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Montenegro Is Balancing the Books: A Buzz Interview with Luka Popovic of BDK Advokati

Montenegro Is Balancing the Books: A Buzz Interview with Luka Popovic of BDK Advokati

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The political landscape in Montenegro is dominated by the upcoming elections and the formation of a new government – sometimes leading to populist measures that may negatively affect certain industries – yet sectors like energy, tourism, and IT keep experiencing growth, according to BDK Advokati Senior Partner Luka Popovic.

"In general, politics has become inescapable in Montenegro due to the recent and upcoming elections," Popovic says. "This constant pressure on politicians to win over voters often leads to adopting populist measures. For instance, the gaming industry requires a new, robust regulation but, instead, we have recently seen minor adjustments that add complexity without contributing to the sector's improvement."

Another such measure, according to Popovic, is the planned windfall tax, to be imposed on entities exceeding a threshold in revenue. "It is a kind of retroactive tax, and the need for it was the result of a budget deficit – which was itself largely the result of a populist measure," he points out. "The Europe Now program, which abolished the health insurance contribution a while ago to increase salaries, resulted in a revenue shortfall for the healthcare system," he adds. "This is why we are now facing tax increases, such as last year’s increase in personal and corporate income taxes and this year’s increase in real estate taxes."

Consequently, Popovic says, "although Montenegro remains an appealing investment destination, we are starting to witness a lack of predictability in regulations, particularly in the area of taxation." Still, he highlights that certain industries are staying busy: "In the first part of the year, there has been a surge of interest in the energy sector, with several renewable projects, such as solar and wind, receiving approval throughout the country," he notes. "Furthermore, there are good signs in the tourism sector, with some major operators establishing a presence in Montenegro and attracting new players and investors. Lastly, the IT sector's growth remains strong, with many local companies contributing to its expansion. Montenegro is becoming a regional hub for technology companies."

Popovic emphasizes that some significant transactions have already taken place in Montenegro. "The most significant acquisition in Montenegro this year has recently been closed," he says. "The Capital Plaza – a group of companies managing the largest residential and business complex in the country – has been sold to BIG from Israel, which is expanding in the region."

"In terms of general trends, one issue that has arisen is that banks are becoming stricter towards companies with complex shareholder structures which do not align with their preferences," Popovic adds. "This is due to anti-money laundering rules and, in some cases, banks opt to outright reject a client instead of properly conducting their KYC checks under AML regulations. This can pose challenges for companies attempting to relocate their offices and personnel to Montenegro, particularly from those countries impacted by the war. Banks view such situations as risky and prefer not to get involved."

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