Montenegro has adopted the Euro as the country's legal tender, thereby minimizing the inflation taxation of its citizens. Without that step, the central bank in Montenegro, a transitional economy with weak institutions, would have been under constant pressure to print money.

Adopting the new tax law will introduce one of the lowest corporate tax rates in Europe: a mere 9%. Capital-exchange restrictions have been eliminated and the repatriation of profits made by foreign investors in Montenegro is free. Interest rates are markets determined and more than 99% of the prices are freely set. Treating foreign investors like domestic ones, enjoying the same rights and legal protections, is intrinsic to Montenegro's privatization, investment and business regulations.

In order to encourage new business development, the required starting capital for a limited liability company has been reduced to EUR1. The aluminum industry, which accounts for 60% of total exports, is in the process of being privatized. The tender for Telecom Crna Gore, the national fixed-line operator, is also already underway.

As anywhere else in the world, objections to the implementation of economic freedom in Montenegro come from rent-seeking groups, monopolists, and people who benefit from state redistribution. But Montenegro also has to overcome a barrier that is peculiar to its political situation. As one of the basic preconditions for signing the Association and Stabilization Agreement with the EU, Brussels insisted on the "harmonization" of economic systems between Serbia and Montenegro.

Given the fact that Montenegro wants to develop an open and service-oriented economy while Serbia wants to protect its agriculture and inherited heavy industries, the harmonization of these systems will be problematic.

If you would like more information regarding asset protection, trusts, family limited partnerships or the subject of this article please call or email our office.