So far, Konto’s Consulting has established 39 new companies in Montenegro. Since 2010, we have been working hard to be an efficient service and to assist everyone who wants to start their own business. We are convinced that the development of small and medium-sized businesses in Montenegro is the backbone of the development of our economy.

In this text, we will specifically deal with tax incentives for newly established companies in economically underdeveloped municipalities, i.e. in each town in the north of Montenegro. These incentives are not new, but it’s important to talk more about them, so if at least one person reading this text finds out about these for the first time, then our blog has fulfilled its purpose. But let’s start:

1. Exemption from profit tax – newly established legal entities in economically underdeveloped municipalities, which conduct manufacturing activities, are exempted from profit tax for the first eight years. The total amount of the tax exemption for the period of eight years cannot be higher than 200,000 €, which includes the amount received paid by the taxpayer as state aid. The tax exemption or facilitation does not apply to a taxpayer who operates in the sector of primary production of agricultural products, transport, shipyard industry, fish industry, steel industry, trade, hospitality, except for the primary hospitality facilities.

2. Exemption from taxes on personal income – a taxpayer who begins a manufacturing activity in the economically underdeveloped municipalities is exempted from profit tax for the first eight years. The total amount of the tax exemption for the period of eight years cannot be higher than 200,000 €, which includes the amount received by the taxpayer as state aid. The tax exemption or facilitation does not apply to a taxpayer who operates in the sector of primary production of agricultural products, transport, shipyard industry, fish industry, steel, trade and hospitality, except for the primary hospitality facilities.

3. Tax exemption for newly employed persons  –  The taxpayer who hires an employee for an indefinite period of time or for the minimum period of three years, shall be exempt from the payment of the calculated and halted personal income tax for that employee for the period of two years from his/her employment start date. An employee is defined as a person registered with the Employment Agency of Montenegro for a period of more than three months, with whom the employer has signed the Employment Agreement which defines the rights and obligations of the employees and who resides in an underdeveloped municipality. An employee is defined as a person who had been employed by the employer or had been a related party to the employer before the employment start date, regardless of the fact if there had been the termination of employment or not. The tax exemption is obtained under the condition that there has been a net increase in the number of employees in comparison to the average number of employees with that employer in the past 12 months.

4. Subsidies for employment of certain categories of the unemployed – may be used by the employer who hires:

• A person of 40 years of age or over

• An unemployed Roma, Ashkali and Egyptian person
• A person who is at the Employment Agency Registry for more than five years;
• A person who is employed in public works;
• Persons employed for an indefinite period of time after the traineeship;
• A person whose services are no longer needed (technical-economic surpluses), while being registered with the Employment Agency;
• A person who is hired to perform seasonal work;
• An unemployed person with over 25 years of service, and who is a user of a cash refund;
• Persons in the business zones.

For the above listed categories of the unemployed the employer does not pay:

• Contributions for the compulsory social insurance on salaries at the expense of the employer  (contributions for the pension and disability insurance, health insurance, contributions for unemployment insurance, contributions for the Labour Fund);
• Tax on personal income.

Source: Montenegrin Chamber of Commerce