Montenegro is becoming an increasingly attractive destination for starting a business, whether you are a foreign investor or a local entrepreneur. This country is characterized by a favorable tax regime, simple procedures, and low labor costs. With access to the Adriatic Sea, Montenegro offers a suitable environment for a high quality of life. Foreign nationals have the opportunity to establish a company and obtain both work and residence permits.
Which Business Form to Choose
A Limited Liability Company (LLC) is one of the most popular and practical forms of business in Montenegro. The reason for this lies in the fact that an LLC has a flexible organizational structure. It can be founded by one or more individuals (natural or legal persons), and the management of the company can be tailored to the needs of the founders. The company must have an executive director. The executive director manages the company and must be employed by it. The minimum net salary for a director is EUR 450 for full-time working hours. A foreigner can be the executive director and, based on employment in the company, obtain the right to temporary residence. The minimum founding capital is only EUR 1.
The Process of Establishing an LLC
Opening an LLC in Montenegro is a quick process and can be carried out entirely without the presence of the founder, based on a power of attorney. After preparing the founding documentation, such as the founding act, articles of association, and similar, the registration application is submitted to the Central Registry of Business Entities (CRPS), which issues a registration decision within five days. After registration, the company opens a business account in a bank. For certain special activities, the LLC obtains a license from the competent authorities.
Basic Taxes in Montenegro
Corporate income tax is one of the lowest in the region. Income is subject to progressive taxation. Annual corporate income is taxed as follows:
- For income up to EUR 100,000, the tax rate is 9%;
- For income between EUR 100,000.01 and EUR 1,500,000, the profit tax is EUR 9,000 + 12% of the amount above EUR 100,000.01; and
- For income over EUR 1,500,000.01, the profit tax is EUR 177,000 + 15% on the amount above EUR 1,500,000.01.
Employers are required to pay social security contributions for employees. Tax reforms in Montenegro have a trend of constantly reducing contributions, so as of October 2024, contributions will amount to only 11% of the gross salary. Currently, contributions amount to 21.5% of the gross salary.
The general VAT rate is 21%, while a reduced rate of 7% applies to certain products, such as basic foodstuffs (bread, flour, milk and dairy products, baby food, lard, oil, meat, eggs, and sugar), medicines, including veterinary medicines. Capital income (including dividends) is taxed at a rate of 15%.
Other Forms of Business
Starting your own business as an entrepreneur in Montenegro is simple and affordable. Similar to an LLC, the procedure involves registration with the CRPS and opening a bank account. A foreigner can be an entrepreneur, but must obtain a temporary residence and work permit. Montenegro offers a very favorable tax treatment for income earned from entrepreneurial activities. The non-taxable portion of income is EUR 8,400 annually. Annual income over EUR 8,400 is subject to progressive taxation. Annual income in the range of EUR 8,400 to EUR 12,000 is taxed at a rate of 9%, and the portion of annual income above EUR 12,000 is taxed at a rate of 15%.
Our Recommendation
If you are looking for a destination that combines good business opportunities with a high quality of life, Montenegro could be the ideal place for your next business venture. Throughout the entire process, it is important to have an experienced legal advisor who understands the local legislation. The lawyers at the law office “Brajković & Đurišić” have many years of experience in establishing companies and providing full-service legal assistance. Contact us to build a solid foundation together for your successful business venture in Montenegro. Feel free to reach out to us via email at radmila.djurisic@bdlegal.me or by phone at +38267725231
