The economy of Montenegro mostly relies on services sector and it is currently in the procedure of economic transition. Montenegrin economy currently recovers after the Yugoslav wars and the aftermath on the entire Balkan region.
Between years 2006 and 2007 Montenegrin economy was on the peak as the country has been experiencing a rapid real estate market growth. Many wealthy foreigners and investors have started purchasing real estate properties along the coastline. Back in year 2008, the amount of foreign capital investment per capita was bigger than in any other European country, providing a great boost to the economy overall. However, lately, economic recession gradually slows down the industry and production, which has lead the government to the idea of starting another Citizenship for Investment Program.
As we can see from data provided by the World Bank, Montenegrin GDP per capita was growing between years 2012 and 2017.
Montenegrin economy relies on services with economy dominating industries of:
- Steel production;
- Aluminium production;
- Consumer goods production;
- Agricultural processing;
Lately, the tourism in Montenegro becomes more and more popular every year, contributing more funds to the GDP.
Today it estimates approximately 4.8% of the country’s GDP, having over 22 000 people employed in this industry. The only country with more rapidly developing tourism sector currently is Macao, People’s Republic of China, making Montenegro’s tourism second most quickly developing in the world! This provides great business environment for hotel, spa, catering and leisure businesses.
Despite not being qualified as a “tax haven” officially, Montenegro provides quite favorable taxation in comparison to many other European countries, which comes as an obvious benefit of having a tax residence there. Acquiring local tax residence will not provide full exemption from all taxes, but it will most likely reduce the payable amount, especially if you are from other European country.
Personal income tax in Montenegro is generally applied at the 9% flat rate – such relatively low tax rate is explainable by the efforts of the government to create business-friendly environment and attract as many foreign investors as possible.
However, in 2016 the things have changed as the government introduced a new adjusted taxation model, according to which, tax residents of the Montenegro will pay 11% personal income tax on the part of their official salary exceeding country’s average of approximately 750 EUR per month. Any personal income below 750 EUR per month is taxed at 9%.
Apart from that, local municipal administration is entitled to apply a payroll tax equal up to 15% from the employee’s salary.
Value-added tax is levied at the rate of 21% on goods and services with several exceptions in place.
The infrastructure in Montenegro is at a relatively good level, however, still not good enough in comparison to Western European standards: despite there is plenty of roads covering the territory of the country, none can actually qualify as the motorway. As for today, the government considers construction of the new modern roads and motorways a national priority, as they shall contribute to the development of import and trade greatly, as well as to transit to the Balkan Peninsula.
The major railroad of the Montenegro is usually considered the Belgrade-Bar railway, leading to Serbia. There are also several domestic railway lines, operating as freight only, however, recently they were opened to passenger transportation as well, due to rapid increase of the number of tourists.