Establish a Subsidiary in Montenegro

Foreign companies have plenty expansion opportunities in Montenegro, as the country’s economy has evolved positively in the last few years. With a low corporate tax, Montenegro is one of the most appealing investment destinations for those interested in starting a business in Southeast Europe.

There are three main business forms available for foreign companies seeking to operate in Montenegro, among which two of them allow for commercial activities. These are the subsidiary, the branch office and the liaison office (the latter business form is available only for marketing purposes).

Below, our company formation specialists in Montenegro explain how foreign companies can set up subsidiaries in this country. We can also assist with the procedure of registering a subsidiary in Montenegro.

What is a subsidiary in Montenegro?

A legal entity registered in Montenegro with a majority of capital or voting shares owned by a foreign company is called subsidiary.

According to the law, the subsidiaries must be registered with the Central Register of the Commercial Court no later than 30 days from the establishment. Our company formation consultants in Montenegro can help you register a subsiadiary with the responsible authority.

The main characteristics of a subsidiary in Montenegro

The Montenegro subsidiary will take the form of a domestic company (usually a limited liability company) which is why it will be treated as a local business, even if the main shareholder is a foreign business. Those who want to open subsidiaries in Montenegro should also know that:

1. the subsidiary is an independent company and can undertake similar, but also other activities than the parent company;
2. both local and foreign companies can operate through subsidiaries in Montenegro;
3. the subsidiary set up by a foreign company will be treated as a domestic business from a taxation point of view;
4. because it is a local business, the subsidiary must respect the Montenegrin legislation;
5. the subsidiary is subject to local licensing requirements when it comes to the operations it wants to complete here.

The establishment of a subsidiary by a foreign company must respect the provisions of the Company Law in Montenegro. Our company registration agents in Montenegro can explain the requirements related to starting a subsidiary in this country.

Choosing a legal structure for your subsidiary in Montenegro

The most popular forms that the entities may take are the limited liability companies, private or public.

The private limited liability company is preferred by many entrepreneurs because of the advantageous registration procedures. For example only 1 Euro is required as a minimum share capital and only one founder is necessary for its registration. The number of shareholders may not exceed 30. The liability of the shareholders is limited by their contribution to the company’s capital.

As an inconvenient, if the company’s share capital exceeds 25,000 EUR, it must be reorganized as a joint stock company, a type of business designed for the high capital investors. The minimum share capital of this type of business is at least 25,000 Euro paid in cash at registration.

The management of a joint stock company is assured by a board of managers and an auditor must be appointed to verify the company’s accounts.

The liability of its members is limited, like in the case of the limited liability companies by their contribution to the capital. 
For more information about the various types of companies available in the country, our specialists in company formation in Montenegro invite you to check out our dedicated article on legal structures.

The process of opening a subsidiary in Montenegro

The Law on Companies regulates the establishment of subsidiaries in Montenegro. According to it, the following documents must be deposited at the Central Register:

• - the address of the foreign company;
• - the domain of activity;
• - the name and legal form of the parent company;
• - the company’s articles of association accompanied by a certified translation;
• - a copy of the registration certificate;
• - last balance sheet of the company;
• - the name of the Montenegro’s residence which will represent the company in legal matters and in the relations with other legal entities.

Along with the above, the company must submit the notarized articles of association.

In four days, the Central Registry is issuing the certificate of registration, a VAT tax number, a tax identification number and a customs authorization.

The employees must be registered at the Health and Pension Fund and at the Tax Administration counter.

The next step in opening a subsidiary in Montenegro is applying for the company’s seal and opening a bank account.

The last step is announcing the competent tax authority and the municipal authority in charge with the economic affairs regarding the incorporation of the subsidiary. Montenegro companies entering trading relations can also consider EORI registration.

The opening of a subsidiary in Montenegro is also explained in the scheme below:

Steps for registering a subsidiary in Montenegro

The registration formalities of a Montenegro subsidiary must respect the same steps as those of a local company. Apart from the documents which need to be prepared by the parent company, it is important to know that the subsidiary must have its own set of Articles of Association and a legal address in Montenegro.

The following steps must be completed in order to register a subsidiary in Montenegro:

• - the company name must be selected (the subsidiary can have a different name from the parent company);
• - the incorporation documents must be drafted, notarized and filed with the Montenegro Trade Register;
• - tax identification and VAT numbers must be obtained with the tax authorities in Montenegro;
• - the licenses to operate must be obtained with the relevant authorities in the field in which the company will operate.

If you want to open a company in Montenegro and need help with the preparation of the documents to be filed with the Trade Register, you can rely on our representatives.

Taxation of the subsidiary in Montenegro

One of the main reasons foreign companies decide to establish subsidiaries in Montenegro is related to taxation. With a corporate tax rate of 9%, Montenegro is one of the most attractive destinations in Europe for foreign companies. As we mentioned in the beginning of this article, subsidiaries are treated as domestic businesses which makes them liable for taxation on their worldwide incomes in Montenegro.

It is also good to know that from a taxation point of view, various benefits can be obtained by the foreign companies whose countries have signed double tax treaties with Montenegro.

If you have any questions related to the taxation of foreign companies in this country, our local consultants can answer them.

You can rely on us for information on the Montenegro citizenship by investment program.

Why set up a subsidiary in Montenegro?

The registration of a subsidiary in Montenegro has several other advantages than those related to taxation. As the shareholder in an independent company, the parent company will have limited liability with respect to the debts and obligations of the subsidiary. Also, the parent company can complete a greater number of activities through a subsidiary and thus expand its portfolio.

Apart from these, the number of foreign investments has increased in Montenegro, as various information indicates that:

• - the Foreign Direct Investment (FDI) inflow reached 490 million USD in 2018;
• - the FDI stock represented 102.9% of the country’s Gross Domestic Product;
• - Montenegro also enjoys 5.0 points rating in terms of transaction transparency compared to Eastern Europe where the index is 7.0 points;
• - the index of investor protection is 6.3 in Montenegro, which is higher than Germany’s index.

The whole process of subsidiary registration in Montenegro takes about 10 days, period of time that may be influenced by the correctitude of the submitted documents. We invite you to contact our experts in company registration in Montenegro if you intend to open a subsidiary in this country.

German and Russian investors interested in company formation in Montenegro, can contact our partners:  Firmengründung in Montenegro and Региситрация компаний Черногорье.