Decree on fostering direct investments
DECREE PROMOTING DIRECT INVESTMENT
Contact: Secretariat for Development Projects
Bulevar Revolucije br. 7, Podgorica, Montenegro
tel: +382 (0)20 220 271
Ministry of Economy
Rimski trg 46, Podgorica, Montenegro
tel: +382 (0)20 482 213
The Decree promoting direct investment (Official Gazette of Montenegro 80/15) creates conditions for a more favourable business environment that will, through promotion of domestic and foreign investment in all areas of Montenegro, contribute to enhancing competitiveness and industry export potential by introducing new technologies and knowledge and enable creation of new jobs. Investors implementing investment projects which ensure job creation and contribute to economic and regional development of Montenegro may be beneficiaries of financial incentives awarded by a decision of the Government of Montenegro on the allocation of funds for direct investment promotion.
Requirements for economic operators:
Investment promotion funds are allocated on the basis of an application at a public notice for participation in the allocation procedure of direct investment promotion funds and the conclusion of use of funds for direct investment promotion agreements with the Government of Montenegro, for investment projects implemented in the manufacturing and services sectors respectively.
• The capital and the southern region - minimum value of investment €500,000 and creation of at least 20 new jobs within three years from the date of conclusion of use of funds agreements;
• Central region (with the exception of the capital) and the northern region - minimum value of investment €250,000 and creation of at least 10 new jobs within three years from the date of conclusion of use of funds agreements.
A newly employed person is deemed to be a person employed for an indefinite period of time in jobs involving implementation of the investment project. The beneficiary of funds is required to keep the number of newly employed persons continuous for at least three years after the end of investment project implementation for small and medium-sized enterprises, and for five years at least for large enterprises.
The funds can not be used for financing investment projects in sectors of: primary agricultural production, production of synthetic fibres, transport, games of chance, trade, primary production of coal and steel, electricity, oil and gas generation, tobacco and tobacco products, weapons and ammunition, genetically modified organisms and hazardous waste.
Investment promotion funds may be allocated to an economic operator which:
a) is registered in the Central Registry of Business Entities;
b) has submitted an investment project which, according to the Decree, falls under those projects to which funds for direct investment promotion are allocated;
c) is not undergoing bankruptcy or liquidation procedure, with the exception of reorganization in accordance with the law governing bankruptcy of economic operators;
d) has not been convicted of a crime prosecuted ex officio;
e) has settled all liabilities arising from taxes and contributions ending with the month preceding the month in which the application is submitted;
f) did not reduce the number of its employees in Montenegro by 10% and more during the 12 months prior to submitting the application;
g) has not used state aid funds for the same investment project the application is submitted for;
h) is not in distress in accordance with state aid rules;
i) is not obliged to refund illegally received state aid.
Direct investment promotion funds will be awarded in the amount of €3,000 - 10,000 per newly employed person based on scores given to the following criteria:
economic operator’s references; 2. share of other economic operators from Montenegro during and after the investment project implementation; 3. investment project value; 4. effects of the investment project related to research and development; 5. effects of the investment project on human resources; 6. effects of investment project’s environmental impact; 7. volume of international trade; 8. economic effects of the investment project; 9. effects of the investment project on regional development and 10. letter of intent of the local government in which the economic operator intends to invest.
The total value of allocated funds may not exceed a certain percentage of investment project’s value, depending on the size of the company which is the beneficiary of funds, and may amount to:
• at the most up to 50% of the total investment value into the investment project for large enterprises;
• at the most up to 60% of the total investment value into the investment project for medium-sized enterprises;
• at the most up to 70% of the total investment value into an investment project for small enterprises.
Small enterprises are companies that have fewer than 50 employees and an annual turnover or total annual balance sheet not exceeding € 10 million.
Medium-sized enterprises are companies that have 50 to 250 employees and an annual turnover not exceeding € 50 million or total annual balance sheet not exceeding € 43 million.
Large enterprises are companies that have over 250 employees and total annual balance sheet exceeding € 43 million.
For capital investment exceeding € 10 million which ensure job creation for at least 50 new employees, investment promotion funds may be allocated in the amount of up to 17% of the total investment project’s value, without conducting the scoring procedure.
The Decree provides for the possibility of reimbursement of expenses for the development of infrastructure necessary for investment project implementation. The funds allocated for the promotion of investment will be paid to the funds beneficiary after the conclusion of a use of funds agreement, in three equal instalments:
The first instalment will be paid upon submission of a performance bond;
The second instalment will be paid after the beneficiary has submitted a report drawn up by an independent auditor certifying that the beneficiary had completed more than 50% of the investment value in the investment project;
The third instalment will be paid after achieving full employment envisaged by the investment project and investment project implementation in accordance with the use of funds agreement.
The beneficiary will submit funds disbursement applications to the Secretariat for Development Projects, and attached to those, documents proving the fulfilment of requirements for disbursement. Together with the applications for disbursement of the first and second instalment of funds the beneficiary will submit unconditional/irrevocable on first demand performance bonds on behalf of the Government of Montenegro, issued by a commercial bank registered in Montenegro and stating the amount of funds allocated through the first and second instalments. For the disbursement of the last instalment, the beneficiary is required to provide a performance bond in the total amount of funds allocated, after which the Secretariat will return to the beneficiary two previously submitted bonds. Also, funds beneficiary has to report once a year to the Secretariat for Development Projects on the investment project implementation for which investment promotion funds were allocated, and it will do so by submitting an independent auditor’s report on:
• business operations of the funds beneficiary;
• the value of investment in the investment project and
• the number of employees.
After the investment project implementation, the beneficiary of funds is required to provide the Secretariat with an independent auditors' report on the investment project implementation and the fulfilment of investment and employment commitments.
On the basis of the 2015 public notice and signed use of direct investment promotion funds agreements, three investment projects are under way, in sectors of wood processing, feed production and provision of security services to persons and things. On the basis of the 2016 public notice and signed use of direct investment promotion funds agreements, implementation of three investment projects is under way in wood processing, tourism and food industry.
The total value of investment projects implemented in accordance with these agreements amounts to €7,182,429, including a planned employment of 253 persons for an indefinite period. Four investment projects are implemented in the territory of the central region, and two investment projects are implemented in the northern region. A new public notice was published on 3 March 2017. Applications may be submitted no later than 8 May 2017, until 12 hours local time at the address: Sekretarijat za razvojne projekte, Bulevar revolucije br.7, 81000 Podgorica