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Investing in Montenegro

Foreign direct investments (FDIs) represent one of the most important instruments through which a national economy stimulates its production, know-how import, employment growth, infrastructure development, poverty reduction, etc.

Benefits achieved through FDIs inflow created a strong competition in the global market of free capital in order to attract as many and as diverse FDIs.
Montenegro is a small and highly open economic system has a potential to be flexible in fitting in the global FDI trends, and in that sense it primarily has to work on the improvement of the overall investment climate. Attracting foreign investments is one of the primary objectives, bearing in mind their positive effect on speeding up the production and creating new jobs by opening new businesses or companies.

Why invest in Montenegro? Because Montenegro has:
- Political, monetary and macroeconomic stability
- Easy START UP
- The liberal economic foreign trade regime,
- Favorable tax policy: 9 % Profit Tax, 7/ 19% VAT, Income Tax 9 % and 15 %
- International Accounting Standards
- The growth of economic freedoms
- Geography and climate

On the basis of principles of the WTO, Montenegro is a signatory of multilateral and bilateral agreements - Stabilization and Association Agreement with the EU, CEFTA 2006, EFTA, agreements with Russia, Belarus and Turkey, which allows it cumulation of origin and duty-free trade with around 800 million consumers.

A foreign investor may be foreign natural or legal person established abroad, a company in which the share of foreign capital is over than 25%, the Montenegrin citizen with the permanent or temporary residence abroad for more than a year and the company which a foreign person established in Montenegro.

Foreign investor:

- Can establish a company (either alone or with other investors), invest in companies, buy a company or part of it, and establish a part of a company.
 - Is taxed the same as domestic investors.

The share of a foreign investor may be in cash, goods, services, property and securities.

TAXES

Income tax rate - 9% and 15%
Tax rate on company profit - 9%
Value added tax rate - 19% and 7%
Taxes and contributions on personal income
Income tax 9%
Total contributions paid by the employer 9.8%
Total contributions paid by employees 24.0%
Total contributions for compulsory pension insurance 20.5%
Total contributions for compulsory health insurance 12.3%
Total contributions for unemployment insurance 1.0%

SUPPORT TO INVESTORS

The incentives at the national level include tax incentives for investing in underdeveloped parts of the country, namely:

1. Exemption from profit tax
The newly established legal entities in underdeveloped municipalities, which perform the productive activities, are exempt from profit tax for the first eight years. The tax exemption does not apply to a taxpayer who operates in the sector of primary production of agricultural products, transport or shipyards, fishing and steel.

2. Tax on personal income
A taxpayer who starts manufacturing activities in underdeveloped municipality is exempt from income tax for the first eight years. This tax exemption does not apply to a taxpayer who operates in the sector of primary production of agricultural products, shipyards, fishing and steel.

Subsidies for employment of certain categories of unemployed persons

The subsidies may be used by an employer who hires:
- A person with at least 40 years of age;
- Unemployed Roma, Ashkali and Egyptian persons;
- A person who is in the records of the Employment Agency for more than five years;
- A person who is employed on public works;
- A person employed indefinitely after the traineeship;
-A person whose services are no longer needed (techno-economic surpluses), and who is registered in the Registry of the Employment Agency;
- A person who is employed to perform seasonal work;
- The unemployed person with over 25 years of service, which is the user of money allowances;
- Persons in business zones.

For the above listed categories of the unemployed, the employer does not pay:
- Contribution for mandatory social insurance on wages (pension and disability insurance, health insurance contributions, contributions for unemployment insurance, contributions for the Labour Fund);
- Tax on personal income.

Calculated and suspended from the employee's salary are as follows:
- Contribution for a pension and disability insurance at the rate of 15.0%;
- Health insurance contribution at the rate of 8.5%;
- Contribution for unemployment insurance at the rate of 0.5%;
- Surtax;
- The employer pays these contributions in the calculated amount including tax on personal income. The employer pays the calculated surtax. The basis for calculating contributions is a gross income of an employee and the employer pays taxes and contributions when paying the salary to an employee.

FINANCIAL SUPPORT

During the two years of work, the Investment and Development Fund (IDF) has supported 394 projects with an investment of over EUR 32 million, and banks supported its implementation and evaluation of projects with around seven million.

The main IDF objectives are encouraging and accelerating the economic development. The Fund grants loans and issue guarantees, performs tasks related to the sale of capital in the Fund's portfolio. The most important areas of activity are:
- Support to SMEs (credit and warranty support);
- Support in dealing with infrastructure and environmental projects;
- Incentives for exports and employment;
- Privatization of the rest of the social capital.
The support to the SMEs and entrepreneurs is realized through direct loans, loans through banks, special credit lines, guarantees and factoring.

The credit conditions stipulate interest rates ranging from 4.5 to 6.5% with a grace period of 2 years and a repayment period of 8 years. Special benefits are defined on the basis of the implementation of projects in the northern municipalities and in less developed towns (Cetinje and Ulcinj), for entities which hire through the implementation of a project five or more new persons and those entities which as collateral submit a bank guarantee. The MIDAS project which is being implemented in cooperation with the Ministry of Agriculture and Rural Development is carried out through the IDF. The credit line for financing of the project headed by women, and a credit line for young people in business (from 21-35 years) are available at the interest rate of 4.5%.

BUSINESS ZONES

Business zones are important generators of the economy. They are chances to increase exports, employment, balance between manufacturing and services sectors and a stimulus to activities that will be a support to the production capacities developed in the zones.

The benefits at the local self-government level are:
- Incentives in payment of utility and other charges;
- Favorable price of lease/purchase of a space for the business zones;
- Reduction or exemption from surtax on personal income;
- Reduction of taxes on real estate;
- The possibility of defining a favorable model of public-private partnerships;
- Infrastructure equipment in areas where it does not exist.

In 2012, the business zones in Berane and Kolašin are open for investments.

The Municipality of Berane defined the business zone of “Rudeš”, which includes except industrial zone the green areas and roads. The business zone covers an area of 548,355.398 m² of which one part is privately owned.

Incentives for doing business in business zones:
- The land will be given in use for a period of up to 10 years free of charge;
- The potential investors commit themselves on behalf of land use to employ a number of workers, including:
- For the use of the land area of 2.500m² to employ 3-5 workers
- For the use of the land area of 5.000 m² to employ 6 – 10 workers,
- For the use of the land area of 10.000 m² to employ 11-20 workers.
- Remove administrative barriers;
- Strengthen the institutional and financial support to small and medium-sized enterprises;
- The possibility of public-private partnerships;
- The possibility of release of land tenure;
- The possibility of assignment of office space and
- Parceling - adjustment of the area to potential investors.

The Municipality of Kolašin declared the site “Bakovići” as a business zone, which is located only 3km from the center, on the left and right sides of the main road Kolašin – Mojkovac, in the area of 30 ha.
- Incentives for doing business in the business zone:
- The potential investors in light industry manufacturing facilities are exempt from fees for the land communal infrastructure;
- The possibility of release of land tenure and
- Exemption from property tax and surtax on income for the first 8 years of operation in the business zone.

The Royal Capital of Cetinje defined a program of incentives. The complex “Gornji Obod“is located in the area of former Košuta and it covers 23,121 m². The areas are equipped with the necessary Infrastructure, including water, electricity, roads and other.

In the administrative capital of Podgorica land the proposed land for the formation of the first business zone is located nearby the airport Golubovci and it covers an area of about 46ha.

For the Municipality of Bijelo Polje, the City Park represents the most competitive location for building a business zone. The capacities would be adapted to the use of micro and small manufacturing facilities, management units of companies, a business incubator, a logistics center, while in the area around the existing capacities additional facilities could be build, according to the needs and interests of investors.

The Municipality of Nikšić has declared as a business zone an area which includes part of capacities of the company Toščelik Nikšić to provide investors with a favorable business environment for carrying out production activities.

The Municipality of Ulcinj has declared as a business zone the site ’’Vladimirske Krute’’ and part of the main road Bar-Vladimir of the total area of 276.166m².

The Municipality of Žabljak has identified five potential business zones:
1. Njegovuđa and Pilana – total area of around 10ha,
2. Njegovuđa II - total area of 4ha,
3. Vruljci – pebbly terrain, area of 10ha,
4. Žabljak work zone - area of 32ha, and
5. Service zone - area of 8ha.
Planned business zones for the Municipality of Mojkovac are:
- An area of the former wood processing plant ’’Vukman Kruščić’’  and  ’’Zakršnica ’’ in Podbišće as the hotel-tourists zones;
- An area of the former ’’Tailings pond” and ’’Babića field ’’ as a sports and recreation zone;
- An area in Gornja Polja ’’Varda’’ and the former mines ’’Brskovo’’ as economic zones.
The spatial and urban plan of the Municipality of Tivat by 2020 defined the locations that are suitable for manufacturing and utility activities. The DUP “Gradiošnica” planned the zone of the total area of 23.690m². Also, within the scope of the State Location Study “Part of the Sector 22 and Sector 23”, in the urban zone 4 are designed for utility and business services. Within the scope of the State Location Study, an area “Kalardovo-the Island of Flowers-Brdišta“ placed in the urban zone 6 is planned for storage and service zone.

The Municipality of Danilovgrad for the construction of industrial buildings planned a space in the area of Spuž, which is defined as an agro-industrial zone where agro-production plants have already been built or are in construction. This area also includes a narrower band around the train station Spuž which envisages the construction of storage and possibly industrial plants.
The second land area where the construction of industrial and agro -processing plants is allowed is an area near the main road M-18 Podgorica-Nikšić and the reconstructed local road Danilovgrad-Spuž-KPD-Podgorica.

The third land area where the construction of industrial and agro-processing plants is allowed is the immediate area around the train station in Danilovgrad and the area on the right side of the local road Danilovgrad-Glava Zete-Bogetići stretching from the gas station in Danilovgrad to the border with the Municipality of Nikšić.

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