Montenegro’s real estate and hospitality sectors have been gaining momentum, driven by the country’s natural beauty, strategic location, and an increasingly favorable investment environment. Keker, Bujkovic, Pejovic Partner Aleksandra Bujkovic, JPM Partners Senior Partner Lana Vukmirovic Misic, BDK Advokati Senior Partner Luka Popovic, and Vujacic Law Office Partner Sasa Vujacic discuss the country’s competitive advantages, challenges faced by investors, and the steps needed to further enhance its appeal to foreign capital.
Favorable Climate for Business
“With its sunny beaches and high mountains, Montenegro has recently developed into a prime tourist destination in the region. In addition, Montenegrin legislation is more than open to foreign investment, with low taxes being the primary cause,” Vujacic begins, pointing to the country’s annual corporate tax rate of 15%. “Generally, for a foreigner to establish a company in Montenegro, it is only necessary to obtain a residence permit and thereafter register the company at the Central Registry, with the entire process lasting no more than a month.” Vujacic stresses that “Montenegro already features a rich array of top-end hotels – Hilton, Crowne Plaza, Hyatt, and Splendid, among others – many of which were built with the help of government subventions, largely through exemptions or deductions of local taxes.”
Bujkovic echoes that “Montenegro’s key competitive advantages in the Adriatic real estate and hospitality sector lie in its strategic location, natural beauty, and a historically open investment environment.” However, she notes that “recent developments suggest a shift in focus, with some benefits and promotional efforts for foreign investments being scaled back.” According to her, “recent actions – or the lack thereof – suggest an apparent stagnation in strategic initiatives. Despite this, the country still offers significant opportunities for growth, particularly in the luxury real estate and hospitality sectors.” Importantly, Bujkovic points to the fact that Montenegro provides foreign nationals the right to “purchase real estate without restrictions, except for agricultural and forest land unless tied to a corporate structure. The country’s relatively low property taxes enhance the financial attractiveness of real estate investments, and the introduction of a progressive property transfer tax system in 2024, though new, remains competitive within the European context.”
Popovic too stresses the ease of doing business in the Adriatic country. “Montenegrin forex regulations are very liberal and there are no restrictions on capital transfers or any payments to or from Montenegro. Also, Montenegro has no restrictions on foreign ownership of companies. Furthermore, the corporate income tax rate is low, with progressive tax rates of 9%, 12%, and 15%, respectively.” Additionally, he explains that “the hotel regulations provide for various modes of hotel operations, including the so-called ‘condo model’ and ‘mixed-model’ that are hybrids of traditional hotels and condominiums, which allow investors to generate better returns on investments. Finally, hotel licensing procedures and categorization are rather straightforward, and, in my experience, the licensing authorities are efficient.”
Furthermore, Montenegro’s accession path to the EU has shaped much of its policy direction. As Vujacic notes, “as a part of Montenegro’s accession to the European Union, particularly the Stabilization and Association Agreement of 2007, Montenegro is required to harmonize its legislation with EU directives in all the relevant areas.” Additionally, “Montenegro has signed bilateral treaties with Greece, Bosnia and Herzegovina, Serbia, North Macedonia, and Albania. It should be particularly noted that all investors from EU Member States have the same status as national investors – national status,” Vujacic reports.
On the flip side, Bujkovic argues that the country’s regulatory framework also presents “notable challenges and in certain cases, areas of oversight or neglect when compared to its Adriatic neighbors,” adding that “Montenegro faces challenges shared with other Adriatic nations, including concerns about political and legal predictability.” Still, Popovic believes that “in terms of regulatory framework and procedures, Montenegro provides for more predictability than some neighboring non-EU countries, and more flexibility than the neighboring EU countries.”
Navigating Investment Challenges
As Bujkovic hints, it’s not all sunshine and sandy beaches – investment challenges are still very much present in Montenegro.
Vujacic points to inadequate spatial planning as a frequently cited hurdle. “The main problem for investments coming into Montenegro is spatial planning that is yet to be sufficiently developed in certain parts of the country, therefore making obtaining parcels and building on them more difficult. In addition, the administration can sometimes move slower than it generally should. In order to help foreign investors in Montenegro, the Montenegrin Investment Agency was established.”
According to Bujkovic, “the permitting process is complex and often plagued by lengthy delays. Regulatory uncertainties, including frequent policy changes and inconsistent zoning regulations, add to the difficulties. A critical issue is the absence of the General Regulation Plan, the country’s key planning document. Without it, existing regulations are applied inconsistently, and there is no standardized approach to handling expired planning rules.” Moreover, she echoes Vujacic in stressing that “slow bureaucracy exacerbates these issues, with project approvals often hindered by inefficient administrative processes.” Furthermore, Bujkovic adds that “the language barrier adds to the difficulty, as insufficiently developed documentation in English makes it harder for international investors to navigate legal and procedural requirements.” Vukmirovic Misic agrees with these points, adding that, ultimately, “investors sometimes find it challenging to navigate differences in interpretation of zoning plans, land-use regulations, or property rights.”
From Popovic’s perspective, it is infrastructure fees and property disputes that are the key causes of slow projects. “There is a concept of the fees for communal development of the land, that refers to the process of equipping land with essential infrastructure, such as roads, water supply, sewage systems, and utilities, to make it suitable for construction or use. Investors are supposed to pay the fee, and local municipalities are obliged to do the needed infrastructure work. But in reality, this process is very slow and often encumbered with resolving property disputes between the municipalities and the owners of the land where the infrastructure is needed to be built, and that can affect the dynamics of the project,” he explains.
At the same time, government changes can occasionally stall momentum, according to Bujkovic: “Montenegro has made progress in attracting foreign investment in the hospitality sector through incentives like tax breaks, streamlined processes for high-value projects, and promotional efforts to position the country as a premium tourism destination. However, frequent changes in government have created instability, shifting priorities, and inconsistent policies, which undermine long-term planning and deter investors who value predictability.”
Opportunities on the Horizon
Focusing on emerging trends, Vujacic highlights the advantages that upscale hotels benefit from. “With the new set of regulations, it was made possible for foreign investors in Montenegro who invest in 4+ star hotels to be exempt from paying a part of local communal taxes. This advantage was reserved only for investors in 5-star hotels until recently.”
Vukmirovic Misic points to expanded tourism routes. “Improvements in infrastructure and the country’s natural beauty have been significant drivers for the growth in the hospitality sector. The Adriatic coast remains the focal point for hospitality investments, with the highest interest concentrated around Budva, Kotor, Tivat, and Herceg Novi,” she explains. Moreover, she reports that “due to the already constructed section of the highway and the planned continuation, it is reasonable to expect that the established tourism routes will expand to the central and northern parts of the country. This can be confirmed considering the fact of the number of hotels being built in Kolasin, which indicates a growing investment in the tourism sector and regional economic growth.”
Popovic points to condo and mixed hotel models as those in pole position. “The condo model allows hospitality units to be sold to third parties, with owners participating in a rental pool arrangement while the mixed model requires part of the building to be operated as a traditional hotel, with the rest sold to third parties who may choose, but are not obligated, to participate in the rental pool arrangement,” he explains. “These models are permitted exclusively for five-star hotels in more developed areas and for both five- and four-star hotels in less developed regions of the country. This innovation has significantly enhanced the financial viability of hotel projects, attracting foreign investors.”
Efforts To Seize the Moment
Looking ahead, Vujacic reports that “the new general spatial planning plan, including the plan for general regulation, is to be adopted in the first quarter of 2025. For this purpose, the draft on Spatial Planning Law and the draft on the Construction of Buildings Law has been adopted in December of 2024, as the previous step before the final adoption of the previously mentioned plans/laws.”
Building on that, Vukmirovic Misic adds that “to enhance its appeal to real estate and hospitality investors, Montenegro should prioritize infrastructure development, digitalization, and modernization of spatial plans. Investing in transport infrastructure such as roads, airports, and ports, alongside expanding utilities like water, electricity, and waste management, will improve accessibility and support large-scale projects. Improving spatial plans and accelerating the permit approval process is essential.” Additionally, she says that it is equally crucial to ensure that all advancements are “conducted thoroughly so that the drive for efficiency does not result in approving projects that could have negative consequences for our country.”
Resonating this, Bujkovic recommends “establishing a centralized online platform where permits can be tracked in real-time, introducing mandatory deadlines for decision-makers, and ensuring clear submission guidelines.” Additionally, she feels that “large-scale infrastructure upgrades – such as modernizing airports and expanding road networks – combined with sustainability measures, would further strengthen Montenegro’s long-term appeal for investors.”
Finally, Popovic calls for a unified approach to urban development. “The key effort must focus on urban planning, as many areas still lack detailed plans that are a precondition for any construction works,” he says. “To address this, strategic decisions are needed to define the types of developments the country aims to attract. These decisions must then be implemented through a streamlined, efficient, and transparent spatial planning process.”
This article was originally published in Issue 11.12 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
