Since the onset of the conflict in Ukraine, there has been an increase in the registration of Russian companies in Montenegro. These companies, for the most part, are of a small scale and have made limited contributions to the state budget. This has raised questions regarding whether their primary purpose is to secure residence papers.
Despite the attention and speculation surrounding the influx of Russian companies into Montenegro following the Ukrainian conflict in February 2022, an analysis of available data indicates that, on average, the Montenegrin state has gained a little over 800 euros from each newly established firm.
In 2021, there were approximately 4,600 companies in Montenegro registered to Russian owners. However, between February 2022 and early July 2023, an additional 5,846 new companies were registered, according to data from the Revenue and Customs Administration. Notably, around 64 percent of these new companies have no more than one employee, and 22 percent have no registered employees beyond the founder.
Meager income for the state
Collectively, these companies contributed 4.89 million euros in taxes and social security contributions to the state between February of the previous year and July 4, 2023, averaging 837 euros per company.
Some experts suggest that these statistics indicate that Russians may be registering businesses in Montenegro not primarily for profit but as a means of obtaining residence permits. Boban Stanić, an economics analyst, remarks:
“The numbers show that a large part of these companies have a small number of employees or even no registered workers, which may be an indicator that business is not the primary goal. This could suggest that the creation of companies is a strategy for securing the right of residence, rather than a legitimate business interest.”
It’s important for authorities to differentiate between these types of investments and enhance scrutiny of small firms to ensure they meet their obligations to the state. Stanic emphasizes the need for a comprehensive approach that not only attracts foreign investments but also promotes transparency, accountability, and long-term sustainability.
Benefits of setting up in Montenegro
Western sanctions imposed on Russia due to the Ukraine conflict have led many Russian businesses, especially in the IT sector, to relocate their operations to safer areas. Montenegro, which is not yet a member of the European Union, has become an attractive destination for such relocations. To illustrate, Aleksei Gudashev, a programmer, registered his IT agency in Montenegro, where he is the sole employee. He highlights that opening a company allows legal work with foreign clients and the possibility to obtain a residence permit in Montenegro.
Between February 2022 and July 2023, the Montenegrin interior ministry issued a total of 29,294 temporary and permanent residence permits to Russian citizens, with just over half being temporary residence and work permits. To secure a temporary residence permit, a foreigner must demonstrate employment with a Montenegrin-registered company or show that they have opened a company in the country.
The ease of registering a limited liability company in Montenegro, with a minimum founding capital of one euro, has attracted many Russians. Nonetheless, according to revenue and customs data, 161 companies founded by Russian citizens have already closed since the Ukrainian conflict began.
Russian-owned companies are predominantly established along the coast, with Budva being the most popular municipality, followed by Podgorica, Herceg Novi, and the port of Bar. The IT firm First Line Software is the largest Russian employer in Montenegro, with 201 employees.
Further scrutiny
The Union of Employers of Montenegro has expressed concern that about half of new companies established by foreigners have not submitted final accounts or settled their tax obligations. They stress the need for timely and institutional handling of such procedures to prevent misuse of company registration for purposes other than genuine economic activities.
Regarding the economic benefit to Montenegro from Russian companies registering in the country, the Central Bank provided data on foreign direct investment.
Russia accounted for the largest share of foreign investment, amounting to 52.5 million euros, with a significant portion going into real estate and intercompany debt. Boban Stanić emphasizes the importance of stricter regulatory measures to ensure all companies fulfill their financial obligations, considering the potential impact on the sustainability of these ventures.
