Foreign Company Registration in Montenegro

Once a foreign company has decided to open an office in Montenegro, the next step is to choose the appropriate business structure for their registration. The guide below provides an overview of the business structure options available to foreign companies. The following topics are covered.

  • Key Differences
  • Subsidiary Company
  • Branch Office
  • Representative Office
  • What to Choose?

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Key Differences

A foreign company can register in Montenegro as a subsidiary company, a branch office or a representative office. Below are the key differences of these structures:

A Subsidiary Company is a locally incorporated entity where the shares are held by the parent company. It is taxed at the local Montenegro corporate tax rates and benefits from local tax exemptions and incentives. Finally, its liabilities do not extend to the parent company.
A Branch Office is simply an extension of a foreign company, not a separate legal entity. A branch office is considered a non-resident entity and thus has none of the tax benefits that apply to a subsidiary company. The parent company is fully responsible for the liabilities of a branch office.
A Representative Office (RO) provides access to Montenegro for foreign companies who wish to conduct market research. An RO cannot engage in any profit-earning activities. It has no legal or tax status because it’s merely a temporary administrative arrangement. An RO must be renewed each year, with a maximum lifespan of three years.

A Subsidiary Company is the most commonly used corporate structure by foreign companies in Montenegro

Subsidiary Company

Most foreign companies establish their offices in Montenegro as subsidiaries for the following reasons:

  • Montenegro permits individuals or corporations to be shareholders of private limited companies; thus, the shareholding structure of a subsidiary can be very flexible. The parent foreign company can be the sole shareholder in a subsidiary if that is the structure the parent desires.
  • A subsidiary company is a separate legal entity from its parent company. Thus, it can have a different name and can conduct different activities from those of the parent.
  • The separate legal status protects the parent company from any debts and liabilities the subsidiary incurs. These debts and liabilities do not flow to the parent.
  • A subsidiary company operates like any other local Montenegro company and thus enjoys the rights and privileges of being a true Montenegro company.
  • A subsidiary is taxed as its own entity, at the low Montenegro corporate tax rate.
  • A subsidiary is eligible for business incentives offered by the Singapore government.
  • A subsidiary company can have a name that’s different from its parent company.

The following are the key requirements to keep in mind when registering a subsidiary company in Singapore:

  • The company must have one or more directors, at least one of whom must be a Montenegro citizen, permanent resident, or an employment pass holder. This requirement can be satisfied one the following ways:
  • If the foreign company is hiring a local executive, he/she can be appointed as the local director.
  • If one of the foreign company’s overseas executives is relocating to Singapore, he/she can be appointed as the local director after the executive’s Employment Pass is approved.
  • Alternatively, the foreign company can subscribe to the nominee local director service offered by their incorporation agent in Montenegro .
  • The company does not have to appoint a local company secretary and have a local registry address.
  • The company does not have to hire a local corporate services company to help set up a subsidiary.

To learn more, see requirements and procedure for setting up a subsidiary company in Montenegro.

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Branch Office

As an alternative to a subsidiary company, a foreign business can set up a branch office in Montenegro. A branch office is an extension of the parent company and lacks the liability protection, local tax rate and government incentives that are available to subsidiary companies.

Below are the key facts you need to consider before setting up a branch office:

  • The branch’s corporate structure and activities must conform to the foreign parent company’s Constitution. Thus, it is restricted in the business activities it can undertake.
  • The branch must use the same name as the parent company.
  • All debts and liabilities accrued by the branch office are passed to the parent company.
  • A claimant can file suit against the parent in a Montenegro court and the case will be heard in Singapore.
  • Because it is not a local company, branch offices are not eligible for business incentives offered by the Singapore Government to Montenegro-based companies.
  • Montenegro mandates that two local agents must act on behalf of the branch, unlike a subsidiary, which requires only one local director. The agents must be “ordinary residents” of Montenegro , meaning they must be Montenegro citizens, permanent residents, or employment pass holders.
  • The company must hire a local corporate services firm to assist with registration of the branch office.
    To learn more, see requirements and procedure for setting up a branch office in Montenegro .

Representative Office

An Representative Office does not permit you to conduct business activities; it is a structure that is to be used only for performing exploratory or marketing activities before commencing profit generating activities.This form is not known in Montenegro. If you decide to commence business activities in Montenegro, you must register a subsidiary company or a branch office in Montenegro .

Below are the key features of a representative office:
It has no independent legal status.
The representative office can only engage in market research or feasibility studies. It is expressly prohibited from engaging in any activities that yield a profit.

This form is not known in Montenegro.

What to choose

Montenegro’s representative office provides a simple structure,
but it is not known structure in Montenegro.
A branch office has several limiting factors that make it an unattractive option for foreign entrepreneurs. A subsidiary company remains the best option for a foreign company in Montenegro .

Planning to register your foreign company in Montenegro? Contact us for a FREE consultation today.

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