Investment in MONTENEGRO
As Kasaroglu International Consultancy Services A.S; we are now more capable to provide consultancy services to investor candidates who desire to receive high quality and reliable service regarding their investments in Montenegro and other Balkan countries with the establishment of our subsidiary company established in Montenegro with the title of KASAROGLU MONTENEGRO DOO. Indeed, in order to carry our experience one step further which we have gained through the investment and legal consultancy services that we have been providing to investors who wish to invest in Turkey and abroad for over 40 years, KASAROGLU MONTENEGRO will be a very strong bridge to access to all the required sources to be successful.
INVESTMENT ENVIRONMENT IN MONTENEGRO
Since the restoration of independence in 2006, Montenegro’s security and prosperity have facilitated prospective EU and NATO integration; in April 2012, Montenegro became a full member of the World Trade Organization (WTO). According to the Human Development Index (HDI), a key quality of life indicator published by the UNDP, Montenegro was ranked 49th out of the total of 188 countries in 2015, falling into the category of countries with high HDI.
The current developments in the Montenegrin economy suggest that the economic activity has picked up since the second quarter of 2016, driven primarily by the intensified works in the course of implementation of large infrastructure projects in the tourism and energy sectors.
In this regard, adoption of new laws, harmonized with the EU ones, and implementation of the institutional reform in the fiscal system and financial sector helped towards a considerable improvement of the business environment in the country. The economic growth model will remain unchanged in the upcoming period and will rely mainly on foreign direct investments (FDIs). Growth potential exists in the sectors of tourism, energy, agriculture and industry, which have been identified as the strategic development priorities. The economic policy will therefore focus on enhancing the competitiveness of the economy, along with implementation of structural reforms and development of infrastructure, all with the aim to facilitate greater volumes of domestic and foreign investments.
Treatment of Foreign Investors
Foreign investors may invest in any industry and are free to transfer funds, assets and other goods, including profit or dividend. Foreign investors enjoy national treatment, i.e. have the same status as the domestic ones. Foreign investors include: foreign physical or legal persons with headquarters abroad; companies with more than 25% of foreign capital; Montenegrin citizens residing abroad for more than 12 months, or companies set up by foreign citizens in Montenegro.
Foreign investments are implementable through:
- Setting up of a new company (independently or together with other investors);
- Investing in existing companies;
- Setting up a foreign company branch;
- Purchase of a company.
Fiscal Policy
To enhance utilization of major resources and bring in new investments, the tax reform policy introduced fiscal incentives for the investments in the following sectors: high-end tourism – hotels with 5 or more stars; food production, except primary agricultural production, and capital investments in the energy sector. The Law on VAT stipulates zero VAT rate on the delivery of products and services for the construction and furnishing of any hospitality establishment with 5 or more stars, construction of energy-generation facilities with more than 10 MW installed capacity or of food production plants categorized within sector C group 10 under the Law on Business Activity Classification (Official Gazette of MNE 18/11), if the investment exceeds € 500,000.
Economic Cooperation Agreements
The economic cooperation agreements aim primarily to establish an institutional form of cooperation through the strengthening and promotion of economic interests. These agreements identify the areas of mutual interest, with particular emphasis on the following: agriculture, water management, energy, research and development, construction industry and infrastructure, transport and logistics, environmental protection, tourism, investment promotion, cooperation in the field of SMEs, ICT and services.
20 agreements on economic cooperation are in effect in Montenegro, namely with: Romania, the Republic of Austria, the Republic of Bulgaria, the People’s Republic of China, the Republic of Hungary, the State of Qatar, the Republic of Serbia, the Republic of Turkey, the Republic of Macedonia, the Republic of Slovenia, the Hellenic Republic, the Republic of Croatia, the Federal Republic of Germany, Spain, the Republic of Azerbaijan, the United Arab Emirates, the Czech Republic, the Slovak Republic, the Republic of Albania, and the Argentine Republic.
The agreements envisage establishment of Joint Committees, assigned to carry out periodical reviews of the issues related to the enhancing of the existing bilateral economic relations and identification of new avenues for their development. Most Joint Committees meet once a year to exchange experience in the course of direct communication and provide suggestions for further strengthening of economic cooperation.
Agreements on the Mutual Promotion and Protection of Investments
These agreements ensure further enhanced mutually beneficial cooperation between two countries, thus establishing an adequate legal framework for reinforced cooperation in the field of investment. They define the conditions for investments, allow free transfer of funds, and regulate the right of subrogation, compensation in the event of expropriation and settlement of disputes between investors and countries, including the settlement of disputes between the countries themselves. 24 agreements on the mutual promotion and protection of investments are in effect in Montenegro, namely with: the Republic of Austria, the Republic of Slovakia, the Republic of Serbia, the Czech Republic, the Kingdom of Denmark, the Republic of Finland, the State of Qatar, the Republic of Macedonia, Malta, France, the Hellenic Republic, the Netherlands, Israel, Cyprus, Romania, Lithuania, the United States of America, Germany, Poland, Spain, the Swiss Confederation, the Republic of Azerbaijan, Moldova, and the United Arab Emirates.
INCENTIVES AND RELIEFS AVAILABLE TO INVESTORS
Decree on Fostering Direct Investment
The Decree on fostering direct investment (Official Gazette of Montenegro 80/15) sets forth the financial incentives for new investment in Montenegro, as well as for expansion or diversification of the existing ones; it aims to improve the business environment and enhance the competitiveness of the economy. The Decree seeks to attract new investors, increase employment, in particular in the less developed areas, and balance out regional disparities.
The investors implementing investment projects that create jobs and contribute to the economic and regional development of the country are eligible for the financial incentives approved by the Government of Montenegro.
Promotion Programme of Business Development – Business Zones
The Government of Montenegro adopted the Promotion Programme of Business Development, which included the plan for development of Business Zones. Business Zones are unique entities at the territories of the respective local governments; they are partly or fully connected to the utilities and potential investors gain access, in addition to shared premises, to additional tax and administrative reliefs both at the national and local level. The project aims to incentivize production industries on the land plots with available connections plots with available connections to utilities, enhance employment in the less developed local governments, and activate the capital of the domestic and foreign investors who would identify interest in the implementation and advancement of this project at considerably lower costs of operation within the zones.
Local-level reliefs include:
- Lower utility and other fees;
- Favorable lease/purchase of premises within the business zone;
- Lower or zero surtax to PIT;
- Lower real estate tax rate;
- Opportunity to define a favorable public-private partnership model;
- Access to utilities, where required.
In addition to the reliefs described above, which are available only in the Business Zones, the investors operating on these sites have access to other national- and local-level reliefs, such as subsidies under the Decree on fostering direct investment, Investment and Development Fund (IDF) loans and similar support programmes, all in line with state aid rules.
Cluster Development Programme in Montenegro 2017-2020
The Programme aims to provide financial support to the entrepreneurs and MSMEs within clusters through investment in tangible or intangible assets or operational costs, in order to strengthen the capacities of clusters and their positioning in the local and international market.
The Ministry of Economy will cover up to 65% of the eligible costs of the purchase value of equipment, excluding VAT, for the clusters operating in the less developed local governments, or up to 50% of the eligible costs for the clusters from other regions; the maximum amount per applicant is €15,000. The remaining 35% or 50% of the costs of purchase of equipment are covered by the applicants themselves. The strategic priority activities eligible for co-financing include the following:
- Wood processing;
- Other manufacturing activities (except those not included in the Programme);
- Tourism and hospitality industry.
The Programme is implemented with the aim to enhance the innovation potential of SMEs and strengthen cooperation with innovative organizations (science-and research institutions, science and technology parks, centers of excellence, innovation entrepreneurship centers, business incubators, consultancy companies) and to advance research and development and translate the results into development of new products, processes, organization models and marketing improvements.