Business Environment
Business Environment in Montenegro
by Darko Konjević
In the second quarter of 2013 the Montenegrin economy was characterized by an increase of the Value Added Tax as well as excises on tobacco products. As the number of companies with blocked accounts is rising there are some positive trends in the Montenegrin economy. The Government of Montenegro as it was already announced proposed and the Parliament of Montenegro adopted changes of the Law on VAT. The proposed change was to increase the VAT rate from 17% to 19% and to keep current lower rates for specific products of 7% and 0%. Even though there was an ongoing debate whether it is a good move for the Government in order to better fulfill the budget and improve fiscal stability the Government decide to increase the rate. Even with this rate compared to all EU countries Montenegro has a competitive tax system and the Government should work on preserving this situation and cut some additional taxes that were introduced. The Government forecast is that by the introduction of measures aiming to increase the tax income it will in 2013 collect an additional 53-55 million euros of which: €12 million will be from tax on SIM cards, cable TV, electric counters etc., €7.5 million from 15% tax on salaries above average, €25 million from increasing the VAT rate to 19%, as well as an increase of the minimum wage from 30% to 40% of the average wage in Montenegro. In order to adjust the excise system of Montenegro to EU rules the Government of Montenegro proposed and the Parliament adopted the changes of the Law on excises. Main changes in the law are as follows:
• An obligation for paying excise is also implemented on legal persons and entrepreneurs that are not excise payers if they are selling excise products without a control excise stamp. This article was added in order to improve the situation of the market and to decrease the level of the grey economy concerning the excise on goods, • Decrease of the time needed to issue an excise permit from 60 to 30 days. Since the time of 60 day was recognized as a business obstacle the Government proposed a new timeframe for issuing an excise permit of 30 days, • An increase of the specific excise on cigarettes from €15 to €17.5 and a decrease of the proportional excise rate from 36% to 35% in order to adjust with EU requirements, • Defining the minimal excise at the level of 100% of total excise, • Increase of the excise on kerosene that is used as a motor fuel from €156 to €330 • Define the right of agricultural producers that are buying mineral oil for agricultural production for a refund of the excises There were also changes in the Law on construction in order to improve the situation in the area of issuing construction permits. Since Montenegro was recognized in the World Bank Doing Business report as a country with a poor score and expensive procedures (ranked 176 out of 185 countries) the Government proposed a cut of certain taxes. Investors according to the new law are not obliged to pay significant fees for a request they submit for issuing certain documentation in order to obtain a construction permit.
Also the construction permit will be issued within 30 days after the request is submitted. This is an important step in order to improve the situation and to decrease the time and costs for issuing construction permits. Industrial production in May 2013 grew 22.4% on an annual basis mostly due to the growth of the sector of electric energy. The value of construction work in the first quarter of 2013 was 5.7% higher then in the same period of last year. Also the number of employees in May 2013 was 5.2% higher than in the same period last year. The Government of Montenegro changed the Decree on quota for employment of foreigners increasing the number of permits due to the demand by employers and the situation of the market. The number of companies with blocked accounts is growing. According to the data from the Central bank of Montenegro 2.5 thousand companies have blocked accounts more than 30 days and with amounts higher than €10.000. The Government of Montenegro proposed and then withdrew the rebalance of the Budget of Montenegro. The new proposal is to be submitted to the Parliament in September. ■ Number of registered companies in Montenegro as of 1st August 2013 Source: Commercial Court
Joint stock company Limited liability company
339 28,300
Part of a foreign company
448
General partnership
59
NGO
297
Limited partnership
418
Entrepreneur
17,285
Institution
1,158
Other
114
Total
48,418
Tax rates Value added tax
179, 7% and 0%
Corporate profit tax
9%
Personal income tax
9% (15% over 479€)
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