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Montenegro is a Southeastern European nation. It is part of the Balkans and shares boundaries with Serbia to the northeast, Bosnia and Herzegovina to the north and west, Kosovo to the east, Albania to the southeast, the Adriatic Sea and Croatia to the southwest, and a maritime boundary with Italy. Podgorica, Montenegro's capital and biggest city, spans 10.4 percent of the country's area of 13,812 square kilometers (5,333 square miles) and is home to nearly 30 percent of the country's total population of 621,000 people.
During the Early Medieval era, three principalities existed on the area of modern-day Montenegro: Duklja in the south, Travunia in the west, and Rascia proper in the north. In the 14th and 15th centuries, the Principality of Zeta arose. Large portions of southern Montenegro were administered by the Venetian Republic and included into Venetian Albania from the late 14th century until the late 18th century. Montenegro was given its name for the first time in the late 15th century. After coming under Ottoman authority, Montenegro recovered its independence in 1696, first as a theocracy and subsequently as a secular principality, under the reign of the House of Petrovi-Njego. The Great Powers recognized Montenegro's independence during the Congress of Berlin in 1878. The nation was elevated to the status of kingdom in 1910.
Following World War I, the kingdom was annexed by Yugoslavia. Following the disintegration of Yugoslavia, the republics of Serbia and Montenegro declared a federation. Montenegro proclaimed its independence and the confederation was dissolved after an independence vote conducted in May 2006.
Montenegro's economy is upper-middle-income, and it ranks 48th in the Human Development Index. It belongs to the UN, NATO, the World Trade Organization, the Organization for Security and Cooperation in Europe, the Council of Europe, and the Central European Free Trade Agreement. Montenegro is also a founding member of the Union for the Mediterranean and is in the process of becoming a member of the European Union.
A minimum of 20 days of yearly leave is required. Employees whose full-time work hours are lowered from 40 to 36 hours per week are entitled to 30 working days if they work in a job with difficult working conditions. Employees who work a six-day week are entitled to at least 24 working days of yearly leave.
Montenegro recognizes ten public holidays.
For the first 60 days of sick leave, employees get 70% reimbursement from their employer, with the remainder coming from social security.
Employees must produce a medical certificate to their employers within three days of beginning their sick leave.
Employees who are expecting a child are entitled to 98 days of paid maternity leave. It is taken 28 days before delivery and 70 days following childbirth.
Paternity leave is enclosed in parental leave.
Parental leave can be utilized for a total of 365 days once maternity leave has ended. Each parent is entitled to an equal amount of time off. Parental leave taken by one parent may be transferred to the other parent once 30 days have passed from the day it was taken. If this is done, the parent who transferred the right to the other parent will lose the right to utilize parental leave in the future.
Employers must have valid legal grounds and provide the requisite notice of termination before terminating an employee.
Unless the employer and employee agree otherwise, a written notice must be given at least 30 days prior to the date of termination of employment.
The probationary period is defined in a collective bargaining agreement with an employer or in the labor contract and shall not exceed six months, except for crew members of long-haul merchant mariners, for whom the probationary period may extend until the ship returns to its homeport.
Severance should not be less than three months' worth of average monthly earnings free of taxes and contributions in the preceding semester.
The workweek is 40 hours but is frequently reduced by collective bargaining agreement terms. Employees who work in a hazardous environment where hazards cannot be eliminated through occupational health and safety measures may have their workweek reduced to as little as 36 hours.
Overtime is permitted only in the event of an emergency. Whenever possible, the employer must provide written notice explaining why the overtime is necessary, identifying the employees who will work overtime, and indicating when the overtime work will begin.
Employers are required to notify the government labor inspectorate if they have employees who work nights (work between 10 p.m. and 6 a.m.) Employees must undergo a medical examination prior to being assigned to night work and must be examined on a periodic basis while working at night, with the employer covering all examination costs.
Overtime cannot exceed ten hours per week on a weekly basis for a total of fifty hours worked. Overtime, with the exception of emergency situations, must be agreed upon in writing. While collective bargaining agreements generally define overtime pay, the legal minimum is 140 percent of regular pay.
Montenegro's minimum wage has been set at 331.3 EUR per month from June 2019.
Montenegro has mandatory universal health insurance. Employers contribute 2.3 percent of salaries, while workers contribute 8.5 percent.
Private clinics are also available, for which additional health insurance may be obtained, and dental treatment is usually paid for out of cash.
Supplemental health insurance, food allowance, and transportation allowance are all common perks.
Montenegrin corporations are subject to a 9% corporate earnings tax (CPT).
Residents are taxed on their global earnings. Non-resident taxpayers are taxed on income earned in Montenegro or income earned via a permanent establishment in Montenegro (PE). Non-residents must additionally pay withholding tax (WHT) on income earned in Montenegro.
Individual income is taxed in Montenegro depending on their residency status. Residents are taxed on their global income from all sources. Non-residents must pay taxes on income from a fixed base/permanent establishment (PE) in Montenegro, as well as royalties, interest, and rental income on immovable property in Montenegro.
Salaries, property-related income, and investment income are subject to a 9% personal income tax (PIT) (interest income earned by non-residents is subject to a 5 percent PIT).
In January 2016, the Montenegrin government raised the PIT rate from 9% to 11% for gross incomes that exceeded the average monthly wage (where the higher rate applies only on part of the salary exceeding the amount of average salary).
Although the tax rate hike was stated as a temporary measure, it is still in effect.
The basic concepts of Montenegrin VAT are consistent with the recommendations of the European Union's (EU) Sixth Directive. Taxable supplies are subject to a standard VAT rate of 21%; however, some items are taxed at a reduced rate of 7% (e.g., bread, milk, books, medications, computers) and 0% rate (e.g. export of goods, supply of gasoline for vessels in international traffic).
In general, the VAT base is made up of the consideration (in cash, commodities, or services) received for supply, as well as taxes other than VAT (e.g., customs, excise duty), and direct expenses (e.g. commissions, cost of packing, transport). If the consideration is not paid in cash, or if products are exchanged for services, the tax base is the market worth of the commodities or services received at the time of supply. The VAT base cannot be lower than the selling price of items.
VAT registration in Montenegro may be optional or obligatory. Voluntary VAT registration is available for small taxpayers with a turnover of less than 18,000 euros (EUR) in the previous 12-month period. A business that has been registered may not seek for deregistration for at least three years. VAT registration is required for any company with a yearly turnover of more than EUR 18,000 in any 12-month period.
VAT is computed and paid on a monthly basis (i.e. a VAT return must be submitted and VAT liability must be cleared monthly). VAT assessed on imports is paid in addition to customs charges.
Visitors on business may enter on a short-term C visa, which permits them to enter and remain for up to 90 days in a 180-day period. The actions that are permissible are not restricted by legislation. Because the labor inspectorate has broad latitude in determining compliance, activity during business inspections should be kept to a minimum.
The Temporary Residence and Work Permit is the most common kind of work authorization, and it may be utilized by both intracompany transferees and locally recruited personnel. The permit is originally valid for one year and is renewed.
In Montenegro, employment contracts are either indefinite or fixed-term. In Montenegro, employment contracts must be in writing. A collective bargaining agreement governs several aspects of work, including the general collective bargaining agreement, which applies to all employees in Montenegro.
In most circumstances, fixed-term contracts, whether a single contract or a series of contracts, cannot be longer than 36 months. Fixed-term contracts may also be drafted to end when a certain piece of work is done or when a specific event occurs, rather than after a predetermined period of time. In circumstances when the employee will temporarily replace a permanent employee, conduct seasonal labor, or work on a specific project until completion, the fixed-term contract may be formed for a duration greater than 36 months.
If a probation term is to be implemented, it must be established in writing in the contract. The probation term cannot be more than six months.
Several factors might have a substantial influence on the time required and the type of the incorporation procedure. Because various areas or localities may have their own Montenegro subsidiary laws, your location, for example, might have an influence on pricing, availability, and more. If you are unfamiliar with the region, we suggest working with a consultant who can assist you discover the finest place inside the nation.
Another essential consideration is the nature of your organization. Montenegro permits you to incorporate as a private limited company, a public limited corporation, a branch, and other types of businesses. However, for flexibility and advantages, most businesses incorporate as a private limited company, commonly known as a limited liability corporation (LLC).
The following stages are involved in forming your LLC:
1. Choosing a distinct trade name that differs from the name of your parent firm
2. Checking the legitimacy of your selected name
3. Creating a Memorandum of Association and Articles of Association
4. Opening a local bank account and depositing the required share capital
5. Obtaining a tax and VAT registration
6. Obtaining a Montenegrin employer identification number from the Montenegrin government
7. Applying for licenses with the appropriate authorities, organizations, or institutions depending on your applications
As a foreign investor, you must comply with Montenegro's subsidiary legislation regarding LLCs. A firm growing as a joint stock company, for example, would need at least 25,000 EUR, but an LLC would require just 1 EUR. Because your subsidiary will be classified as a local business, it must pay 9% in corporation taxes.
In order to register a business, you must have one founder and no more than 30 shareholders. Each shareholder is solely accountable for the amount of capital they contributed.