Easy business start up

Hub for regional business

Strategic geographical position

National treatment of foreigners

Dynamic economyc growth and development

Favourable tax climate (CT 9%, VAT 19%)

The positive experience from existing investors

Political stability and multi-ethnic harmony

Qualified human resources

Montenegro – a place to invest in

Montenegrin economy• Montenegro is constantly devoted to the improvement of the business environment.

• This has been recognised by the World Bank Doing Business Report 2017 and Montenegro has been ranked as the 51st out of 190 economies in the world, especially improving in the field of dealing with construction permits.

• Montenegro has been improving on the Doing Business rankings since 2009 when it was ranked the 90th.

INDICATOR 2013 2014 2015 2016

GDP at current prices (€ million) 3,335 3,458 3,618 2,282 (IIIQ)

Real GDP growth (%) 3.5 1.8 3.4 2.4 (IIIQ)

Inflation (%) 1.8 -0.3 1.4 -0.2Unemployment rate (%) 15.02 18.0 17.6 17.2

Public debt (% of GDP) 51.1 59.6 65.69 70.6

Net foreign direct investment, current prices (€ million)

323.9 498 619.27 347,4

Net foreign direct investment (% of GDP)

9.7 14.4 26,6 12,2

Montenegro memberships:

CEFTA

Montenegro – EU and NATO integration• Accession negotiations with the EU opened in 2012, and now, with more than two

thirds of the accession chapters opened, the Montenegro enjoys a widespreadsupport among EU members' officials

• In its 2016 assessment of the accession progress, the European Commission hasidentified Montenegro as having the highest level of preparation for membershipamong the negotiating states

• A formal invitation was issued by the alliance on 2 December 2015, beginning the finalaccession talks, and 23 countries ratified the Protocol of Accession so far.

• Government of Montenegro is strongly committed to Montenegro’s integration tothe EU and NATO

• Free trade agreements

Montenegro joined the Central European Free Trade Agreement – CEFTA. Montenegro also signed theFTAs with EFTA (the common market that includes Switzerland, Norway, Iceland and Liechtenstein),Russia, Turkey and Ukraine.

• Agreements on mutual promotion and protection of investments

Since re-gaining its independence, Montenegro has signed 26 agreements on the mutual promotionand protection of investments. Agreements are in place with: Austria, the Slovak Republic, theRepublic of Serbia, the Czech Republic, the Republic of Finland, the Kingdom of Denmark, theState of Qatar, the Belgium-Luxemburg Economic Union, the Republic of Macedonia, Malta,France, the Hellenic Republic, the Netherlands, Israel, Cyprus, Romania, Ukraine, Hungary,Germany, Poland, Spain, the Republic of Turkey, the Swiss Confederation, the Republic ofAzerbaijan, Moldova, and the United Arab Emirates.

• Double taxation agreements

Montenegro has so far signed 42 double taxation treaties on income and property with: the Republicof Albania, Belarus, Bulgaria, Cyprus, Egypt, Germany, the Republic of Italy, Latvia, Malta, theKingdom of Norway, the Russian Federation , the Republic of Slovenia, Switzerland, Ukraine,Austria, Belgium, the People’s Republic of China, Czech Republic, the Republic of Finland,Hungary, South Korea, the Republic of Macedonia, Moldavia, Poland, the Republic of Serbia, SriLanka, the Republic of Turkey, the United Kingdom, the Republic of Azerbaijan, Bosnia andHerzegovina, the Republic of Croatia, the Kingdom of Denmark, France, Ireland, Kuwait,Malaysia, the Netherlands, Romania, the Slovak Republic, Sweden, the United Arab Emirates.

FDI inflows by countries (2007 – 2015)

16%9%

8%

7%6%6%5%5%

• Foreign investors in Montenegro are coming from 107 countries.

Foreign investors in Montenegro

Opportunities in MontenegroAGRICULTURE - Big potentials in organic

production, forestry, fishery, water production etc

TOURISM - Projects in process or in initial phase up to 3 billion euro: Porto Montenegro, Porto Novi, Lustica Bay, Aman Sveti Stefan, Qatari Diar, Hilton,Sheraton...

RENEWABLE ENERGY .

- Enormous potentials in hydropower, wind, biomass and solar energy.

.

Things that foreign investor should know when starting a business

According to Montenegrin law, it is possible to establish six types of companies:Entrepreneur, Limited Liability Company, Joint Stock Company, Generalpartnership , Limited partnership and Part of a foreign company.

New business entities can register a company, apply for general taxregistration and obtain a VAT, excise and customs code all in oneplace. This means that it is not necessary to go to several differentinstitutions, since everything can be done with the Central Registerof the Commercial Court, which saves time and money.

Personal Income Tax – 9% (11% for gross personal income above €720) Corporate Income Tax – 9% Value Added Tax – 19% (reduced to 7% for tourism and 0% for some basic products)Property tax - between 0.08% and 0.80% of the real estate property’s market valueWithholding Tax – 9% on dividends/profit distribution, capital gain, royalties, intellectual property rights, rental income, consulting, marketing.

Investment incentives and reliefs1. VAT refundIf the tax liability (output tax) for the taxable period is lower than the input VAT, deductible for the same period, the difference is either recorded as tax credit for the coming period or refunded, following the taxpayer’s request, within 60 days from the date of submission of the VAT return.To taxpayers who are predominantly involved in export and those who have shown excess input VAT in three consecutive VAT assessments this difference is refunded within 30 days from the date of submission of VAT return.2. VAT O% - for the delivering products and services for theconstruction and equipment of four or five stars hotels.2. The subsidies for employment of certain categories ofunemployed personsFor the certain categories of the unemployed, the employer does not pay: Contribution for mandatory social insurance on wages and tax on personal income for the period of 12 years

Cluster Development Programme in Montenegro

.• The Programme aims to provide financial support to theentrepreneurs and 100% privately owned MSMEs withinclusters through investment in tangible or intangibleassets or operational costs

• The Ministry of Economy will cover up to 65% of theeligible costs of the purchase value of equipment,excluding VAT, for the clusters operating in the lessdeveloped municipalities, or up to 50% of the eligiblecosts for the clusters from other regions;

• The strategic priority activities eligible for co-financing include the following:

- Agricultural production and processing,- Wood processing,- Other manufacturing activities (except those not included in the Programme).

Investment incentives and reliefs

1. Programme for Enhancing Regional and Local Competitiveness through Harmonization with International Standards of Business for the period 2017-2020

The Programme aims to support entrepreneurs and SMEs, inparticular the ones from the less developed municipalities and thenorthern region, to enhance their competitiveness throughharmonization with the international standards related to products,management systems, staff, testing, control and certification andsupport for conformity assessment accreditation.

The program contains two components of support:1. Support for SMEs in terms of reimbursement of the costs ofaccreditation of conformity assessment bodies;2. Support SMEs in terms of reimbursement of the costs of theimplementation of standards. Assistance granted by the Ministry ofEconomy is up to 70% of eligible costs for small companies, or up to60% of eligible costs for medium-sized companies, in the amount upto EUR 5,000 (excluding VAT) per applicant.

2. Programme to support industry modernization

The Programme aims to strengthen competitivenessof companies and upgrade business operation,productivity and profitability by investing inequipment.The Programme includes co-financing of the eligiblecosts of purchase of equipment – up to 20% for smalland 10% for medium-sized enterprises, excl. VAT, inline with state aid rules. The remaining funds areprovided through the IDF lending scheme. The fundsallocated to the Programme are intended to co-financethe costs of purchase of new/used productionequipment/machines or new parts and specializedtools, to enable activation of unused machines.

Montenegrin state support for business

Decree on fostering direct investmentsDecree defines that financial incentives may be awarded to a foreign and domesticcompanies, which have the intention to invest at least 500,000€ (or 250,000€ for theinvestment project carried out in the territory of local self-government units in thenorthern and central regions, excluding the Capital City of Podgorica) and will providejobs for at least 20 new employees (or 10 for the investment project carried out in theterritory of local self-government units in the northern and central regions, excludingthe Capital City of Podgorica) within a period of three years from the day ofconcluding the Direct Investment Incentives Agreement. The investment incentivesmay be used for financing projects in the areas of manufacturing, services, hospitalityand hotel industryThe amount of investment incentives that can be awarded, based on the awardcriteria, are in range from 3.000€ to 10.000€ per new employee. Decree also providesreimbursement for infrastructure incurred for purposes of the investment projectimplementation. The incentive programme is administered by the Secretariat forDevelopment Projects.

Decree on Business ZonesDecree categorizes two types of business zones designated and managed by theGovernment of Montenegro or by the local governments. Investors will be grantednational- and local-level incentives. At the national level, the employers who hire staff towork in a Business Zone are exempt from the contribution for compulsory insurance paidto salaries and from personal income tax. Exemptions are applicable for a period of 5years from the date od employment of employees in the business zone.Local-level reliefs include: Lower utility and other fees; favourable lease/purchase ofpremises within the business zone; lower or zero surtax to PIT; lower real estate tax rate;opportunity to define a favourable public-private partnership model; access to utilities,where required.

Nine local governments have identified Business Zones of Local Importance to date,enabling the investors to invest under favourable terms in Berane, Bijelo Polje, Kolašin,Mojkovac, Cetinje, Nikšić, Podgorica, Ulcinj and Rožaje.

Montenegrin state support for business

MIPA Publications

Thank you for your attention

Montenegrin Investment Promotion AgencyJovana Tomasevica 2APodgorica 81000, MNE

Phone:(00 382 20) 203-140; 202-910

E-mail: info@mipa.co.me

Web site: www.mipa.co