How a foreigner can open a company in Montenegro

Montenegro is an ideal destination for those looking to open a business in Europe with limited start-up capital. Opening a business in Montenegro for a foreigner requires meeting a number of requirements and adhering to local laws.

Company registration is carried out with the Central Register of Legal Entities (CRPS). Typically, the company formation process can take anywhere from a few days to a few weeks, depending on how quickly the necessary documents are received.

For a non-resident to be eligible to open a business in Montenegro and become a company director, they must first obtain permanent residence in the country and then a work permit.

Advantages of Opening a Company in Montenegro for Foreigners

• Simple business registration. Documents can be submitted and received online, as the country is rapidly developing its e-government services sector.
• The requirements for foreigners wishing to open a company in Montenegro are the same as for Montenegrin citizens, including tax rates, required documents, and fees.
• Low share capital. Foreigners are required to deposit a minimum of 1 euro into a corporate bank account for an LLC or nothing for sole proprietors.
• Low costs. Compared to other European countries, Montenegro offers relatively low rent, utility bills, and employee salaries.
• Company profits are taxed at a rate of 9%, which is significantly lower than in most European and Asian countries.
• Residence Permit. Montenegrin entrepreneurs have the right to apply for a residence permit, which potentially leads to citizenship.

Forms of Doing Business

According to Montenegrin law, foreigners can register as:

• Private Entrepreneur (PE);
• General Partnership or Simple Partnership (OP);
• Limited Liability Partnership or Limited Partnership (KD);
• Ordinary Joint Stock Company (AD);
• Limited Liability Company (LLC);
• Representative Office of a Foreign Company.

Company Registration

To open a business in Montenegro, a foreign entrepreneur must complete several steps. Steps:

1. Research the legal requirements for entrepreneurs. The current rules for registering a company in Montenegro are set out in the Law on Companies No. 01-1286/2 and the Law on the Classification of Activities. Entrepreneurs should carefully review the tax rates and possible benefits for their type of activity. At this stage, most entrepreneurs seek assistance from immigration lawyers and qualified intermediaries with experience in this field to properly register their company.
2. Complete the registration form and prepare the documents. The form can be downloaded from the website of the Central Register of Legal Entities of Montenegro (CRPS). The application must provide general information about the future company and its director. Information on completing the form is contained in the document itself.
3. Obtain a certificate. To complete the registration process, you will need the company owner's electronic signature, issued by an authorized certification body in Montenegro.
4. Register the company in CRPS. The entrepreneur must create an account in the system, upload the completed application and required documents, and provide a receipt for payment of the state fee of €8 (€43 for a joint-stock company). The company owner must then sign the document with their electronic key. After this, the company name will appear in the register, and the owner will be assigned a tax identification number.
5. Prepare additional documents. At this stage, the company drafts its articles of association, opens a bank account, and obtains a seal. Additional permits for company activity, such as licenses, can be obtained from local authorities.

Required Documents

The basic set of documents required to open a company in Montenegro:

• Passport valid for at least three months from the date of application;
• An appendix containing all company information;
• Memorandum of Association;
• Article of Association;
• Receipt of payment of state duty;
• A tax office statement confirming that the company has no outstanding debts.

Depending on the legal form of the company and the type of activity, additional permits, licenses, and documents may be required.

Foreigners most often choose to establish their business as an LLC, while small firms with a small number of employees usually register as sole proprietors. Currently, LLCs are especially relevant, as foreigners can only become landowners in Montenegro by having legal entity status.

Creating a Limited Liability Company

• The company registration process typically takes about 2 weeks.
• The minimum authorized capital required by law is 1 euro, but this amount can be higher if desired (for a joint-stock company, the authorized capital is 25,000 euros).
• The founder only needs a foreign passport.
• The number of founders of an LLC in Montenegro, as stipulated by law, is up to 30. The list of founders must be declared. A foreigner can be both a founder and a director of a company.
• It is also necessary to provide several company name options for review by the state registrar.
• The company's legal address and its primary activity must be indicated.
• An executive director of the company must be appointed.
• Documents are submitted to the Central Register of the Commercial Court in Podgorica by the founder in person or by their authorized representative (with a notarized power of attorney).
• If the director of the company is a foreign citizen, the basis for issuing a work permit is the fact of company registration.

Accounting in Montenegro

A company registered in Montenegro must maintain accounting records even if there is no income.

Taxes

Corporate and income taxes Taxes

• Income tax: 9% (or 11%) (exempt up to €30,000).
• Corporate tax: 9%.
• Social security rate: 34.3% (maximum: €50,000).
• Social security rate for companies: 10.3%.
• Social security rate for employees: 24%.

Value Added Tax (VAT) and VAT Refunds

The value added tax (VAT) rate in Montenegro is 21%, VAT is exempt up to €30,000.

Let's assume that the amount of tax debt in the tax period is less than the amount of value added tax that The taxpayer can claim a deduction in the same period. The difference is recognized as a tax deduction upon the taxpayer's application for the next tax period. This procedure is completed within 60 days of filing the value-added tax (VAT) return.

For taxpayers primarily exporting products, as well as for taxpayers with more than three consecutive VAT calculations, the refund of the VAT difference, indicating VAT payment, is processed within 30 days of filing the VAT return. If the taxpayer has ceased paying other taxes, the VAT difference is reduced by the amount of the tax liability.

Import Regime

The import of raw materials is exempt from customs duty if the imported raw materials are used to produce final products for export. This requires obtaining permission from the competent customs authority. A foreign investor does not pay customs duties when importing equipment, but is required to pay VAT.

Approval must be obtained by contacting the authorized customs authority.

Export Regime

Exported products are not subject to customs duties; however, according to the VAT Law, VAT is paid at a 0% rate. This means that VAT is paid on raw materials, and no VAT is paid on exported finished products. Furthermore, VAT paid on raw materials used in exporting products can be refunded.

Customs Duties

Customs duties are regulated by the Law on Customs Duties. Customs duty rates range from 0% to 30%. A 5% tax applies to goods imported for non-commercial purposes.

There are also cleaning and property taxes, the rates of which vary by municipality. Foreign investors are taxed no more than local investors. A company operating in Montenegro may transfer funds to its foreign account at the end of the year in addition to the income tax paid in advance. The real estate sales tax rate is 3% of the taxable base.

Montenegro is not yet a member of the European Union and, according to some estimates, may join by 2028. Until then, specific new business registration rules have not yet been developed and adopted. After joining the EU, business registration rules in the country will become more harmonized with EU law, potentially simplifying procedures for citizens of member states and strengthening regulations in line with European standards.

It should also be noted that the business registration process may become more complex if EU accession leads to a revision of the current rules for non-EU citizens. Requirements for obtaining and renewing business-based residence permits will become more stringent and will require proof of the company's real economic value to the country. The company registration process will become more harmonized with European standards. This may include greater digitalization, facilitating online document submission, but will also require strict adherence to all formal requirements, including the legalization of foreign documents and payment of fees.