Law Office Vujacic > Podgorica, Montenegro > Firm Profile

Law Office Vujacic > Firm Profile

Law office Vujacic was founded in 1971, and in that time it was one of the first law firms in Montenegro. Today it is a modern business law firm with a long and proud tradition of supporting clients by high quality legal services in all areas of corporative, civil and commercial law.

Our team of lawyers has shown a great success in areas such as: mergers and acquisitions, telecommunications/media, intellectual property, administrative law, corporate law, finance law, competition law, real estate, dispute resolution, employment, tax issues etc.

The guiding principles of our office are quality, confidentiality, efficient, timely, and cost effective services. We provide efficient legal representation to our clients both on regional and international levels.

The firm offers one-stop service to foreign direct investors in different field of investments including advice on entry and tax strategies for overseas investors, entity structuring etc.

Our work is based on commitment for providing comprehensive, effective legal advice to domestic and international clients operating in Montenegro.

Also we try to find innovative solutions covering a variety of law and business experience.

We are proud to have participated in the projects of multimillion value, where some of them are the first projects of its kind in Montenegro, like the first Wind Farm in Montenegro – Krnovo, as well as the largest mall in Montenegro – Capital Plaza (earlier Atlas Capital Center)

Also  we cooperate with many international law firms from former Yugoslav, European Union, East Europe.

Doing Business In

Montenegro

MONTENEGRO

With its lovely location, high mountain covered with snow and ice, long river, lovely beaches, and abundance of energy sources, Montenegro is an excellent site to combine the pleasant and the practical.

• Population: 622,373 (2017 midyear est.)
• Area:000 km²
• Government: is an independent and sovereign state, republican form of government. Montenegro is a civil, democratic, ecological and the state of social justice based on rule of law.
• Capital city: Podgorica, population: 185,000
• Membership of international organizations: Montenegro is in process of European Union integration and negotiations between Montenegro and the European Union officially begun on 29 June 2012, Brussels.

Montenegro joined the NATO in June 2017, and also Montenegro is member of many international organization as UN, WTO, OSCE.

• Official language: Montenegrin.
• Currency: euro (EUR), since 2002.

• Business environment

Since gaining its independence in 2006, Montenegro has achieved significant strides in both social and economic development, establishing itself as a safe, politically stable, and economically thriving nation with the potential for rapid growth.

Montenegro is characterized by the following business benefits significant for investments in various fields:

1. Political and monetary stability;
2. Legal framework for investment reformed according to the EU;
3. Favorable tax policy: 9% tax on profit, 7/21% VAT, 9/15% income tax;
4. Simple START UP;
5. Liberal regime of foreign trade;
6. The national treatment of foreign investors;
7. A set of incentives established at national level, in form of tax exemptions, for investments in the northern part of the country and in newly established business zones;
8. Investment incentives and subsidies given at local level in form of utility fees exemptions, favorable land rental/purchase price, reduction of property tax rate;
9. Developed telecommunication infrastructure;
10. No restrictions on profit, dividend or interests.

Based on the principles (member) of the WTO (2012), Montenegro is a signatory of the multilateral and bilateral agreements – Stabilization and Association Agreement with the EU, CEFTA 2006, EFTA, Turkey, etc. which enables the cumulating of origin and duty-free trade with around 800 million consumers.

• Foreign investment regime

Foreign investor may be a foreign natural or legal person established abroad, a company with a share of foreign capital of over 25%, the Montenegrin citizen residing abroad for more than a year and the company established in Montenegro by a foreign entity.

Foreign investor:

• may establish a company (either alone or with other investors), invest in companies, buy a company or part of it, establish a part of a company.
• is taxed the same as domestic investors.

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

Foreigners in Montenegro have the right to purchase real estate under the conditions fulfilled by domestic entities and by presenting an identification document.

However, according to the Law on Property Relations, a foreigner cannot own natural resources, public goods, agricultural land, forests and forest land, cultural monuments of great and special importance, real estate in a land-border area up to a depth of one kilometer and islands, real estate located in an area which was declared by law an area in which foreigners cannot have right of ownership in view of protecting the interests and security of the country.

Foreigners may be entitled to a long-term lease, concession, BOT and other arrangements of public-private partnership, over the above-mentioned real estate.

Law on Foreign Investment, which was adopted by the Parliament in 2011, establishes the framework for investment in Montenegro and eliminates previous investment restrictions, extends national treatment to foreign investors, allows for the transfer and repatriation of profits and dividends, provides guarantees against expropriation, and allows for customs duty waivers for equipment imported as capital-in-kind.

In December 2019 a new Law on Public Private Partnerships has been adopted by the Government, and it also has been established the Montenegrin Investment Agency (MIA), in order to better promote investment and foster economic development.

The Montenegro Citizenship by Investment Program which was officially launched on 22 November 2018 was concluded on 31 December 2022.

• Taxation regime

 The health insurance contributions for employees as well as employers have been suspended, and Montenegro will initially fund its healthcare system from the state budget.

• Taxation treaties

Montenegro has signed many taxation treaties with countries on income and property, that regulate double taxation. There are 44 taxation treaties in force with:

There are also 23 bilateral investment treaties in force with following countries: Austria, Czech Republic, Finland, Denmark, Malta, France, Germany, Poland, Greece, Netherlands, Spain, Cyprus, Lithuania, Slovakia, Romania, the Republic of Serbia, Qatar, Macedonia, Azerbaijan, the United Arab Emirates, Moldova, Israel, and Switzerland.

• Business structures

The business activity organization and conduct in Montenegro is basically regulated by the Company Law according to which there is following modes of business organization possible to establish:

1. Entrepreneur,
2. Partnership,
3. Limited Partnership,
4. Joint Stock Company,
5. Limited Liability Company, and
6. Foreign Entity Branch.

Out of the above stated modes of business organization, taking into consideration information collected and experiences, there are two models that are usually used by foreigners “Limited Liability Company” and “Foreign Entity Branch”.

• Limited Liability Company (LLC)

LLC is a form of business organization highly recommended to be established for various aspects, that is to say:

• It can be organized by foreign and domestic individuals and legal entities, equally,
• Founders are liable for the company’s actions up to the amount of their equity in the company,
• There is no minimum number of founders and maximum is 30,
• Minimum amount of founding capital is 1,00 EUR, and there is no maximum,
• Registered founding capital must be fully paid, but also can be disposed of freely,
• There are no registered or bearer shares, but founders hold equities in the company,
• Company’s obligatory bodies are Assembly and Executive Director, while Board of Directors is optional,
• In a one-founder company, a Founder exercises all rights and obligations of the Assembly,
• Equities are not registered with the Securities Commission,
• Executive Director can be only an individual, and not corporate structure,
• LLC gains the status of independent legal entity as of the date of its registration with Montenegrin Company Registry (Company registry).

LLC is a form of business organization used most often by both domestic and foreign investors, mostly because of its independency and limited liability towards the Founder, as well as for the reasons that Foreign Entity Branch at this moment, and according to its practical functions in this jurisdiction, does not provide to the mother company any favourable aspect in this type of organization, that is better elaborated below.

• Foreign Entity Branch (Branch)

Foreign Entity Branch is the type of business organization used sometimes by the foreign investors, for the following reasons and with the following practical aspects, that is to say:

• Branch must be registered with the Company registry,
• It must conduct business activity in full compliance with the Montenegrin regulations,
• All changes in the mother company, Branch must report with the Company registry,
• Foreign Entity Branch does not have a status of an independent legal entity,
• Branch has its Founder/Mother Company and Authorised Representative as equivalent to the Executive Director in the LLC,
• Taking into consideration practical requirements of the state and municipality bodies, in all aspects of its function, Branch is equal to the LLC and requirements attached to the status of LLC.

Taking into consideration that, as practice showed the Branch is not interpreted in the sense and as a legal institution of foreign legal systems, as such form of organization currently must have all requisites as LLC, as : Tax and VAT Number, employed Authorised Representative, paid social security contributions, engaged business premises and pertaining business license, its own annual financial report and obligation to pay income tax, and others, almost all foreign investors organized before in such a form are currently trying to make new establishment as LLC, as consolidation between mother and daughter company became impossible.

• The Ultimate beneficial Owners Register

The UBO Register has been established in 2021 in line with the requirements of European law to increase transparency and prevent the abuse of the financial systems: for laundering money, for example, and for financing terrorism.

Companies, legal entities, associations, institutions, political parties, religious communities, artistic organizations, chambers, trade unions, employers’ associations, foundations or other business entities, legal entities that receive, manage or allocate funds for certain purposes, foreign trust funds, foreign institutions or similar entities of foreign law, which receive, manage or distribute assets for certain purposes are required to register UBO.

Entrepreneurs, one-member limited liability company and direct and indirect budget users are released from the obligation to register the beneficial owner.

Current opportunities & future prospects

• Business zones

Government of Montenegro has adopted the Decree on Business Zones which has the goal of stimulating business development and creating more attractive investment opportunities.

A business zone represents a developed area in construction terms, which is fully equipped with utility infrastructure and directed at production activities and favourable conditions for investment.

This Decree on Business Zones regulates the conditions for the establishment of business zones, according to the classification of strategic importance, the establishment, organization and management, improvement of infrastructure in business zones and other issues relevant to the work of business zones.

There are eight bussiness zones in Montenegro.

Business zones are divided to:

1. Business zones of strategic interest;
2. Business zones of local government interest.

Business zone can be founded by State or units of local governments.

Location of business zone could be owned by the State, units of local governments or could be private property.

The business zone of strategic interest shall be founded by the Government of Montenegro, independently or in a cooperation with the other founder.

Department of units of local governments shall found the business zone of the local interest, independently, or in a cooperation with the other founder, with the prior consent of the Ministry.

The beneficiaries of business zones will have more encouraging work conditions in terms of lower costs and resolved infrastructural problems.

Such benefits are intended for small and medium-sized enterprises engaged in light industries which do not harm the environment.

These include industrial branches whose production is focused on the means of consumption (food, textiles, tobacco, furniture and electronics industries and the finishing and assembling of final products).

Business incentives offered by the zones are:

• Developed land with all the necessary permits;
• Lower lease prices of business premises;
• Reduced administrative costs;
• Integration of complementary business activities;
• Other business incentives.

The government offers in this regard in the partnership with local municipalities, some incentives through business zones, which exist in several cities outside the capital.

• Investment Incentives

In accordance to the Decree on Direct Investment Incentives the Montenegrin government offers financial incentives to investors based on the value of their investment. These incentives refer equally to Montenegrin and foreign entities or investors that can benefit from these incentives.

For investments greater than EUR 500,000 that create at least 20 new jobs within three years from the date of signing the incentive agreement, both domestic and foreign investors can apply for cash grants in the amount of EUR 3,000-10,000 per every new job created. For investments in the North and Central region, except for the capital Podgorica, the minimum investment is EUR 250,000 with a threshold of creating 10 new jobs. For capital investments greater than EUR 10 million that create at least 50 new jobs, incentives can be awarded in the amount of up to 17 % of the investment value. These incentives also include refunds on infrastructure development costs incurred in the process of completing the investment project.

• Privatisation

Decision on Privatization Plan for 2023 sets out the goals and methods of privatization, enterprises and capital for privatization, the conditions for their implementation, as well as the locations that need to be valued and the social aspects of the privatization process. The main goal of privatization is to increase the competitiveness and efficiency of the functioning of companies, encourage foreign investments and entrepreneurship in all areas, increase employment and improve living standards, as stated in the Decision.

It is planned to continue the procedure for the privatization of the Institute “Dr Simo Milošević” LLC Igalo via the sale of shares. The privatization procedure will continue in accordance with the ruling of the Administrative Court.

Furthermore, it is planned to start the preparation and implementation of public tenders for the privatization of the following companies:

• HG “Budvanska rivijera” AD Budva (sale of shares),
• “Castello Montenegro” AD Pljevlja (sale of shares),
• “Institut za crnu metalurgiju ” AD Nikšić (sale of shares and/or recapitalization),
• “Montepranzo Bokaprodukt” AD Tivat (sale of shares) and
• “TC Durmitor” DOO Žabljak (sale of 100% stake).

It was emphasized by The Privatization and Capital Projects Council during the passing of the Draft Decision on the Privatization Plan for 2023 that listed companies have very valuable state assets that have not been used in an appropriate way in terms of creating new value, making profits, raising the quality of products and services, creating new jobs, which was the main reason for proposing their privatization. In this context, it was especially emphasized that precise tender conditions and criteria will be determined for each company individually.

Ultimately, the sale of following companies’ shares through the stock exchange is envisaged:

• AD “Agrotransport” – Podgorica;
• “Kotor – projekt” AD – Kotor;
• AD “Metal produkt” – Podgorica;
• AD “Montenegroturist” – Budva and
• “Crnagoracoop” AD – Danilovgrad.

• Legal System and Judicial Independence

Montenegro’s legal system is of a civil, continental type based on Roman law.

In accordance to the Law on Courts the judicial system consisting of three levels of courts: Basic, High, and the Supreme Court.  Montenegro established the Appellate Court and the Administrative Court in 2005 for the appellate jurisdiction in criminal and commercial matters, and specialized jurisdiction in administrative matters.  The specialized Commercial Court has first instance jurisdiction in commercial matters. Apart from those, there are also specialized Misdemeanours Courts.

Legislative reforms from the last several years effect the efficiency and effectiveness of court proceedings which is already visible through the introduction of the Public Enforcement Agents.

For clients it is important to act in accordance to the regulation in force, in order to prevent the penalties and possible court disputes. In that regard it is important also to have experienced law firm who will advice the client drying the investment activities.

• Foreign Exchange

In Montenegro are no limitations placed on the transfer of foreign currency.

The Foreign Investment Law guarantees the right to transfer and refund profits in Montenegro, and there are not difficulties in the free transfer of funds exercised on the basis of profit, repayment of resources, or residual assets.

Sector opportunities in Montenegro

ENERGY

The energy sector represents one of the strategic development areas in which Montenegro has great untapped potential.

The strategic development objectives of the energy sector are defined in the National Energy  Development Strategy of Montenegro by 2025, where building of new capacities for hydro and thermal power plants is planned, including small hydro power plants and other renewable and alternative energy sources.

There are already completed several projects as it is construction of the submarine interconnection cable between Montenegro and Italy as well as two wind farms in Montenegro – Krnovo, with a capacity of 72MWh; and Mozura, with a capacity of 46MWh which are currently in operation.

Montenegro has the potential to develop solar energy also because Montenegro is “rich” with solar radiation due to a good geographical position and there are started several projects in this area.

TOURISM

Tourism records the most dynamic development and influences the growth of agriculture and food processing industry, transport, telecommunication, trade, as well as a whole set of other branches.

Montenegro Tourism Development Strategy 2022-2025 provides guidelines for future activities in the direction of ensuring full and quality valorization of all potentials in a dynamic and optimal way, in accordance with current market circumstances and respecting the principles of sustainability, which relate to operational goals, namely: improved regulatory framework in tourism with formalization of tourism turnover; improved tourist and accompanying infrastructure and superstructure; improved quality and quantity of accommodation capacities; improved quality of diversified tourism product; improved human resources and skills in tourism; development of digital, innovative solutions and new technologies in tourism, and a globally recognized tourist destination.

ICT SECTOR

One of the crucial industries for the Montenegrin economy’s recovery is the ICT industry.  Innovative Montenegrin ICT start-ups and businesses are expanding into the global market and have displayed encouraging earnings and employment creation projections.  With full adherence to the EU’s regulatory framework, Montenegro’s ICT legislation offer investors a secure environment for doing business.   Three foreign businesses are present in the well-developed telecommunications sector, which has started implementing 5G technology.  Data protection and IT/cyber security investments are anticipated to increase.

The innovation law that is already in place will strengthen the startup ecosystem by allowing businesses to invest up to €100,000 of the capital gains taxes they owe in startups of their choice in exchange for stock.  With potential in software development, hardware, digitalization, and e-services, as well as ICT education, U.S. technology and solutions companies are well positioned for the Montenegrin market.

BANKING

The banking sector is characterized by stability, with growth in deposits, the level of liquidity and capital, high levels of non-performing loans and high interest rates.

There are 7 foreign-owned banks, while 4 banks are in the majority ownership of domestic entities. The banking sector is liquid and under the supervision of the Central Bank of Montenegro.

REAL ESTATE

Montenegro is still considered as rising star in the Balkan peninsula that attracts the attention of potential investors from world-wide especially in Real estate market.

Foreigners can own and buy real estate in Montenegro and there are no legal restrictions except those regulated by the Law on Ownership Rights that prohibits only acquisition of certain type of immovable property by foreigners like a forest, agricultural land etc.

Foreigners can buy immovable property as individuals, but also through the local company in which case they can avoid above mentioned limitations.

It is significant to know that with signing of Agreement on Stabilization and Association, Montenegro granted a national treatment to EU nationals acquiring real estate on its territory.

The following are the main real estate market trends in Montenegro:

• an increase in foreign buyers of real estate
• an increase in luxury properties in coastal and mountainous regions
• favorable prices
• favorable taxation policies.

AGRICULTURE

Agriculture is one of the strategic development areas of Montenegro. Fertile and unpolluted land and pure high quality waters represent the good Basis for the development of agriculture and food industry. The production of meat, milk, dairy products, honey, fish, vegetable, fruit, high quality wines and mineral waters is recording growth. The agricultural sector provides for 7,5 percent of Montenegrin GDP.

What to know before Investing

Many foreign citizens/entities searching to relocate themselves or their businesses to a European country choose Montenegro as their lifetime or investment destination, even though it is not yet a member of the EU.

As an EU candidate country and with the euro as its official currency, Montenegro is among the most attractive destinations for investment.

Montenegro is a safe country to invest in and it enjoys great economic freedom and monetary stability.  It is predicted that Montenegro will join EU in the next couple of years.

Foreign companies can own 100% of a domestic company, and their profits and dividends can be repatriated without limitations or restrictions.

The Montenegro ranks 50th out of 190 economies in terms of ease of doing business, according to the World Bank Doing Business report.

Montenegro has one of the most competitive tax systems in Europe; qualified and low-cost workforce; touristic potential (sea, mountain, climate); hydroelectric potential; negotiations for accession to the European Union; good quality of education and health systems.

As there are many incentives for doing business in Montenegro there is no matter in which part of the country you will invest, because in any case it will be a right choice.