-hour flight from the European capitals; furthermore, Montenegro enjoys the economic freedom. The attractive sectors are finance, tourism, energy, health tourism, agriculture and the real estate market.
Advantages of purchasing real estate in Montenegro:
- Foreign citizens may finally take possession of their purchased asset
- There is on further wealth tax
- Extremely low, 3% property tax which must be paid to the income authority
- One of the lowest income taxes among the European enterprises – only 9%
- The property may be sold again in any forms, without tax penalty
- Quick arrangement of ownership documents
- The real estate may be rented out without any restrictions
- The value of the purchased property grows continuously
- Tourist destination – fastest growth in the world
- The longest port in Europe, especially designed for super yachts, is under construction in the Bay of Kotor
Direct flights from all big European centers to the Bay of Kotor (Tivat Airport). The expansion of the airport and the increase of the number of flights is under planning.
Compared to other countries in the region, in Montenegro, there is a more simple procedure in force related to company registration, accompanied with the lowest registration fee.
By the easiness of starting an enterprise, according to the World Bank, New Zealand is the best country. There the registration only takes one day, and it does not even cost a dollar. Australia is at the second place, and Canada is the third. In our region Macedonia is the best – it is at the sixth place. After it, there is Slovenia at the 28th place, and Montenegro is the 47th in the world. Croatia falls behind with 20 places, to the 92nd place. Serbia and Bosnia-Herzegovina are now at the 162nd place.
Montenegro has a relatively straightforward taxation system, which is considered attractive for businesses and individuals due to its competitive rates. Here’s an overview:
Corporate Income Tax
• The corporate income tax rate in Montenegro is 9%, one of the lowest in Europe.
• This rate applies to profits generated by resident companies, as well as non-resident companies on income earned within Montenegro.
Personal Income Tax
• The personal income tax rate is 9% on gross income for most taxpayers.
• Higher-income earners (above €1,000/month) are subject to an additional 13% surtax on income exceeding this threshold.
• Income types subject to taxation include salaries, self-employment income, rental income, and capital gains.
Value Added Tax (VAT)
Montenegro applies a VAT system with three rates:
1. 21%: Standard rate for most goods and services.
2. 7%: Reduced rate for essential goods, medicines, books, public transportation, and certain hospitality services.
3. 0%: Zero rate applies to exports and specific transactions.
Social Security Contributions
Both employers and employees contribute to social security:
• Employer contributions: 10.7% of gross wages.
• Employee contributions: 24% of gross wages (split into 15% for pension, 8.5% for health, and 0.5% for unemployment insurance).
Property Tax
• Property tax rates range from 0.25% to 1% of the market value of the property, depending on location and property type.
Withholding Taxes
• Dividends, interest, and royalties paid to non-residents are subject to a 9% withholding tax.
• Payments to entities in jurisdictions with preferential tax regimes may be taxed at 30%.
Capital Gains Tax
• Capital gains are taxed at 9% for both individuals and businesses.
Other Taxes
• Excise duties: Imposed on alcohol, tobacco, fuel, and luxury goods.
• Tourist tax: Applied to accommodations used by tourists.
Double Tax Treaties
Montenegro has a network of double taxation treaties with many countries to avoid double taxation and promote cross-border investment.
Montenegro’s low tax rates and straightforward tax regime make it appealing to foreign investors and expatriates, particularly in sectors like tourism, real estate, and IT.