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HomeBalkansRussian Business Influx into Montenegro More a Means to Residence

Russian Business Influx into Montenegro More a Means to Residence

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Contrary to the hype surrounding the influx of Russian companies into Montenegro since the Kremlin’s invasion of Ukraine in February 2022, a BIRN analysis of the available data shows that, on average, the Montenegrin state reaped on average a little over 800 euros from each newly-opened firm.

In 2021, there were some 4,600 companies in Montenegro registered to Russian owners, but between February 2022 and early July this year, a further 5,846 were opened, according to data from the Revenue and Customs Administration.

Roughly two-thirds – 64 per cent – of those new companies, however, have no more than one employee; 22 per cent have no registered employees other than the founder.

These companies altogether paid 4.89 million euros into state coffers in the form of taxes and social security contributions between February last year and July 4, 2023 – that’s an average of 837 euros.

Experts say the data suggests Russians are opening businesses not to earn money, but to secure residence papers.

“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,” said economics analyst Boban Stanic. “This could suggest that the creation of companies is a strategy for securing the right of residence, rather than a legitimate business interest.”

And small foreign-owned companies in Montenegro have a habit of not paying taxes.

Stanic said it was important that authorities differentiate between such types of investment, stepping up scrutiny of small firms and whether they are meeting their obligations to the state.

“This implies recognizing those that bring real value to the economy, compared to those that may not have long-term benefits.”

“A comprehensive approach must be built, which not only attracts foreign investments but also promotes transparency, accountability and long-term sustainability.”

One-man band

Western sanctions on Russia over its invasion of Ukraine have driven many Russians to move their businesses elsewhere; those in the IT sector in particular have been able to relocate and continue their work online.

“I am convinced, and this is also shown by the data, that many companies that did business in Russia and Ukraine want to transfer their business to safer areas and that Montenegro is one of the more attractive destinations for that,” Montenegrin Economic Development and Tourism Minister Goran Djurovic told television Vijesti in May 2022.

Programmer Aleksei Gudashev was one of those who chose Montenegro, which is not yet a member of the European Union and for years has courted Russians to spend their summer holidays on the Adriatic coast or buy properties.

Gudashev registered his IT agency in the coastal town of Herceg Novi in March last year and is the only employee.

“After opening a company, you can legally work with foreign clients, but also get a residence permit in Montenegro,” he said. “Nevertheless, the process did not go quickly. Eight months passed from the establishment of the company in Montenegro to the first payment.”

According to the Montenegrin interior ministry, between February 2022 and July this year, a total of 29,294 temporary and permanent residence permits were issued to Russian citizens.

Just over half were temporary residence and work permits, allowing a foreign citizen to stay beyond 90 days. That compares to 6,343 such permits in 2021.

To obtain a temporary residence permit, a foreigner must prove employment with a company registered in Montenegro or that they themselves have opened a company in the country.

“Most companies are opened only so that people can live in Montenegro, and I think that many people choose this country precisely for living, and not for business emigration,” said Gudashev.

“Self-employed people like me do not take jobs in Montenegro. They export services to other countries and pay taxes here.”

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