Several updates vie for the front page in Montenegro, from politics, tax reforms, and the influx of high-skilled professionals to vibrant renewable energy sector activity and a booming M&A market, according to Komnenic & Partners Partner Nemanja Radovic.
“The political change we experienced in 2020, after almost 30 years, had a significant impact on the judicial system,” Radovic begins. “There were changes made to the Supreme Court, the President of the Commercial Court, and the Special Prosecutor's office, among others. These changes have shaped the legal landscape in Montenegro and presented interesting and challenging times for lawyers,” Radovic stresses.
Speaking about the reforms that have taken place recently, Radovic mentions a “tax reform, which introduced progressive tax rates ranging from 12% to 15% depending on turnover. Despite the increase in tax rates, Montenegro remains an attractive country for investors from the tax perspective,” he says. “Additionally, we have seen other reforms in response to the war in Ukraine, the energy crisis, and rising product prices. These reforms have influenced various sectors such as construction, hospitality, renewable energy, and the IT sector.”
Focusing on the blowback of the war in Ukraine, and the subsequent influx of immigrants from Russia and Ukraine, Radovic says that the effects on Montenegro were mostly positive. “Montenegro, being a micro-state with a population of 600,000, has experienced positive effects due to the arrival of approximately 30,000 immigrants from Russia and Ukraine. Many of them work in the IT sector and have brought their businesses and additional knowledge to our country.” According to him, “this has resulted in significant growth in the IT sector, with a 40% increase compared to the previous year.”
In addition, Radovic reports that the renewable energy sector has been on the up and up in the Balkan country. “We were involved in several notable projects, including two large-scale renewable energy projects named M Energy and Sunrise Montenegro, which together exceeded 600 megawatts,” he says. “These projects align with the EU's green transition reform and have attracted developers and major companies in the energy sector to Montenegro.“
Apart from these projects, Radovic reports that there has been notable M&A transaction activity as well. “One of the largest transactions for the year in Montenegro involved the Fortenova group, where Mercator acquired one of the biggest chains of supermarkets – Franca Markeri – and established a long-term supply agreement,” he reports. “Furthermore, Lidl has announced its forthcoming entry into the market, which has prompted various companies to prepare for the increased competition in different ways.”
Finally, Radovic reports that there have been “discussions regarding the introduction of special provisions to the tax law framework, to tax companies that made an extra profit during the pandemic, which has sparked conversations about the legal predictability of the system due to its retroactive effects.” With general elections having taken place on June 11, 2023, the business sectors of Montenegro could soon be looking at another shake-up. “It is an interesting and dynamic time for sure,” Radovic concludes.