The system of tax breaks for donors in innovation in Montenegro is vulnerable to abuse, due to a lack of oversight, unclearly defined rules and the absence of risk checks, research has shown. Center for Investigative Journalism of Montenegro (CIN-CG).
National strategic documents state that the state lacks mechanisms for assessing the risks of new technologies and business models, which is why innovative entities, especially those related to digital assets, remain off the radar of supervisory authorities and pose a high risk of money laundering and suspicious money flows.
Under the previous Law on Incentive Measures for the Development of Research and Innovation, investors could obtain tax incentives through the acquisition of equity stakes in startup companies.
In the amendments to the Law on Innovation Activities from May 2025 states that a startup is a micro and small business that is no older than five years old, has not yet distributed profits, and was not created through a merger, and that develops and implements innovations with the potential for rapid growth.
"We have a number of examples of abuse where the definitions of new technologies, especially in the field of crypto and IT startups, were used more as a cover than as a real basis for business development. The result was a complete waste of funds, and often the technologies themselves were rendered meaningless," cryptocurrency expert and creator of the Montenegrin digital currency Perper told CIN-CG. Ivan Jolicic.
According to him, startup founders in Montenegro have little understanding that their company can be misused for money laundering. He also claims that it is easier to conceal money flows through retail chains, construction projects or seasonal summer businesses.
"These are more proven mechanisms for laundering money than investing in startups. Criminal structures, due to their connections with the executive and judicial branches, did not even need to resort to more sophisticated models, such as startups. In other words, either they did not need it or they never seriously considered investing capital in this way," Joličić told CIN-CG.
The new Law on Incentive Measures for the Development of Research and Innovation, which will be implemented from 2025, provides for a model of donations without acquisition of ownership, precisely to reduce the risk of potential conflicts of interest and circular financial flows. This law also prohibits the spending of donated funds on the engagement of related parties, including founders, members or legal entities that are donors or are related to them, in order to prevent possible abuses, concealment of money flows or conflicts of interest.
Tax breaks for investors
According to data provided to CIN-CG by the Tax Administration, from 2021 to August 2025, 98 startups were registered in the Register of Innovation Activities (RID), of which 20 were deleted last August after their startup status expired, or their registration decision ceased to be valid.
According to data from Poslovna mreža, the company “Bemax” is listed as an investor in the startup Final Find, as well as the company “Škorpion”" from Herceg Novi. “Bemax" is a co-owner of startups "Go4Adventure doo” and “Foodyness doo”, while “Škorpion" co-owner in a startup "DrKnight d. o. o.".
These startups are registered with RID, and the company is also participating in their development. "DigitalDen HUB”, registered as “another innovation infrastructure entity”. According to data from the Poslovna mreža platform, “DigitalDen HUB” has shares in 12 startups registered in the RID, while its authorized representative and co-owner is Darko Ivanovic He is also engaged in executive positions in some of these companies.
Ivanovic explains to CIN-CG that "Digital Den HUB" operates as a venture studio and that the startups in which it has a stake operate as completely separate legal entities, with their own accounts, bookkeeping and management, and that there is no diversion of funds to investors or related parties.
"It is the only private company of its kind in Montenegro and the region," says Ivanović, emphasizing that the investment capital and tax incentives were used exclusively for product development and startup operations.
According to him, "Digital Den HUB" has provided employment for around 30 people and contributed to the development of products used in Montenegro and abroad, including hardware and software solutions, gaming projects with international investments, applications for digital speech therapy support, as well as platforms for the development of emotional intelligence and mental health.
The registry currently lists 79 innovation donors, including, in addition to the companies “Bemax" and “Škorpion”, there are also construction and catering companies, such as “Zetagradnja", “Glossary", “Podcafe F&B, BIP hotels”, “Voli trade”, “Cungu & Co. ", "Technomax”, “Cerovo”, “SM&SM.” Donors include numerous banks.
The law allows donors to be exempt from part of the profit tax and contributions on salaries for employees in research and development jobs.
The Ministry of Education, Science and Innovation told CIN-CG that from 2022 to 2024, the amount of tax breaks for donors was around seven million euros, while the Tax Administration said that the application of the breaks for donors is recorded through regular tax returns.
Although the Law on Incentive Measures for the Development of Research and Innovation entered into force in 2020, its practical application was enabled in 2022 after the adoption of secondary legislation and harmonisation with systemic laws.
Therefore, from 2022 to the end of 2024, in addition to investors, tax breaks were also used by innovative companies that redirected their profit tax to the development of their own innovations, as well as freelancers registered in the Central Register of Business Entities (CRPS) as entrepreneurs.
According to the 2020 Law, a legal entity could become a donor if it invested five thousand euros, while a natural person had to invest 2.500 euros. Amendments to the Law on Incentive Measures from June 2025 tightened the conditions under which legal entities and natural persons can obtain the status of a beneficiary of incentive measures. A legal entity now acquires this status if it donates at least 15 thousand euros to startups or spinoffs, or at least 10 thousand euros to licensed scientific and research institutions or the Innovation Fund of Montenegro (FICG). Natural persons obtain the status of a donor if they donate at least five thousand euros.
However, the new law does not require verification of the origin of money donated to startups or scientific research projects.
When CIN-CG asked about the number of inspections conducted on entities operating in the innovation and information technology sector, the Tax Administration did not respond, stating that there is no special activity code for these economic entities. They also said that during inspections, they most often noticed irregularities such as incorrect recording of research and development costs, untimely submission of tax returns and incorrect application of tax benefits.
Country without money laundering risk assessment
A report by the Financial Intelligence Unit published last October states that in 2024, the unit of the Police Directorate (UP) suspected money laundering in 16 cases, and that three criminal charges were filed with the state prosecutor's office against one legal entity and four natural persons for money laundering in the amount of 5,9 million euros. The report does not specify what kind of money laundering cases these were.
The UP did not respond to CIN-CG's question about whether there have been any investigations or proceedings related to abuses in startup investments in the past 10 years, stating that this is "secret information" that, according to the law, the Sector for the Prevention of Money Laundering and Terrorism Financing "may not be disclosed or communicated to third parties, including the media."
The Government of Montenegro warned in its Action Plan for Improving the System for Preventing Money Laundering and Terrorism Financing for the Period 2024-2025 that Montenegro does not have developed mechanisms for risk control in the fastest-growing sectors, including innovative entities, technology companies and virtual asset businesses. The document states that the country does not have an adequate legal framework for assessing the risks of new products, business models and digital technologies.
“There are no legal obligations for the state to identify and conduct risk assessments of money laundering and terrorist financing in relation to new products and business practices. No risk assessment of new products and business practices has been conducted,” the government document states.
The Action Plan warns of the high risk of doing business with virtual assets and virtual asset service providers, especially when they are used for the purchase of real estate or suspicious financial transfers. It also states that Montenegro has weaknesses in the supervision of legal entities, from checks on beneficial owners to the control of companies whose main place of business is different from the place of registration, and which open accounts and carry out transactions without real business.
The Law on Innovation Activities, which regulates the national innovation system, formally recognizes startups, but does not prescribe precise criteria for their assessment, mechanisms for monitoring capital inflows into startups, the obligation to report on results, or the transparency of investments.
Narrowing space for investing in startups
Cryptocurrency expert Ivan Jolicic claims that the Montenegrin market is not suitable for serious investments in startups, warning that the transparency of capital is very questionable.
The Science and Technology Park of Montenegro (NTPCG) claims that the development of startups in Montenegro is hampered by a small market, limited access to venture capital in the early stages, administrative and regulatory ambiguities, and a lack of systemic connections with international investors. They also point out that the development of the startup community is also slowed down by the lack of international payment systems, such as PayPal and Stripe, warning that international investors are needed for progress.
"Every investment in the startup scene should be based on maximum transparency and full respect for legal, moral and ethical principles. We always encourage founders to be as cautious as possible. Only in this way can they protect their business, but also contribute to the healthy and sustainable development of the startup scene in Montenegro," the Science and Technology Park told CIN-CG.
Joličić explains that there are very few startups in Montenegro that have managed to attract significant foreign capital.
"From my experience and contacts with investors, it is clear that most venture capital funds operate either entirely through offshore structures, or at least partially. This is not necessarily related to the origin of the capital, but primarily to the regulatory framework. Due to complex procedures and high requirements in certain jurisdictions, it is easiest for investors to operate through offshore companies and intermediaries," claims Joličić.
The Government of Montenegro established the Innovation Fund of Montenegro (FICG) in June 2021, which implements innovation policy measures and programs aimed at the development of small and medium-sized enterprises and the transfer of technologies from scientific and research institutions to the economy. FICG is financed from the budget of Montenegro and from international and EU funds.
According to data provided by FICG to CIN-CG, by October 2025, it had financed 37 projects with a total of 1,2 million euros through the Early Stage Startup Development Support Program..
"The number of applications is continuously growing year after year, which clearly shows that there is increasing interest and trust among innovative teams in the fund's programs," FICG stated.
Last year, FICG financed 11 projects with a total of 355.789 euros, while in 2024, a total of 388.573 euros were paid out for 12 projects. During 2023, 14 projects were financed with a total of 463.420 euros. FICG could not answer the number of employees in startup companies in Montenegro in 2025 and how that number has changed over the years, explaining that this data is in the collection and analysis phase.
The NTPCG explains that problematic investors in startups can be identified by an unrecognizable or complex ownership structure with many intermediaries. Problematic investors, they state, have no business history or have a bad reputation in other communities.
"We recommend that founders conduct legal and financial due diligence before accepting an offer, because if they accept a dubious investment, the consequences can be very serious. First of all, we are talking about criminal liability and seizure of assets, as well as reputational liability regarding the loss of trust of investors and partners," the NTPCG states.
Joličić believes that there is almost no institutional support for the startup industry in Montenegro, which is why it exists in a semi-gray zone.
“For years, there has been a lack of a serious legal and incentive framework for startups, and there is no appropriate legal form for this type of business. It is no surprise that teams and individuals trying to develop a startup regularly seek support outside the country.”
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