Montenegro a place to invest in

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2 Montenegro a place to invest in 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

3 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 51 st 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 90 th. INDICATOR GDP at current prices ( million) 3,335 3,458 3,618 2,282 (IIIQ) Real GDP growth (%) (IIIQ) Inflation (%) Unemployment rate (%) Public debt (% of GDP) Net foreign direct investment, current prices ( million) Net foreign direct investment (% of GDP) , ,6 12,2

4 Montenegro memberships: CEFTA

5 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 widespread support among EU members' officials In its 2016 assessment of the accession progress, the European Commission has identified Montenegro as having the highest level of preparation for membership among the negotiating states A formal invitation was issued by the alliance on 2 December 2015, beginning the final accession talks, and 23 countries ratified the Protocol of Accession so far. Government of Montenegro is strongly committed to Montenegro s integration to the EU and NATO

6 Free trade agreements Montenegro joined the Central European Free Trade Agreement CEFTA. Montenegro also signed the FTAs 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 promotion and protection of investments. Agreements are in place with: Austria, the Slovak Republic, the Republic of Serbia, the Czech Republic, the Republic of Finland, the Kingdom of Denmark, the State 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 of Azerbaijan, Moldova, and the United Arab Emirates. Double taxation agreements Montenegro has so far signed 42 double taxation treaties on income and property with: the Republic of Albania, Belarus, Bulgaria, Cyprus, Egypt, Germany, the Republic of Italy, Latvia, Malta, the Kingdom 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, Sri Lanka, the Republic of Turkey, the United Kingdom, the Republic of Azerbaijan, Bosnia and Herzegovina, the Republic of Croatia, the Kingdom of Denmark, France, Ireland, Kuwait, Malaysia, the Netherlands, Romania, the Slovak Republic, Sweden, the United Arab Emirates.

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8 FDI inflows by countries ( ) Foreign investors in Montenegro are coming from 107 countries. 16% 9% 8% 5% 5% 6% 6% 7%

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10 Foreign investors in Montenegro

11 . Opportunities in Montenegro AGRICULTURE - 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.

12 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, General partnership, Limited partnership and Part of a foreign company. New business entities can register a company, apply for general tax registration and obtain a VAT, excise and customs code all in one place. This means that it is not necessary to go to several different institutions, since everything can be done with the Central Register of 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 value Withholding Tax 9% on dividends/profit distribution, capital gain, royalties, intellectual property rights, rental income, consulting, marketing.

13 Investment incentives and reliefs 1. VAT refund If 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 the construction and equipment of four or five stars hotels. 2. The subsidies for employment of certain categories of unemployed persons For 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 the entrepreneurs and 100% privately owned MSMEs within clusters through investment in tangible or intangible assets or operational costs 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 municipalities, or up to 50% of the eligible costs 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).

14 Investment incentives and reliefs 1. Programme for Enhancing Regional and Local Competitiveness through Harmonization with International Standards of Business for the period The Programme aims to support entrepreneurs and SMEs, in particular the ones from the less developed municipalities and the northern region, to enhance their competitiveness through harmonization with the international standards related to products, management systems, staff, testing, control and certification and support for conformity assessment accreditation. The program contains two components of support: 1. Support for SMEs in terms of reimbursement of the costs of accreditation of conformity assessment bodies; 2. Support SMEs in terms of reimbursement of the costs of the implementation of standards. Assistance granted by the Ministry of Economy is up to 70% of eligible costs for small companies, or up to 60% of eligible costs for medium-sized companies, in the amount up to EUR 5,000 (excluding VAT) per applicant. 2. Programme to support industry modernization The Programme aims to strengthen competitiveness of companies and upgrade business operation, productivity and profitability by investing in equipment. The Programme includes co-financing of the eligible costs of purchase of equipment up to 20% for small and 10% for medium-sized enterprises, excl. VAT, in line with state aid rules. The remaining funds are provided through the IDF lending scheme. The funds allocated to the Programme are intended to co-finance the costs of purchase of new/used production equipment/machines or new parts and specialized tools, to enable activation of unused machines.

15 Montenegrin state support for business Decree on fostering direct investments Decree defines that financial incentives may be awarded to a foreign and domestic companies, which have the intention to invest at least 500,000 (or 250,000 for the investment project carried out in the territory of local self-government units in the northern and central regions, excluding the Capital City of Podgorica) and will provide jobs for at least 20 new employees (or 10 for the investment project carried out in the territory of local self-government units in the northern and central regions, excluding the Capital City of Podgorica) within a period of three years from the day of concluding the Direct Investment Incentives Agreement. The investment incentives may be used for financing projects in the areas of manufacturing, services, hospitality and hotel industry The amount of investment incentives that can be awarded, based on the award criteria, are in range from to per new employee. Decree also provides reimbursement for infrastructure incurred for purposes of the investment project implementation. The incentive programme is administered by the Secretariat for Development Projects.

16 Montenegrin state support for business Decree on Business Zones Decree categorizes two types of business zones designated and managed by the Government of Montenegro or by the local governments. Investors will be granted national- and local-level incentives. At the national level, the employers who hire staff to work in a Business Zone are exempt from the contribution for compulsory insurance paid to salaries and from personal income tax. Exemptions are applicable for a period of 5 years from the date od employment of employees in the business zone. Local-level reliefs include: Lower utility and other fees; favourable lease/purchase of premises 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.

17 MIPA Publications

18 Thank you for your attention Montenegrin Investment Promotion Agency Jovana Tomasevica 2A Podgorica 81000, MNE Phone: ( ) ; Web site: