When establishing a company in Montenegro, the new legal requirement which refers to the registration of Ultimate Beneficial Owners (UBO) should be considered. The Revenue and Customs Administration of Montenegro established the UBO Register within the Central Registry of Business Entities, in accordance with the provisions of the Law on Prevention of Money Laundering and Terrorist Financing in 2021.
The UBO Register has been established in line with the requirements of European law, to increase transparency and prevent the abuse of financial systems, e.g., for money-laundering or terrorism-financing purposes. The obligation to register the UBO applies to companies, legal entities, associations, institutions, political parties, religious communities, artistic organizations, chambers, trade unions, employers’ associations, foundations or other business entities, legal entities that receive, manage, or allocate funds for certain purposes, foreign trust funds, foreign institutions or similar entities of foreign law, which receive, manage, or distribute assets for certain purposes. Entrepreneurs, one-member limited liability companies, and direct and indirect budget users are released from the obligation to register the beneficial owner.
Data on all companies can be found on the online website of the Central Register of Legal Entities, and now potential partners of a particular company can clearly get to know the business of the company through insight into its financial reports submitted to the tax authorities for the last three years. Furthermore, the procedure for establishing a company has been simplified, and the Law on Business Entities makes it possible for one person to be the founder of a company.
There have been some changes pursuant to the amendments to the Law on Business Entities and it is prescribed that the formation of the general assembly of a company, as well as the appointment of an executive director, is mandatory, while the choice to form other bodies in the company, such as a Board of Directors or a Supervisory board, is left up to the company. For single-member companies, the one member of the company has the powers of the assembly and is required to make decisions in written form and keep records of the decisions made in the book of decisions of the company.
Special conditions for establishing a company are prescribed in the case of joint-stock/shareholding companies. This is primarily because the minimum basic capital for a shareholding company is EUR 25,000, while for other forms of company establishment this amount is EUR 1. Also, when establishing bodies in a joint-stock company, a Board of Directors and an Assembly must be formed, and an Executive Director must be appointed. Joint-stock companies may also be established as bicameral joint-stock companies and, in that case, the establishment of a Supervisory Board, a Board of Directors, and an Assembly is mandatory.
The main sectors in which foreign nationals open companies in Montenegro are real estate, the energy sector, and the construction industry. Following the instructions of the European Union, Montenegro facilitated the process for foreigners to establish companies, and they can establish companies under the same conditions that apply to domestic citizens.
It is important to note that, in the last two years, Montenegro has made certain changes with the aim of better inspecting and controlling companies, as well as ensuring tax collection. Also in accordance with EU instructions and guidelines, the government has reformed its tax system in such a way that the tax authorities have direct insight into the financial books of every company on Montenegrin territory. In this regard, the main reform is related to tax payment control. When issuing invoices and calculating VAT, the tax authorities assign each invoice a special QR code, through the website of the tax administration – where every company, as a taxpayer, must log in when issuing an invoice. In this way, direct control over the services that have been provided and charged is carried out.
In this way, in addition to ensuring the payment of taxes, the so-called gray economy was suppressed to a large extent, and it became almost impossible to avoid paying obligations to the state, which all leads to the strengthening of the state’s economy, as well as enabling companies to operate legally and safely, which was the ultimate goal of all these reforms.
By Sasa Vujacic, Partner, Vujacic Law Office
This article was originally published in Issue 9.10 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.