Albanian government leaders have acknowledged that private sector development and increased levels of foreign investment are critical to supporting sustainable economic development. Albania maintains a liberal foreign investment regime designed to attract FDI. The Law on Foreign Investment outlines specific protections for foreign investors and allows 100 percent foreign ownership of companies, except in the areas of domestic and international air passenger transport and television broadcasting. Albanian legislation does not distinguish between domestic and foreign investments.

The Law on Strategic Investments approved in 2015 offers incentives and fast-track administrative procedures, depending on the size of the investment and number of jobs created, to both foreign and domestic investors who apply before December 31, 2023.

The Albanian Investment Development Agency (AIDA) is the entity responsible for promoting foreign investments in Albania. Potential U.S. investors in Albania should contact AIDA to learn more about services AIDA offers to foreign investors (  http://aida.gov.al/  ). The Law on Strategic Investments stipulates that AIDA, as the Secretariat of the Strategic Investment Council, serves as a one-stop-shop for foreign investors, from filing the application form to granting the status of strategic investment/investor. Despite supporting legislation, very few foreign investors have benefited from the “Strategic Investor” status, and almost all projects have been granted to domestic companies operating in the tourism sector.

Foreign and domestic investors have equal rights of ownership of local companies, based on the principle of “national treatment.” There are only a few exemptions regarding ownership restrictions:

Domestic and international air passenger transport: foreign interest in airline companies is limited to 49 percent ownership by investors outside the Common European Aviation Zone, for both domestic and international air transportation.

Audio and audio-visual broadcasting: An entity, foreign or domestic, that has a national audio or audio-visual broadcasting license cannot hold more than 20 percent of shares in another audio or audio-visual broadcasting company. Additional restrictions apply to the regional or local audio and audio-visual licenses.

Agriculture: No foreign individual or foreign incorporated company may purchase agricultural land, though land may be leased for up to 99 years. However, if the company registers in Albania, this limitation on agricultural land does not apply.

Albania currently lacks an investment-review mechanism for inbound FDI. However, in 2017, the government introduced a new provision in the Petroleum Law, which allows the government to reject a petroleum-sharing agreement or the sale of shares in a petroleum-sharing agreement to any prospective investor due to national security concerns.

Albanian law permits private ownership and establishment of enterprises and property. To operate in certain sectors, licenses are required but foreign investors do not require additional permission or authorization beyond that required of domestic investors. Commercial property may be purchased, but only if the proposed investment is worth three times the price of the land. There are no restrictions on the purchase of private residential property. Foreigners can acquire concession rights on natural resources and resources of the common interest, as defined by the Law on Concessions and Public Private Partnerships.

Foreign and domestic investors have numerous options available for organizing business operations in Albania. The 2008 Law on Entrepreneurs and Commercial Companies and Law Establishing the National Business Center (NBC) allow for the following legal types of business entities to be established through the NBC: sole proprietorship; unlimited partnership; limited partnership; limited liability company; joint stock company; branches and representative offices; and joint ventures.

The World Trade Organization (WTO) completed a Trade Policy Review of Albania in May 2016 (  https://www.wto.org/english/tratop_e/tpr_e/tp437_e.htm   ). In November 2017, the United Nations Conference on Trade and Development (UNCTAD) completed the first Investment Policy Review of South-East European (SEE) countries, including Albania (  http://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=1884   ).

The National Business Center (NBC) serves as a one-stop shop for business registration. All required procedures and documents are published online http://www.qkb.gov.al/information-on-procedure/business-registration/  . Registration may be done in person or online via the e-Albania portal. Many companies choose to complete the registration process in person, as the online portal requires an authentication process and electronic signature and is only available in the Albanian language. When a business registers in the NBC it is also automatically registered with the Tax Office, Labor Inspectorate, Customs, and the respective municipality. According to the 2020 World Bank Doing Business Report, it takes 4.5 days and five procedures to register a business in Albania.

Albania neither promotes nor incentivizes outward investment, nor does it restrict domestic investors from investing abroad.

Albania’s legal, regulatory, and accounting systems have improved in recent years, but there are still many serious challenges. Endemic corruption, uneven enforcement of legislation, cumbersome bureaucracy, distortion of competition, and a lack of transparency all hinder the business community.

Albanian legislation includes rules on disclosure requirements, formation, maintenance, and alteration of firms’ capitalization structures, mergers and divisions, takeover bids, shareholders’ rights, and corporate governance principles. The Competition Authority (  http://caa.gov.al   ) is an independent agency tasked with ensuring fair and efficient competition in the market. However, business groups have raised concerns about unfair competition and monopolies, rating the issue as one of the most concerning items damaging the business climate.

The Law on Accounting and Financial Statements includes reporting provisions related to international financial reporting standards (IFRS) for large companies, and national financial reporting standards for small and medium enterprises. Albania meets minimum standards on fiscal transparency, and debt obligations are published by the Ministry of Finance and Economy. Albania’s budgets are publicly available, substantially complete, and reliable.

In August 2020, Albania approved the law for the establishment of the register of the Ultimate Beneficiary Owners. The law aims to ensure transparency on the ultimate beneficiary owners, who directly and indirectly own more than 25 percent of shares, voting rights, or ownership interests in all entities registered to do business in Albania, and was adopted following the recommendations of MONEYVAL.

The rulemaking process in Albania meets the minimum requirements of transparency. Ministries and regulatory agencies develop forward regulatory plans that include changes or proposals intended to be adopted within a set timeframe. The law on notification and public consultation requires the GoA to publish draft laws and regulations for public consultation or notification and sets clear timeframes for these processes. Such draft laws and regulations are published at the following page:   http://www.konsultimipublik.gov.al/ . The business community frequently complains that final versions of laws and regulations fail to address their comments and concerns and that comment periods are frequently not respected.

The Albania Assembly ( www.parlament.al ) publishes a list of both proposed and adopted legislation. All laws, by-laws, regulations, decisions by the Council of Ministers (the government), decrees, and any other regulatory acts are published at the National Publication Center at the following site:  https://qbz.gov.al/

Independent agencies and bodies, including but not limited to, the Energy Regulatory Entity (ERE), Agency for Electronic and Postal Communication (AKEP), Financial Supervising Authority (FSA), Bank of Albania, Competition Authority (CA), National Agency of Natural Resources (NARN), and Extractive Industries Transparency Initiative (EITI), oversee transparency and competition in specific sectors.

Albania acceded to the WTO in 2000 and the country notifies the WTO Committee on Technical Barriers to Trade of all draft technical regulations.

Albania signed a Stabilization and Association Agreement (SAA) with the EU in 2006. The EU agreed to open accession talks on March 25, 2020, and the country is awaiting to hold the first Inter-Governmental Conference (IGC), which would mark the official opening of accession talks. Albania has long been involved in the gradual process of legislation approximation with the EU acquis. This process is expected to accelerate with the opening of accession negotiations.

The Albanian legal system is a civil law system. The Albanian constitution provides for the separation of legislative, executive, and judicial branches, thereby supporting the independence of the judiciary. The Civil Procedure Code, enacted in 1996, governs civil procedures in Albania. The civil court system consists of district courts, appellate courts, and the High Court (the supreme court). The district courts are organized in specialized sections according to the subject of the claim, including civil, family, and commercial disputes.

The administrative courts of first instance, the Administrative Court of Appeal, and the Administrative College of the High Court adjudicate administrative disputes. The Constitutional Court, reviews cases related to the constitutionality of legislation and, in limited instances, protects and enforces the constitutional rights of citizens and legal entities.

Parties may appeal the judgment of the first-instance courts within 15 days of a decision, while appellate court judgments must be appealed to the High Court within 30 days. A lawsuit against an administrative action is submitted to the administrative court within 45 days from notification and the law stipulates short procedural timeframes, enabling faster adjudication of administrative disputes.

Investors in Albania are entitled to judicial protection of legal rights related to their investments. Foreign investors have the right to submit disputes to an Albanian court. In addition, parties to a dispute may agree to arbitration. Many foreign investors complain that endemic judicial corruption and inefficient court procedures undermine judicial protection in Albania and seek international arbitration to resolve disputes. It is beneficial to U.S. investors to include binding international arbitration clauses in any agreements with Albanian counterparts. Albania is a signatory to the New York Arbitration Convention and foreign arbitration awards are typically recognized by Albania. However, the government initially refused to recognize an injunction from a foreign arbitration court in one high-profile case in 2016. The Albanian Civil Procedure Code outlines provisions regarding domestic and international commercial arbitration.

Albania does not have a specific commercial code but has a series of relevant commercial laws, including the Entrepreneurs and Commercial Companies Law, Bankruptcy Law, Public Private Partnership and Concession Law, Competition Law, Foreign Investment Law, Environmental Law, Law on Corporate and Municipal Bonds, Transport Law, Maritime Code, Secured Transactions Law, Employment Law, Taxation Procedures Law, Banking Law, Insurance and Reinsurance Law, Concessions Law, Mining Law, Energy Law, Water Resources Law, Waste Management Law, Excise Law, Oil and Gas Law, Gambling Law, Telecommunications Law, and Value-Added Law.

There is no one-stop-shop that lists all legislation, rules, procedures, and reporting requirements for investors. However, foreign investors should visit the Albania Investment Development Agency webpage (  www.aida.gov.al   ), which offers broad information for foreign investors.

Major laws pertaining to foreign investments include:

Law on Foreign Investments

Law on Strategic Investments: Defines procedures and rules to be observed by government authorities when reviewing, approving, and supporting strategic domestic and foreign investments in Albania

Law on Foreigners

Law on Concessions and Public Private Partnerships: Establishes the framework for promoting and facilitating the implementation of privately financed concessionary projects

Law on Entrepreneurs and Commercial Companies: Outlines general guidelines on the activities of companies and the legal structure under which they may operate

Law on Cross-Border Mergers: Determines rules on mergers when one of the companies involved in the process is a foreign company

Law on Protection of Competition: Stipulates provisions for the protection of competition, and the concentration of commercial companies; and

Law on Collective Investment Undertakings: Regulates conditions and criteria for the establishment, constitution, and operation of collective investment undertakings and of management companies.

The Law on Foreign Investments seeks to create a hospitable legal climate for foreign investors and stipulates the following:

No prior government authorization is needed for an initial investment.

Foreign investments may not be expropriated or nationalized directly or indirectly, except for designated special cases, in the interest of public use and as defined by law.

Foreign investors enjoy the right to expatriate all funds and contributions in kind from their investments.

Foreign investors receive most favored nation treatment according to international agreements and Albanian law.

There are limited exceptions to this liberal investment regime, most of which apply to the purchase of real estate. Agricultural land cannot be purchased by foreigners and foreign entities but may be leased for up to 99 years. Investors can buy agricultural land if registered as a commercial entity in Albania. Commercial property may be purchased, but only if the proposed investment is worth three times the price of the land. There are no restrictions on the purchase of private residential property.

To boost investments in strategic sectors, the government approved a new law on strategic investments in May 2015. Under the new law, a “strategic investment” may benefit from either “assisted procedure” or “special procedure” assistance from the government to help navigate the permitting and regulatory process. Despite supporting legislation, very few foreign investors have benefited from the “Strategic Investor” status, and almost all projects have been granted to domestic companies operating in the tourism sector.

Authorities responsible for mergers, change of control, and transfer of shares include the Albanian Competition Authority ACA:   http://www.caa.gov.al/laws/list/category/1/page/1   , which monitors the implementation of the competition law and approves mergers and acquisitions when required by the law; and the Albanian Financial Supervisory Authority FSA: http://www.amf.gov.al/ligje.asp   , which regulates and supervises the securities market and approves the transfer of shares and change of control of companies operating in this sector.

Albania’s tax system does not distinguish between foreign and domestic investors. Informality in the economy, which may be as large as 40 percent of the total economy, presents challenges for tax administration.

Visa requirements to obtain residence or work permits are straightforward and do not pose an undue burden on potential investors. Generally, U.S. passport holders are entitled to a one year stay in Albania without a residence permit, a special provision the GoA reaffirmed in March 2022. The government approved a new Law on Foreigners in July 2021, which partially aligns the domestic legislation, including that on migration, with the EU Directives. The new law introduces a single application procedure for permits in general. For investors there is a special permit called “Unique Investor Permit.” Foreign investors are issued a 2-year unique investor permit if they invest in Albania and meet certain criteria, including a quota ratio of one to five, of foreign and Albanian workers. In addition, same ratio should be preserved in the Board of Directors and other leading and supervisory structures of the company. Salaries of the Albanian workers should match the average of last year for equivalent positions. The permit can be renewed for an additional three years and after that the investor is eligible to receive a permanent permit provided that they fulfil the criteria outlined above and prove that the company is properly registers, has paid taxes and is not incurring losses. The Council of Ministers approves the annual quota of foreign workers following a needs assessment by sector and profession. However, work permits for staff that occupy key positions, among other categories, can be issued outside the annual quota.

Foreign investors can obtain the single permit by the immigration authorities following the initial approval for employment from the National Agency for Employment and Skills https://www.akpa.gov.al/ . U.S. citizens along with EU, Western Balkans, and Schengen-country citizens are exempt from this requirement. In addition, U.S., EU, and Kosovo citizens when applying for residency permit for the first time, have a term of 5 years. The new law also introduced the National Electronic Register for Foreigners (NERF), which is a state database on foreigners, who enter or intend to enter Albania, with purpose of staying, transiting, working, or studying in Albania. NERF will register data on foreign nationals, who have an entry visa, stay, or transit in the Republic of Albania, have a temporary or permanent residence permit, and have a have a unique permit (residence and employment) in Albania.

The Law on Entrepreneurs and Commercial Companies sets guidelines on the activities of companies and the legal structure under which they may operate. The government adopted the law in 2008 to conform Albanian legislation to the EU’s Acquis Communitaire. The most common type of organization for foreign investors is a limited liability company.

The Law on Public Private Partnerships and Concessions establishes the framework for promoting and facilitating the implementation of privately financed concessionary projects. According to the law, concession projects may be identified by central or local governments or through third party unsolicited proposals. To limit opportunities for corruption, the 2019 amendments prohibited unsolicited bids, beginning in July 2019, on all sectors except for works or services in ports, airports, generation and distribution of electricity, energy for heating, and production and distribution of natural gas. In addition, the 2019 amendments removed the zero to 10 percent bonus points for unsolicited proposals, which gave companies submitting unsolicited bids a competitive advantage over other contenders. Instead, if the party submitting the unsolicited proposal does not win the bid, it will be compensated by the winning company for the cost of the feasibility study, which in no case shall exceed 1 percent of the total cost of the project.

The Albanian Competition Authority http://www.caa.gov.al/?lng=en    is the agency that reviews transactions for competition-related concerns. The Law on Protection of Competition governs incoming foreign investment whether through mergers, acquisitions, takeovers, or green-field investments, irrespective of industry or sector. In the case of share transfers in insurance, banking and non-banking financial industries, the Financial Supervisory Authority (  http://amf.gov.al/   ) and the Bank of Albania https://www.bankofalbania.org/    may require additional regulatory approvals. Transactions between parties outside Albania, including foreign-to-foreign transactions, are covered by the competition law, which states that its provisions apply to all activities, domestic or foreign, that directly or indirectly affect the Albanian market. Parties can appeal the decision of the CA to the Tirana First Instance Court within 30 days of receiving the notification. The appeal does not suspend the enforcement of the decision that authorize concentrations and the temporary measures.

The Albanian constitution guarantees the right of private property. According to Article 41, expropriation or limitation on the exercise of a property right can occur only if it serves the public interest and with fair compensation. During the post-communist period, expropriation has been limited to land for public interest, mainly infrastructure projects such as roads, energy infrastructure, water works, airports, and other facilities. Compensation has generally been reported as being below market value and owners have complained that the compensation process is slow, and unfair. Civil courts are responsible for resolving such complaints.

Changes in government can also affect foreign investments. Following the 2013 elections and peaceful transition of power, the new government revoked, or renegotiated numerous concession agreements, licenses, and contracts signed by the previous government with both domestic and international investors. This practice has occurred in other years as well.

There are many ongoing disputes regarding property confiscated during the communist regime. Identifying ownership is a longstanding problem in Albania that makes restitution for expropriated properties difficult. The restitution and compensation process started in 1993 but has been slow and marred by corruption. Many U.S. citizens of Albanian origin have been in engaged in long-running restitution disputes. Court cases go on for years without a final decision, causing many to refer their case to the European Court of Human Rights (ECHR) in Strasbourg, France. A significant number of applications are pending for consideration before the ECHR. Even after settlement in Strasbourg, enforcement remains slow.

To address the situation, the GOA approved new property compensation legislation in 2018 that aims to resolve pending claims for restitution and compensation. The 2018 law reduces the burden on the state budget by changing the cash compensation formula. The legislation presents three methods of compensation for confiscation claims: restitution; compensation of property with similarly valued land in a different location; or financial compensation. It also set a ten-year timeframe for completion of the process. In February 2020, the Albanian parliament approved a law “On the Finalization of the Transitory Process of Property Deeds in the Republic of Albania,” which aims to finalize land allocation and privatization processes contained in 14 various laws issued between 1991 and 2018.

The GOA has generally not engaged in expropriation actions against U.S. investments, companies, or representatives. There have been limited cases in which the government has revoked licenses, specifically in the mining and energy sectors, based on contract violation claims.

The Law on Strategic Investments, approved in 2015, empowers the government to expropriate private property for the development of private projects deemed special strategic projects. Despite the provision that the government would act when parties fail to reach an agreement, the clause is a source of controversy because it entitles the government to expropriate private property in the interest of another private party. The expropriation procedures are consistent with the law on the expropriation, and the cost for expropriation would be incurred by the strategic investor. The provision has yet to be exercised.

Albania maintains adequate bankruptcy legislation, though corrupt and inefficient bankruptcy court proceedings make it difficult for companies to reorganize or discharge debts through bankruptcy.

A 2016 law on bankruptcy aimed to close loopholes in the insolvency regime, decrease unnecessary market exit procedures, reduce fraud, and ease collateral recovery procedures. The Bankruptcy Law governs the reorganization or liquidation of insolvent businesses. It sets out non-discriminatory and mandatory rules for the repayment of the obligations by a debtor in a bankruptcy procedure. The law establishes statutory time limits for insolvency procedures, professional qualifications for insolvency administrators, and an Agency of Insolvency Supervision to regulate the profession of insolvency administrators.

Debtors and creditors can initiate a bankruptcy procedure and can file for either liquidation or reorganization. Bankruptcy proceedings may be invoked when the debtor is unable to pay the obligations at the maturity date or the value of its liabilities exceeds the value of the assets.

According to the provisions of the Bankruptcy Law, the initiation of bankruptcy proceedings suspends the enforcement of claims by all creditors against the debtor subject to bankruptcy. Creditors of all categories must submit their claims to the bankruptcy administrator. The Bankruptcy Law provides specific treatment for different categories, including secured creditors, preferred creditors, unsecured creditors, and final creditors whose claims would be paid after all other creditors were satisfied. The claims of the secured creditors are to be satisfied by the assets of the debtor, which secure such claims under security agreements. The claims of the unsecured creditors are to be paid out of the bankruptcy estate, excluding the assets used for payment of the secured creditors, following the priority ranking as outlined in the Albanian Civil Code.

Pursuant to the provisions of the Bankruptcy Law, creditors have the right to establish a creditors committee. The creditors committee is appointed by the Commercial Section Courts before the first meeting of the creditor assembly. The creditors committee represents the secured creditors, preferred creditors, and the unsecured creditors. The committee has the right (a) to support and supervise the activities of the insolvency administrator; (b) to request and receive information about the insolvency proceedings; (c) to inspect the books and records; and (d) to order an examination of the revenues and cash balances.

If the creditors and administrator agree that reorganization is the company’s best option, the bankruptcy administrator prepares a reorganization plan and submits it to the court for authorizing implementation.

According to the insolvency procedures, only creditors whose rights are affected by the proposed reorganization plan enjoy the right to vote, and the dissenting creditors in reorganization receive at least as much as what they would have obtained in a liquidation. Creditors are divided into classes for the purposes of voting on the reorganization plan and each class votes separately. Creditors of the same class are treated equally. The insolvency framework allows for the continuation of contracts supplying essential goods and services to the debtor, the rejection by the debtor of overly burdensome contracts, the avoidance of preferential or undervalued transactions, and the possibility of the debtor obtaining credit after commencement of insolvency proceedings. No priority is assigned to post-commencement over secured creditors. Post-commencement credit is assigned over ordinary unsecured creditors.

The creditor has the right to object to decisions accepting or rejecting creditors’ claims and to request information from the insolvency representative. The selection and appointment of insolvency representative does not require the approval of the creditor. In addition, the sale of substantial assets of the debtor does not require the approval of the creditor. According to the law on bankruptcy, foreign creditors have the same rights as domestic creditors with respect to the commencement of, and participation in, a bankruptcy proceeding. The claim is valued as of the date the insolvency proceeding is opened. Claims expressed in foreign currency are converted into Albanian currency according to the official exchange rate applicable to the place of payment at the time of the opening of the proceeding.

The Albanian Criminal Code contains several criminal offenses in bankruptcy, including (i) whether the bankruptcy was provoked intentionally; (ii) concealment of bankruptcy status; (iii) concealment of assets after bankruptcy; and (iv) failure to comply with the obligations arising under bankruptcy proceeding.

According to the World Bank’s 2020 Doing Business Report, Albania ranked 39th out of 190 countries in the insolvency index. A referenced analysis of resolving insolvency can be found at the following link:

 http://documents.worldbank.org/curated/en/255991574747242507/Doing-Business-2020-Comparing-Business-Regulation-in-190-Economies-Economy-Profile-of-Albania

The Albanian Investment Development Agency (AIDA; www.aida.gov.al) is the best source to find incentives offered across a variety of sectors. Aside from the incentives listed below, individual parties may negotiate additional incentives directly with AIDA, the Ministry of Finance and Economy, or other ministries, depending on the sector.

To boost investments in strategic sectors, the GoA approved a Law on Strategic Investments in May 2015 that outlines the criteria, rules, and procedures that state authorities employ when approving a strategic investment. The GoA has extended the deadline to apply to qualify as a strategic investment to December 2023. A strategic investment is defined as an investment of public interest based on several criteria, including the size of the investment, implementation time, productivity and value added, creation of jobs, sectoral economic priorities, and regional and local economic development. The law does not discriminate between foreign and domestic investors.

The following sectors are defined as strategic sectors: mining and energy, transport, electronic communication infrastructure, urban waste industry, tourism, agriculture (large farms) and fishing, economic zones, and development priority areas. Investments in strategic sectors may obtain assisted procedure and special procedure, based on the level of investment, which varies from EUR one million to EUR 100 million, depending on the sector and other criteria stipulated in the law.

In the assisted procedure, public administration agencies coordinate, assist, and supervise the entire administrative process for investment approval and makes state-owned property needed for the investment available to the investor. Under the special procedure, the investor also enjoys state support for the expropriation of private property and the ratification of the contract by parliament.

The law and bylaws that entered into force on January 1, 2016, established the Strategic Investments Committee (SIC), a commission in charge of approving strategic investments. The Committee is headed by the prime minister and members include ministers covering the respective strategic sectors, the state advocate, and relevant ministers whose portfolios are affected by the strategic investment. AIDA serves as the Secretariat of SIC and oversees providing administrative support to investors. The SIC grants the status of assisted procedure and special procedure for strategic investments and investors based on the size of investments and other criteria defined in the law.

Major Incentives Albania Offers:

Energy and Mining, Transport, Electronic Communication Infrastructure, and Urban Waste Industry:  Investments greater than EUR 30 million enjoy the status of assisted procedure, while investments of EUR 50 million or more enjoy special procedure status.

The government offers power purchasing agreements (PPA) for 15 years for electricity produced from hydroelectric plants with an installed capacity of less than 15 megawatts. The government also offers feed-in-premium tariff for solar installations with installed capacity of less than two megawatts and for wind installation of less than three megawatts. Exemption from custom duties and VAT is available for the manufacturing or the mounting of solar panel systems for hot water production.

Certain machinery and equipment imported for the construction of hydropower plants are VAT exempt. The government supports the construction of small wind and photovoltaic parks with an installed capacity of less than three megawatts and two megawatts, respectively, by offering feed-in-premium tariffs for 15 years. The Energy Regulatory Authority (ERE;  http://www.ere.gov.al/  ) conducts an annual review of the feed-in-premium tariffs for wind and photovoltaic parks. The ERE also conducts an annual review of the feed-in-tariffs for small hydroelectric plants with an installed capacity of less than 15 megawatts. Imports of machinery and equipment for investments of greater than EUR 400,000 for small wind and solar parks with an installed capacity of less than three megawatts and two megawatts, respectively, enjoy a VAT exemption. Imports of hot water solar panels for household and industrial use are also VAT exempt.

Tourism and Agritourism:  Investments of five million euro or more enjoy the status of assisted procedure, while investments greater than EUR 50 million enjoy the status of special procedure. In 2018, the GoA introduced new incentives to promote the tourism sector. International hotel brands that invest at least USD 8 million for a four-star hotel and USD 15 million for a five-star hotel are exempt from property taxes for 10 years, pay no profit taxes, and pay a VAT of 6 percent for any service on their hotels or resorts. For all other hotels and resorts, the GoA reduced the VAT on accommodation from 20 percent to 6 percent. Profit taxes for agritourism ventures were reduced to 5 percent from 15 percent previously, while VAT for accommodation is now 6 percent, down from 20 percent. Five star hotels and agritourism facilities are exempt from the tax on impact on infrastructure while both four and five start hotels are exempt from tax on buildings.

Agriculture (Large Agricultural Farms) and Fishing:  Investments greater than EUR three million that create at least 50 new jobs enjoy the status of assisted procedure, while investments greater than EUR 50 million enjoy the status of special procedure. In addition, the GoA offers a wide range of incentives and subsidies for investments in the agriculture sector. The funds are a direct contribution from the state budget and the EU Instrument of Pre-Accession for Rural Development Fund (IPARD.) IPARD funds allocated for the period 2018-2020 totaled EUR 71 million. The program is managed by the Agricultural and Rural Development Agency (  http://azhbr.gov.al/  ). Agricultural inputs, agricultural machinery, and veterinary services are exempt from VAT. The government offers other subsidies to agricultural farms and wholesale trade companies that export agricultural products.

Some incentives offered in the agriculture sector include: Zero VAT for agricultural machineries and for 27 fishing industry items including ships, nets, electronic equipment, refrigerators, ship engines, etc. Zero tariff for the registration and compulsory vaccination of livestock. Zero tax for the purchase of diesel from fishing vessels (0 excise, 0 fuel tax, 0 carbon tax.) A reduction of profit tax up to 5 percent for Agricultural Cooperative Societies and 10 percent VAT for supply of agricultural inputs including chemical fertilizers, pesticides, seeds, and seedlings. In addition, those investing in agriculture sector can rent agriculture land from 10 to 99 years.

Development Priority Areas:  Investments greater than EUR one million that create at least 150 new jobs enjoy the status of assisted procedure. Investments greater than EUR 10 million that create at least 600 new jobs enjoy the status of special procedure.

Foreign Tax Credit: Albania applies foreign tax credit rights even in cases where no double taxation treaty exists with the country in which the tax is paid. If a double taxation treaty is in force, double taxation is avoided either through an exemption or by granting tax credits up to the amount of the applicable Albanian corporate income tax rate (currently 15 percent).

In 2019, the GoA reduced the dividend tax from 15 percent to 8 percent.

Corporate Income Tax Exemption:  Film studios and cinematographic productions, licensed and funded by the National Cinematographic Center, are exempt from corporate income tax.

Loss Carry Forward for Corporate Income Tax Purposes:  Fiscal losses can be carried forward for three consecutive years (the first losses are used first). However, the losses may not be carried forward if more than 50 percent of direct or indirect ownership of the share capital or voting rights of the taxpayer is transferred (changed) during the tax year.

Lease of Public Property:  The GoA can lease public property of more than 500 square meters or grant a concession for the symbolic price of one euro if the properties will be used for manufacturing activities with an investment exceeding EUR 10 million, or for inward processing activities. The GoA can also lease public property or grant a concession for the symbolic price of one euro for investments of more than EUR two million for activities that address certain social and economic issues, as well as activities related to sports, culture, tourism, and cultural heritage. Criteria and terms are decided on an individual basis by the Council of Ministers.

Incentives for the Manufacturing Sector and ICT:  The GoA reduced the profit tax from 15 percent to 5 percent for software development companies and the automotive industry. Manufacturing activities are exempt from 20 percent VAT on imports of machinery and equipment. The government offers a one-euro symbolic rent for government-owned property (land and buildings) for investments exceeding USD 2.7 million that create a minimum of 50 jobs. No VAT is charged for products processed for re-exports. Employers are exempt from paying social security tax for one year for all new employees. The GoA pays the first four months of salaries for new employees and offers various financing incentives for job training.

The manufacturing sector obtains VAT refunds immediately in the case of zero risk exporters, within 30 days if the taxpayer is an exporter, and within 60 days in the case of other taxpayers.

Apparel and footwear producers are exempt from 20 percent VAT on raw materials if the finished product is exported. In 2011, the GoA also removed customs tariffs for imported apparel and raw materials in the textile and shoe industries (e.g., leather used for clothes, cotton, viscose, velvet, sewing accessories, and similar items).

Technological and Development Areas (TEDA):  The Law on Economic Development Areas provides fiscal and administrative incentives for companies that invest in this sector and for firms that establish a presence in these areas. Major incentives include: Developers and users benefit from a 50 percent deduction of profit tax for five years, exemption from the infrastructure impact tax, and exemption from real estate tax for five years. A full list of incentives can be found at:   TEDA (aida.gov.al)  

Albania has no functional duty-free import zones or free trade zones, although legislation exists for their creation. The May 2015 amendments to the Law on the Establishment and Operation of Technological and Development Areas (TEDAs) created the legal framework to establish TEDAs, defining the incentives for developers investing in the development of these zones and companies operating within the zones.

The Albanian government has granted the status of the Technological and Development Areas to TEDA Spitalle (49.1 ha), Koplik (61 ha) and Kashar (35 ha) (Tirana) but none has been developed to date.

There are no performance requirements for foreign investors or minimum requirements for domestic content in goods or technology. Investment incentives are equally available to foreign and domestic investors. Investments in certain sectors require a license or authorization and procedures are similar for foreign and domestic investors.

Visa, residence, and work permit requirements are straightforward and generally do not pose an undue burden on potential investors.

The government approved a new Law on Foreigners in June 2021, which partially aligns the domestic legislation, including that on migration, with the EU Directives. The new law introduces a single application procedure for permits. For investors there is a special permit called “Unique Investor Permit.” Foreign investors are issued a 2-year unique investor permit if they invest in Albania and meet certain criteria, including a quota ratio of one to five of foreign and Albanian workers. In addition, same ratio should be preserved in the Board of Directors and other leading and supervisory structures of the company. Salaries of the Albanian workers should match the average of last year for equivalent positions. The permit can be renewed for an additional three years and after that the investor is eligible to receive a permanent permit provided that they fulfil the criteria outlined above and prove that the company is properly registered, has paid taxes and is not incurring losses. The U.S. citizens when applying for the first time receives a five-year permit. Foreign investors can obtain the single permit by the immigration authorities following the initial approval for employment from the National Agency for Employment and Skills ( https://www.akpa.gov.al/https://www.akpa.gov.al/  .) U.S. citizens along with EU, Western Balkans, and Schengen-country citizens are exempt from this requirement. In addition, U.S., EU, and Kosovo citizens when applying for residency permit for the first time, have a term of 5 years. The new law also introduced the National Electronic Register for Foreigners (NERF), which is a state database on foreigners, who enter or intend to enter Albania, with purpose of staying, transiting, working, or studying in Albania. NERF will register data on foreign nationals, who have an entry visa, stay, or transit in the Republic of Albania, have a temporary or permanent residence permit, and have a have a unique permit (residence and employment) in Albania.

The Council of Ministers approved an annual quota of foreign workers following a needs assessment by sector and profession. However, work permits for staff that occupy key positions, among other categories, can be issued outside the annual quota.

Albanian legislation regulating the functioning of the National Agency of Information (AKSHI) requires that every company contracted by the government to develop a computer system provide the source code and all related technical documents of the system. In addition, every government system and its data must be hosted at the government datacenter maintained by AKSHI.

There are no legal restrictions to transferring business-related data abroad, except for a few cases that need prior consent. There are more stringent requirements for personal data. Albania has comprehensive legislation for the protection of personal data: the Law on the Protection of Personal Data, including by-laws, as well as the 1981 Convention for the Protection of Individuals with regard to Automatic Processing of Personal Data, and the Additional Protocol to the Convention regarding Supervisory Authorities and Trans-border Flows of Personal Data, ratified by Albania in 2004. The authority in charge of the protection of personal data is the Information and Data Protection Commissioner https://www.idp.al/?lang=en   .

Based on Albanian legislation, international transfers of personal data in countries deemed to have an adequate level of protection are not restricted. However, companies must notify the Commissioner in advance of any processing of personal data and any intention to transfer data to third countries. This applies to companies in foreign jurisdictions that operate in Albania using any means located within the country. To transfer data to third countries that do not have an adequate protection level, companies need prior authorization from the Commissioner. There are exemptions to this policy for certain data categories defined by the Commissioner as well as when certain conditions are met. Countries with an adequate protection level include EU member states, European Economic Area countries, members of the 1981 Convention and related protocol, and all countries approved by the European Commission.

Many foreign companies operating in Albania that process sensitive data opt to keep their data in Albania.

Individuals and investors face significant challenges with protection and enforcement of property rights. Despite some improvements, procedures remain cumbersome, and registrants have complained of corruption during the process. Over the last three decades, the GoA has drafted and passed much, though not all, of its property legislation in a piecemeal and uncoordinated way. However, the GoA is working to complete the process for registration and compensation of properties, and the law on the finalization of transitional ownership processes adopted in March 2020, specifically aims to consolidate property rights by finalizing land allocation and privatization processes contained in 14 various laws issued between 1991 and 2018. According to the European Commission Report 2021 on Albania, progress on property rights should be made on further first registration of properties and transitional ownership processes, in a transparent and inclusive manner. The GoA aims to fully digitize property documents within 2023, however, the poor state of the data is a risk for title security and a constraint to investment. To streamline the property management process, the GoA established in April 2019 the State Cadaster Agency (ASHK), which merged different agencies responsible for property registration, compensation, and legalization, including the Immovable Property Registration Office (IPRO), the Agency of Inventory and Transfer of Public Properties (AITPP), and the Agency for the Legalization and Urbanization of Informal Areas (ALUIZNI).

The property registration system has improved thanks to international donor assistance, but the process has moved forward very slowly as Albania has yet to complete the initial registration of property titles in the country. In total, about 3.54 million properties were registered as part of the initial registration process. In December 2021, GoA launched a two-year project which aims to complete the digitization of the about 2.3 million remaining properties however plot records for many of these properties are still only in paper form and often in poor and outdated condition. Approximately half a million properties have still not been registered for the first time, which includes the southern coastal area. In 2020, the State Cadaster Agency initiated the process of first registration for eight zones in the Himara municipality area that holds significant potential for the tourism industry.

The Agency for the Treatment of Property (ATP) continued assessing requests and distributing funds for compensation of properties. In 2021, it distributed around USD 9.5 million from the financial fund and an area of around 100 hectares from the land fund.

Albania has registered an estimated 440,000 illegal structures, built without permits, and illicit construction continues to be a major impediment to securing property titles. A process that aims to legalize or eliminate such structures started in 2006 but is not complete. Around 200,000 legalization permits were issued through the end of 2020. The fluid situation has led to clashes between squatters, owners of allegedly illegal buildings, and the Albanian State Police including during the demolition of these structures to make way for public infrastructure projects.

According to the 2020 World Bank’s “Doing Business Report,” Albania performed poorly in the property registration category, ranking 98th out of 190 countries.  It took an average of 19 days and five procedures to register property, and the associated costs could reach 8.9 percent of the total property value. The civil court system manages property rights disputes, but verdicts can take years, authorities often fail to enforce court decisions, and corruption concerns persist within the judiciary.

Albania is not included on the U.S. Trade Representative’s (USTR’s) Special 301 Report or Notorious Markets List. That said, intellectual property rights (IPR) infringement and theft are common due to weak legal structures and poor enforcement. Counterfeit goods are present in some local markets and shopping malls, including software, garments, machines, and cigarettes. Albanian law protects copyrights, patents, trademarks, industrial designs, and geographical indications, but enforcement of these laws remains weak. Regulators are ineffective at collecting fines and prosecutors rarely press charges for IPR theft. U.S. companies should consult an experienced IPR attorney and avoid potential risks by establishing solid commercial relationships and drafting strong contracts. According to the 2021 International Property Right Index published by Property Right Alliance, Albania ranks 98th out of 129 countries evaluated, registering an improvement compared to the previous year when ranked 112th. It ranked 79th in the subcategory of copyright protection and 23rd in trademark protection.

Amendments to the Albanian Industrial Property Law, introducing new provisions regarding trade secrets and trademarks entered into force in August 2021. The most significant change is the transposition of Directive (EU) 2016/943 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure. Trade secrets were previously regulated by the Law on Entrepreneurs and Companies, and Labor Code, and their subject matter was defined in broader terms. Now, under the amended IP law, a trade secret is defined as undisclosed expert knowledge, experience or business information that is not generally known or easily accessible, that has a certain market value, and for which sufficient measures have been taken to keep it a secret.  In 2019, the Criminal Code was amended to include harsher punishments of up to three years in prison for IPR infringement.

In the areas of copyright, patent, and trademarks, the two main bodies responsible are the Copyright Directorate at the Ministry of Culture and the General Directorate of Industrial Property (GDIP), which is in charge of registering, administering, and promoting IPR. Other institutions responsible for IPR enforcement include the Copyright Division of the State Inspectorate for Market Surveillance (SIMS), the Audiovisual Media Authority (AMA), the General Directorate for Customs, the Tax Inspectorate, the Prosecutor’s Office, the State Police, and the courts. In 2018, the National Council of Copyrights was established as a specialized body responsible for monitoring the implementation of the law and certifying the methodology for establishing the tariffs. Two other important bodies in the protection and administration of IPR are the agencies for the Collective Administration (AAK) and the Copyrights Department within the Ministry of Culture. Four different AAKs have merged in 2017 to provide service into a sole window for the administration of IPR.

The 2021 amendments to the IP law also define the role and duties of the State Inspectorate for Market Surveillance (SIMS), the main responsibility of which is to ensure the safety of non-food consumer products by instigating internal market inspections. The SIMS, established in 2016, is responsible for inspecting, controlling, and enforcing copyright and other related rights.  Despite some improvements, actual law enforcement on copyrights continues to be problematic and copyright violations are persistent.  The number of copyright violation cases brought to court remains low. While official figures are not available this year, Customs does usually report the quantity of counterfeit goods destroyed annually.  In cases of seizures, the rights holder has the burden of proof and so must first inspect the goods to determine if they are infringing.  The rights holder is also responsible for the storage and destruction of the counterfeit goods.

Cigarettes are traditionally the most common counterfeited product seized by Customs. According to the EU 2021 report on Albania, the high number of counterfeit products in the country remains a cause for concern. Last year the customs administration suspended the release of more than 23,000 products suspected of infringing IPR.

The GDIP is responsible for registering and administering patents, commercial trademarks and service marks, industrial designs, and geographical indications. In 2020, the number of applications for registration of trademarks continued to rise, amounting to 1,164 national applications and 2,936 international applications. As for patents, 897 patent applications were filed at the GDIP in 2020, of which 12 were national patent applications with Albanian national applicants, and 885 patent applications were patents issued by the European Patent Office seeking protection in Albania.

Albania is party to the World Intellectual Property Organization (WIPO) Patent Law Treaty, the Patent Cooperation Treaty, the Berne Convention, the Paris Convention, and is a member of the European Patent Organization. The government became party to the London Agreement on the Implementation of Article 65 of the European Convention for Patents in 2013. In 2018, Parliament approved the Law 34/2018 on Albania’s adherence to the Vienna Agreement for the International Classification of the Figurative Elements of Marks as well as the agreements of Lisbon and Locarno on international classification and protection of industrial designs. In June 2019, Albania joined the Geneva Act of WIPO’s Lisbon Agreement on Appellations of Origin and Geographical Indications.

For additional information about national laws and points of contact at local IPR offices, please see WIPO’s country profiles at https://www.wipo.int/directory/en/  .

Resources for Rights Holders

Contact at Embassy Tirana on IPR issues:

E-mail: USALBusiness@state.gov 

Country resources:

American Chamber of Commerce

Address: Rr. Deshmoret e shkurtit, Sky Tower, kati 11 Ap 3 Tirana, Albania

Email:  info@amcham.com.al

Phone: +355 (0) 4225 9779

Fax: +355 (0) 4223 5350

(amcham.com.al) 

List of local lawyers:

tirana.usembassy.gov

The government has adopted policies to promote the free flow of financial resources and foreign investment in Albania. The Law on “Strategic Investments” is based on the principles of equal treatment, non-discrimination, and protection of foreign investments. Foreign investors have the right to expatriate all funds and contributions of their investment.  In accordance with IMF Article VIII, the government and Central Bank do not impose any restrictions on payments and transfers for international transactions. Despite Albania’s shallow foreign exchange market, banks enjoy enough liquidity to support sizeable positions.  Portfolio investments continue to be a challenge because they remain limited mostly to company shares, government bonds, and real estate as the Tirana stock market remains non-operational

In recent years, the constant reduction of non-performing loans has allowed commercial banks to loosen lending standards and increase overall lending especially as the economy has recovering from the severe COVID-19 economic disruption in 2020. Non-performing loans (NPL) at the end of 2021 dropped to 5.65 percent compared to 8.1 percent one year ago. Overall lending has steadily increased since 2019 and at the end of 2021 reached about USD 6 billion marking a 10 percent increase compared to 2020. The credit market is competitive, but interest rates in domestic currency can be high. Most mortgage and commercial loans are denominated in euros because rate differentials between local and foreign currency average 1.5 percent. Commercial banks operating in Albania have improved the quality and quantity of services they provide, including a large variety of credit instruments, traditional lines of credit, and bank drafts, etc.

In the absence of an effective stock market, the country’s banking sector is the main channel for business financing.  The sector is sound, profitable, and well capitalized. The Bank of Albania, the country’s Central Bank, is responsible for the licensing and supervision of the banking sector in Albania. The banking sector is 100 percent privately owned and its total assets have steadily increased over the years reaching USD 17 billion at the end of 2021 mostly based on customers deposits.  The banking sector has continued the consolidation process as the number of banks decreased from 16 in 2018 to 11 at the end of 2021 when the Greek Alpha Bank was purchased by OTP Bank. As of December 2021, the Turkish National Commercial Bank (BKT) was the largest bank in the market with 26 percent market share, followed by Albanian Credins Bank with 15.8 percent, and Austrian Raiffeisen Bank third with 15.3 percent.  The American Investment Bank is the only bank with U.S. shareholders and ranks sixth with 5.5 percent percent of the banking sector’s total assets.

The number of bank outlets has also decreased over the recent years also due to the consolidation. In December 2021, Albania had 417 bank outlets, down from 446 from 2019 and the peak of 552 in 2016. Capital adequacy, at 18 percent in December 2021, remains above Basel requirements and indicates sufficient assets.  At the end of 2021, the return on assets increased to 1.42 percent compared to 1.2 percent one year ago. As part of its strategy to stimulate business activity, the Bank of Albania has adopted a plan to ease monetary policy by continuing to persistently keep low interest rates. However, due to the recent inflationary pressure in March 2021, Bank of Albania increased the base interest rate to 1 percent, up from a historical low rate of 0.5 percent which was in place since June 2018.

Many of the banks operating in Albania are subsidiaries of foreign banks. Only three banks have an ownership structure whose majority shareholders are Albanian. However, the share of total assets of the banks with majority Albanian shareholders has increased because of the sector’s ongoing consolidation. There are no restrictions for foreigners who wish to establish a bank account. They are not required to prove residency status. However, U.S. citizens must complete a form allowing for the disclosure of their banking data to the IRS as required under the U.S. Foreign Account Tax Compliance Act.

Parliament approved a law in October 2019 to establish the Albanian Investment Corporation (AIC). The law entered in force in January 2020. The AIC would develop, manage, and administer state-owned property and assets, invest across all sectors by mobilizing state owned and private domestic and foreign capital, and promote economic and social development by investing in line with government-approved development policies.

The GoA plans to transfer state-owned assets, including state-owned land, to the AIC and provide initial capital to launch the corporation. In December 2021, the GoA transferred to the AIC close to USD 20 million. There is no publicly available information about the activities of the AIC for 2020 or 2021.

The IMF https://www.imf.org/en/News/Articles/2019/11/26/mcs11262019-albania-staff-concluding-statement-of-the-2019-article-iv-mission Staff Concluding Statement  of November 26, 2019, warned that the law would allow the government to direct individual investment decisions, which could make the AIC an off-budget spending tool that risks eroding fiscal discipline and circumventing public investment management processes.

Political violence is rare, the more recent instances being an attempt led by a former Albanian leader designated by the USG for corruption to breach a party headquarters in January 2022 that required police intervention and political protests in 2019 that included instances of civil disobedience, low-level violence and damage to property, and the use of tear gas by police. Albania’s April 2021 elections and transition to a new government were peaceful, as were its June 2019 local elections. On January 21, 2011, security forces shot and killed four protesters during a violent political demonstration. In its external relations, Albania has usually encouraged stability in the region and maintains generally friendly relations with neighboring countries.

Albania’s labor force numbers around 1.2 million people, according to official data. After peaking at 18.2 percent in the first quarter of 2014, the official estimated unemployment rate has significantly decreased in recent years. In December 2021, unemployment reached 11.4 percent compared to 11.8 percent at the end of 2020 marking an improvement following the economic disruption due to the COVID-19 pandemic. Unemployment among people aged 15-29 remains high, at 20.6 percent. Around 40 percent of the population is self-employed in the agriculture sector. According to the International Labor Organization (ILO), share of informal employment in the employed population was almost 57 percent in 2019, the highest in the region.

The institutions that oversee the labor market include the Ministry of Finance, Economy and Labor, the Ministry of Health and Social Protection, the National Employment Service, the State Labor Inspectorate, and private entities such as employment agencies and vocational training centers.  Albania has adopted a wide variety of regulations to monitor labor abuses, but enforcement is weak.

Outward labor migration remains an ongoing problem affecting the Albanian labor market especially in the IT and health sector. There is a growing concern about labor shortage for both skilled and unskilled workforces.  In recent years, media outlets have reported that a significant number of doctors and nurses have emigrated to the European Union, especially Germany. According to the World Bank, Albania has the lowest number of doctors per capita in the region with just 1.647 doctors per 1,000 inhabitants in 2019. In December 2021, the average public administration salary was approximately 70,531 lek (approximately USD 650) per month. The GoA has announced it will increase the minimum wage by 6.5 percent to 32,000 lek per month (approximately USD 300) in April 2022, which remains the lowest in the region.

In March 2019, parliament approved a new law on employment promotion, which defined public policies on employment and support programs. Albania has a tradition of a strong secondary educational system, while vocational schools are viewed as less prestigious and attract fewer students.  However, the government has more recently focused attention on vocational education. In the 2020-2021 academic year, about 19,000, or 18.5 percent, of high school pupils were enrolled in vocational schools.

The Law on Foreigners 79/2021 that was approved in July 2021 and various decisions of the Council of Ministers regulate the employment regime in Albania.  Employment can also be regulated through special laws in the case of specific projects, or to attract foreign investment.  The Law on TEDA’s provides financial and tax incentives for investments in the zone. Law on Foreigners extends the same employment and self-employment rights of Albanian citizens to citizens of the five Western Balkan countries and provides the same benefits that the original law provided to the citizens of EU and Schengen countries.

The Labor Code includes rules regarding contract termination procedures that distinguish layoffs from terminations.  Employment contracts can be limited or unlimited in duration, but typically cover an unlimited period if not specified in the contract. Employees can collect up to 12 months of salary in the event of an unexpected interruption of the contract. Unemployment compensation is approximately 50 percent of the minimum wage.

Pursuant to the Labor Code and the recently amended “Law on the Status of the Civil Employee,” both individual and collective employment contracts regulate labor relations between employees and management.  While there are no official data recording the number of collective bargaining agreements used throughout the economy, they are widely used in the public sector, including by SOEs. Albania has a labor dispute resolution mechanism as specified in the Labor Code, article 170, but the mechanism is considered inefficient. Strikes are rare in Albania, mostly due to the limited power of the trade unions and they have not posed a significant risk to investments.

Albania has been a member of the International Labor Organization since 1991 and has ratified 54 out of 189 ILO conventions, including the eight Fundamental Conventions, the four Governance Conventions, and 42 Technical Conventions. The implementation of labor relations and standards continues to be a challenge, according to the ILO.

See the U.S. Department of State Human Rights Report: https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/; and the U.S. Department of Labor Child Labor Report: http://www.dol.gov/ilab/reports/child-labor  .

Kosovo welcomes FDI. Kosovo’s laws do not discriminate against foreign investors. The current government (as the government before) – including the Prime Minister’s Office; Ministry of Economy; Ministry of Industry, Entrepreneurship and Trade; and the Ministry of Finance, Labor and Transfers – recognizes the importance of FDI to the expansion of the private sector.

The mission of the Kosovo Investment Enterprise and Support Agency (KIESA) is to promote and support foreign investments. The agency is tasked with offering a menu of services, including assistance and advice on starting a business in Kosovo, assistance with applying for a site in a special economic zone or as a business incubator, facilitation of meetings with different state institutions, and participation in business-to-business meetings and conferences. In practice, however, many foreign and local companies have complained that KIESA has extremely weak capacity to provide the services under its mandate and must be strengthened.

Foreign chambers of commerce – including the American, German, and European – participate in dialogue platforms with the government, although overall communication between the government and the private sector has slightly deteriorated recently.

The laws and regulations on establishing and owning business enterprises and engaging in all forms of remunerative activity apply equally to foreign and domestic private entities. Kosovo legislation does not interfere with the establishment, acquisition, expansion, or sale of interests in enterprises by private entities. Under Kosovo law, foreign firms and local businesses operating in Kosovo are treated equally. Kosovo does not have an investment screening mechanism, though the U.S. government is actively working with Kosovo on the best practices for developing and implementing such a mechanism.

There have been no reports of restrictions from U.S. investors. There are no licensing restrictions particular to foreign investors and no requirement for domestic partners for joint ventures.

Kosovo is not a member of Organization for Economic Cooperation and Development (OECD), World Trade Organization (WTO), or United Nations Conference on Trade and Development (UNCTAD), so there are no Kosovo-specific investment policy reviews from these organizations. However, Kosovo was profiled as part of the OECD’s report on “Competitiveness in Southeast Europe 2021: A Policy Outlook,” in which Kosovo received an overall score of 2.0 in the area of investment policy and promotion (versus an average of 3.0 across the Western Balkans 6 countries). In February 2017, the Pristina think tank, Group for Legal and Political Studies, published the report, “ How ‘friendly’ is Kosovo for Foreign Direct Investments: A Policy Review of Gaps from a Regional Market Perspective .”

The government has taken steps to remove barriers to facilitate businesses’ operations and improve related government services. With USAID’s assistance, the Government of Kosovo continued a series of business climate reforms that have contributed to Kosovo’s improved ranking in the World Bank Doing Business Index over the years. Per the amended Law on Support to Small and Medium Enterprises, KIESA supports both domestic and foreign-owned micro, small, and medium enterprises (MSMEs), without any specific eligibility criteria. Such services include voucher programs for training and advisory services, investment facilitation, assistance to women and young business owners, and the provision of business space with complete infrastructure at industrial parks, at minimal cost.

The Kosovo Business Registration Agency (KBRA), part of the Ministry of Industry, Entrepreneurship and Trade, registers all new businesses, business closures, and business modifications. The KBRA website is available in English and can be accessed at arbk.rks-gov.net . As of March 2022, some steps in the registration process can be completed online. Successful registrants will receive a business-registration certificate and a VAT number. New businesses must register employees for tax and pension programs with the Tax Administration under the Ministry of Finance, Labor and Transfers. Business registration generally takes one day for an individual business and up to three days for a limited liability company or a joint stock company. A notary is not required when opening a new business unless the business registration also involves a transfer of real property.

Kosovo does not promote, incentivize, or restrict outward investment. There are no restrictions on investments abroad.

The Law on Public Procurement delegates procurement authority to budgetary units (i.e., ministries, municipalities, and independent agencies) except when the government specifically authorizes the Ministry of Finance, Labor and Transfers’ Central Procurement Agency to procure goods and/or services on its behalf. All tenders are advertised in Albanian and Serbian, and for most important projects, also in English.

The Public Procurement Regulatory Commission (PPRC) oversees and supervises all public procurement and ensures that the Law on Public Procurement is fully implemented. As of March 2022, an e-procurement platform is fully operational; all procurements are handled through it, which has greatly enhanced transparency. The PPRC publishes contract award information on its website ( https://e-prokurimi.rks-gov.net/Home/ClanakItemNew.aspx?id=327 ). The National Audit Office conducts annual procurement audits of all Kosovo ministries, municipal authorities, and agencies that receive funds from the Kosovo consolidated budget. The Procurement Review Body (PRB), an independent administrative body, is responsible for handling appeals related to government procurement. The PRB’s Board, its highest decision-making body, has been unable to process appeals at the highest level, due to board vacancies that have gone unfilled by the Government of Kosovo (GoK) for more than a year.

The Kosovo Assembly is responsible for rule-making and regulatory actions, while government ministries and agencies draft and authorize secondary legislation (i.e., implementing regulations). Municipal assemblies and mayors have regulatory authority at the local level, which rarely extends to the broader issues of investment climate. The Government of Kosovo is working to align all legal, regulatory, and accounting systems in Kosovo with EU standards and international best practices. Publicly listed companies are required to comply with international accounting standards. The government requires Environmental and Social Impact Assessment studies for many projects, especially those with a large environmental or social footprint, such as in the energy and mining sectors.

The Assembly publishes draft laws on its website ( http://www.kuvendikosoves.org/shq/projektligjet-dhe-ligjet/ ). The relevant committees also hold public hearings on proposed laws, including investment laws. The 2016 regulation on the Minimum Standards for Public Consultation Process clarifies the standards, principles, and procedures for consultations during the drafting of legislation. Kosovo has developed an online platform for public comments ( http://konsultimet.rks-gov.net/ ) and publishes all laws and most rules and regulations in the Official Kosovo Gazette ( https://gzk.rks-gov.net/ ) and on the Kosovo Assembly’s website. The Government of Kosovo is currently working to annul, amend, and update all secondary legislation that is outdated or that might otherwise contradict primary legislation. The Government of Kosovo is also working on publishing all secondary legislation in the Official Gazette and relevant ministerial websites. The Law on Public Financial Management and Accountability requires a detailed impact assessment of any budgetary implications before new regulations can be implemented. The Ministry of Finance, Labor and Transfers regularly publishes detailed reports on Kosovo’s public finances and debt obligations. Despite the regulatory requirements, some businesses and business associations complain that regulations are still passed with little substantive discussion or stakeholder input.

Kosovo is represented in CEFTA by the United Nations Mission in Kosovo (UNMIK) and is pursuing EU integration. Through its Stabilization and Association Agreement (SAA) with the EU, Kosovo is working to harmonize its laws and regulations with EU standards. Kosovo is not a member of the WTO.

Kosovo is a signatory to the July 2017 Multi-Annual Action Plan for a Regional Economic Area in the Western Balkans Six  and its subsequent Common Regional Market Action Plan . This action plan aims to increase regional integration in the fields of trade, investment policy, labor force mobility, and digitalization.

In 2016, the Kosovo Assembly amended the constitution to enhance the independence of the judiciary in line with EU requirements. Despite significant reforms and improvements in court efficiency, backlog, and sentencing procedures, the judiciary lacks sufficient subject-matter expertise to effectively handle complex economic issues. While complainants have the right to challenge court decisions, regulations, and enforcement actions in the regular court system, as well as the constitutional court, many analysts view Kosovo’s courts as politically influenced by the executive branch, with special treatment or “selective justice” for high-profile, well-connected individuals. While Kosovo court conviction rates generally match regional averages, the rate falls considerably when filtered for high-profile corruption cases.

In January 2022, the Kosovo Assembly unanimously adopted the Law on the Commercial Court, which establishes a special court for handling business disputes fairly, efficiently, and predictably. The Commercial Court aims to improve the business enabling environment by reducing opportunities for corruption and building investor and private sector trust in the judiciary. USAID supported the Kosovo Ministry of Justice in developing the law through an inclusive and participatory process with the judiciary, commercial law experts, practitioners, academics, businesses, and civil society representatives. The Kosovo Judicial Council, with the help of USAID, developed and is implementing an Action Plan for operationalizing the Commercial Court, including by developing regulations on internal organization, case transfer, and recruitment of key personnel.

Significant legislation overhauling the 2004 Criminal Code and the Criminal Procedure Code, amended in 2018, brought Kosovo’s Criminal Law in compliance with the EU Convention on Human Rights, updating definitions and best practices. The Criminal Code contains penalties for tax evasion, bankruptcy, fraud, intellectual property rights offenses, antitrust, securities fraud, money laundering, and corruption. The Special Department of the Special Prosecutor of the Republic of Kosovo handles high-level cases of corruption, organized crime, terrorism, etc.

Kosovo’s civil legal system provides for property and contract enforcement. The Department for Economic Affairs within the Basic Court of Pristina has jurisdiction over economic disputes between both legal and natural persons, including reorganization, bankruptcy, and liquidation of economic persons; disputes regarding impingement of competition; and protection of property rights and intellectual property rights across the entire territory of Kosovo. A similar department within the Court of Appeals holds jurisdiction over “disputes between domestic and foreign economic persons in their commercial affairs” and addresses all appeals coming from the Pristina Basic Court’s Department for Economic Affairs. Commercial cases can take anywhere from six months to several years to resolve. The upcoming Commercial Court, expected to open in 2022, will supplant the responsibilities of the Economic Departments of the Pristina Basic Court and the Court of Appeals in handling commercial cases and the Administrative Department of the Pristina Basic Court in handling commercial-related administrative cases.

The Law on Enforcement Procedures permits claimants to utilize bailiffs licensed by the Ministry of Justice to execute court-ordered judgments. In addition, the Laws on Arbitration and Mediation have helped to address impediments to alternative dispute resolution and to enforcing arbitral awards.

Foreign firms operating in Kosovo are entitled to the same privileges and treatment as local businesses. Kosovo’s commercial laws are available to the public in English, as well as Kosovo’s official languages (Albanian and Serbian) on the Kosovo Assembly’s website ( http://www.kuvendikosoves.org/shq/projektligjet-dhe-ligjet/ ) and on the Official Gazette website ( http://gzk.rks-gov.net/default.aspx ).

Laws of particular relevance include:

The Law on Foreign Investment: provides a set of fundamental rights and guarantees to ensure protection and fair treatment in strict accordance with accepted international standards and practices.

The Law on Business Organizations: regulates the registration and closure of a company and the rights and obligations of shareholders, authorized representatives, and others included in the business management structure.

The Law on Late Payments in Commercial Transactions: discourages late payments and regulates the calculation of interest on late payments.

The Law on Bankruptcy: regulates all matters related to the insolvency of business organizations; the provisions for the protection, liquidation, and distribution of the assets of a bankrupt debtor to its creditors; and the reorganization and discharge of debt for qualified business organizations.

The Law on Prevention of Money Laundering and Combating Terrorist Financing: enabled Kosovo to join Egmont Group, an inter-governmental network of 152 Financial Intelligence Units whose members exchange expertise and financial intelligence to combat money laundering and terrorist financing.

The Credit Guarantee Fund Law: increased access to finance for all MSMEss in Kosovo in an effort to increase employment, boost local production, and improve the trade balance.

The Law on Foreign Trade, and the Law on Anti-Dumping and Countervailing Measures: provides a set of principles and rules on trade, as well as provisions for government interventions in cases of dumping and countervailing measures.

There are two main laws that regulate transactions for competition-related concerns: The Law on Protection of Competition and the Law on Antidumping and Countervailing Measures. The Competition Authority is responsible for implementing the Law on Protection of Competition, but generally lacks the human resources to conduct thorough investigations. The Authority has lacked a decision-making body since May 2021. The Trade Department of the Ministry of Industry, Entrepreneurship and Trade is responsible for the implementation of the Law on Antidumping and Countervailing Measures. In September 2018, Kosovo’s Assembly approved the Law on Safeguard Measures on Imports, which allows the trade minister to impose a provisional safeguard measure for up to 200 days.

Articles seven and eight of the Foreign Investment Law limit expropriation to cases with a clear public interest and protect foreign investments from unreasonable expropriation, guaranteeing due process and timely compensation payment based on fair-market prices. The Law on Expropriation of Immovable Property permits government or municipal expropriation of private property when such action is in the public interest; articles five through thirteen of the Law define expropriation procedures. An eminent domain clause limits legal recourse in cases arising from the expropriation and sale of property through the privatization of state-owned enterprises. There is no history of expropriation other than uncontroversial, undisputed expropriations for work in the public interest, such as roadway construction.

Kosovo has established a flat corporate income tax of ten percent. To encourage investment, the government can grant certain VAT-related privileges, such as a six-month VAT deferment upon presentation of a bank guarantee for companies importing capital goods. Suppliers may export goods and services without being required to collect VAT from foreign buyers. Suppliers may claim credit for taxes on inputs by offsetting those taxes against gross VAT liabilities or claiming a refund. The government can issue guarantees or jointly finance foreign direct investment projects but has not yet done so. Kosovo does not have legislation that incentivizes businesses owned by underrepresented investors.

The Customs agency has enacted an administrative instruction that reduces the number of documents required for export and import. Only two documents are needed to export (a commercial invoice and a customs export declaration) and only three are now required to import (a commercial invoice, a customs import declaration, and a certificate of origin).

Kosovo has previously offered feed-in tariffs for a quota of renewable energy projects, which has been fulfilled. Kosovo currently does not offer any incentives for renewable energy investments, but it is working on its energy strategy which will define its energy future and subsequent policies.

The Kosovo Customs and Excise Code is compliant with EU and World Customs Organization standards, and addresses topics such as bonded warehouses, inward and outward processing, transit of goods, and free-trade zones. In addition to imported goods, some domestically produced goods from designated industries can be stored in bonded warehouses when these goods meet export criteria. Foreign firms are permitted to import production inputs for the manufacture of export goods without paying taxes or customs duties.

The Customs Code permits the establishment of zones for manufacturing and export purposes, and the Law on Economic Zones regulates their establishment. In 2014, Kosovo established three economic zones in the municipalities of Mitrovica/e, Gjakovë/Djakovica, and Prizren. Currently only the economic zone of Mitrovica/e has completed the legal and administrative procedures for building infrastructure, but the zone remains to be established and operationalized. Three business parks and one business incubator are operational.

Kosovo does not specify performance requirements as a condition for establishing, maintaining, or expanding investments in Kosovo. There are no onerous requirements that would inhibit the mobility of foreign investors or their staff. There are no conditions on permissions to invest, and the government does not mandate local employment. Investment incentives apply uniformly to both domestic and foreign investors, on a case-by-case basis.

Depending on the tender, Kosovo may require foreign IT providers to turn over source code and/or provide access to surveillance. Kosovo does not yet have standard rules on data transmission or storage. The Agency for Information Society is responsible for the storage of data for the central government, and other institutions store their respective data as well.

Property rights and interests are enforced, but weaknesses in the legal system and difficulties related to establishing title to real estate, in part due to competing claims arising from the history of conflict with Serbia, can make enforcement difficult. Minority communitiesin particular, are frequently unable to fully exercise their property rights. The country’s legal and regulatory framework is complex, but generally, Kosovo’s de jure property-related laws are well structured and provide for security and transferability of rights. In 2018, Kosovo adopted a new Law on the Treatment of Constructions without Permit under which all buildings constructed without a permit prior to 2018 are subject to legalization and formalization through registration in the Cadaster and Immovable Property Rights Registry, thereby protecting individual property rights and unlocking this capital for circulation in the formal economy and bringing all real property into the property tax system.

The jurisdictions of government ministries, municipal authorities, and independent agencies often overlap, and the court system is backlogged with property-related cases. Mortgages and liens are available, but the range of financial products is limited. Mortgage agreements must be registered in cadastral records by the Kosovo Cadastral Agency, while pledge agreements must be registered with the pledge registry, which is a centralized registry office in the Business Registration Agency.

The Kosovo Property Comparison and Verification Agency (KPCVA) is responsible for receiving, registering, and resolving property claims on private immovable property, including agricultural and commercial property related to the 1998-1999 conflict and post-conflict period. Decisions of the Kosovo Property Claims Commission within the KPCVA are subject to a right of appeal to the Supreme Court. The KPCVA has received 42,749 total claims, the vast majority of which relate to agricultural property. The KPCVA holds the mandate for implementing decisions of the Housing and Property Claims Commission (HPCC) that are pending enforcement.

Resolution of residential, agricultural, and commercial property claims remains a serious and contentious issue in Kosovo and limits the development of the formal property market needed for more stable economic growth. Many property records were destroyed or removed to Serbia by the Serbian government during the 1998-1999 conflict, which can make determining rightful ownership difficult. The country is in the process of rebuilding the property registry and an EU-facilitated Kosovo-Serbia dialogue includes a component focused on comparing the cadastral records with the records taken by Serbia and resolving any gaps, predicated on Serbia returning the cadastral records to Kosovo. The KPCVA is charged with carrying out the task of property comparison and verification.

In February 2022, the Kosovo Assembly approved the Law on Property Rights of Foreign Citizens in the Republic of Kosovo, which establishes the principle of reciprocity and restricts ownership rights of a foreign national only in cases where the origin country of those foreign nationals restricts ownership rights to Kosovo nationals. In early 2017, Kosovo launched the national strategy on land and property rights reform, which includes a provision to clarify and codify regulations regarding property ownership by foreign and/or non-resident investors. Per Article 40 in the Law on Property and Other Real Rights, a proprietary possessor acquires ownership of immovable property after ten years of uninterrupted and uncontested possession.

Registration of intellectual property rights (IPR) in Kosovo conforms with regional and international practices. The trademark registration process takes approximately nine months, while patent approval takes about 18 months.

Public awareness of the importance of IPR is low. Evidence suggests there is little domestic production of counterfeit goods in Kosovo, but the importation of counterfeit goods, especially apparel, is a concern. The government tracks and reports on seizures of counterfeit goods.

The Ministry of Industry, Entrepreneurship and Trade established the Industrial Property Rights Office (IPO) in 2007, which is tasked with IPR protection. Kosovo’s IPR laws were amended in 2015 to align with EU standards and strengthen legal remedies for right holders. Kosovo’s Law on Patents, Law on Trademarks, Law on Industrial Design, and Law on Geographical Indices, together with the relevant Criminal Code and Customs provisions, provide for strong protection of IPR and comply with related international conventions, even though Kosovo is not party to the associated international organizations. Examples of these conventions include the Paris Convention, the Budapest Treaty, the Madrid Protocol, and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). In 2018, the Assembly approved the Law on Customs Measures for Protection of Intellectual Property Rights to harmonize Kosovo law with EU regulations.

To enhance IPR enforcement and increase interagency coordination, the government has adopted an IPR strategy and established the National Intellectual Property Council and a Task Force Against Piracy. The Council and the Task Force have similar structures and are comprised of the IPO, the Copyright Office, Customs, Kosovo Police Departments for Economic Crime and Corruption and Cyber Crimes, the Market Inspectorate, and the Ministry of Justice. The Council also includes the Kosovo Prosecutorial Council, judicial courts, and other government and non-governmental institutions.

Kosovo is not included in the U.S. Trade Representative’s (USTR’s) Special 301 Report or Notorious Markets List. Kosovo is not a member of the World Intellectual Property Organization (WIPO), and there is no WIPO country profile for Kosovo.

Kosovo has an open-market economy, and the market determines interest rates. Individual banks conduct risk analysis and determine credit allocation. Foreign and domestic investors can get credit on the local market. Access to credit for the private sector and financial products are limited but gradually improving.

The country generally has a positive attitude towards foreign portfolio investment. Kosovo does not have a stock exchange. The regulatory system conforms with EU directives and international standards. There are no restrictions beyond normal regulatory requirements related to capital sourcing, fit, and properness of the investors. The Central Bank of Kosovo (CBK) has taken all required measures to improve policies for the free flow of financial resources. Requirements under the SAA with the EU oblige the free flow of capital. The government respects the IMF’s Article VIII conditions on the flow of capital.

In early 2006, Kosovo created a credit registry managed by the Central Bank of Kosovo. It serves as a database for customers’ credit history and aims to help commercial banks and non-banking institutions assess customers’ credit worthiness. Banks and non-banking institutions are required to report to the Credit Registry of Kosovo, but only authorized banking and non-banking institution personnel can access it. In addition to the Credit Registry of Kosovo, the Ministry of Industry, Entrepreneurship and Trade offers a Pledge Registry Sector, a mechanism that records data for collateral pledges.

Kosovo has 11 commercial banks (of which nine are foreign) and 30 micro-finance institutions (of which 13 are foreign). The official currency of Kosovo is the Euro, although the country is not a member of the Eurozone. In the absence of an independent monetary policy, prices are highly responsive to market trends in the larger Eurozone.

Kosovo’s private banking sector remains stable, well capitalized, and profitable despite the COVID-19 pandemic’s negative economic shock to the economy. Difficult economic conditions, weak contract enforcement, and a risk-averse posture have traditionally limited banks’ lending activities. However, financial services and bank lending have steadily improved over the years, albeit from a low baseline. In March 2022, the rate of non-performing loans was 2.3 percent, which stands slightly lower than the pre-pandemic February 2020 rate of 2.5 percent. The concentration of the three largest banks’ assets have decreased slightly to 53 percent in March 2022 compared to 56.2 percent in March 2021. The assets of the entire banking sector total 5.9 billion euros; foreign-owned banks have 85.6 percent of the market share. Relatively little lending is directed toward long-term investment activities, although this trend has been changing slowly. Interest rates have dropped significantly in the past decade, from an average of about 12.7 percent in 2012 to an average of 5.7 percent in March 2022. Slower lending is notable in the northern part of Kosovo due to a weak judiciary, informal business activities, and fewer qualified borrowers.

The Central Bank of Kosovo (CBK) is an independent government body responsible for fostering the development of competitive, sound, and transparent practices in the banking and financial sectors. It supervises and regulates Kosovo’s banking sector, insurance industry, pension funds, and micro-finance institutions. The CBK also performs other standard central bank tasks, including cash management, transfers, clearing, management of funds deposited by the Ministry of Finance, Labor and Transfers and other public institutions, collection of financial data, and management of a credit register. Although the financial sector remains stable, a prolonged period without a governing board and allegations of mismanagement have caused concern over CBK’s institutional development.

Foreign banks and branches can establish operations in the country. They are subject to the same licensing requirements and regulations as local banks. The country has not lost any correspondent banking relationships in the past three years and no such relationship is currently in jeopardy. There are no restrictions on foreigners opening bank accounts; they can do so upon submission of valid identification documentation.

Kosovo is a signatory country to the United States’ Foreign Account Tax Compliance Act (FATCA), aimed at addressing tax evasion by U.S. citizens or permanent residents with foreign bank accounts. For more information, visit the FATCA website: https://www.irs.gov/Businesses/Corporations/Foreign-Account-Tax-Compliance-Act-FATCA .

Kosovo does not have any sovereign wealth funds.

In recent history, the political environment has been characterized by short electoral cycles and prolonged periods of caretaker governments. Despite the political instability, there have not been substantial legislative and regulative changes, especially regarding investments and business environment. There have been no reports of any damage to commercial projects or installations.

Kosovo held national assembly elections on February 14, 2021, after the Constitutional Court ruled in December 2020 that a convicted Member of Parliament’s (MP) decisive 61st vote to form the government was not valid. For the first time in the last 20 years, the elections produced an overwhelmingly clear victor, the Levizja Vetevendosje (“Self-Determination Movement”) led by Albin Kurti, which formed a government in March 2021 with the help of only a few minority MPs. This was unusual as Kosovo’s proportional electoral system typically favors coalitions and partnerships. The new government has restored perceptions of political stability and is likely to provide a break from Kosovo’s short electoral cycles.

The current administration’s electoral victory centered mainly on anti-corruption promises. While the administration has produced some results in fighting corruption, balancing the budget, and reforming the public administration, it has been relatively slow in introducing new laws and regulations as well as drafting strategies that would guide economic policymaking.

Kosovo is not a member of the United Nations and regional neighbors Serbia and Bosnia and Herzegovina are among the countries that do not recognize its statehood. In November 2018, Kosovo imposed a 100 percent tariff on all goods from Serbia and Bosnia and Herzegovina but in April 2020 dropped the 100 percent tariff in favor of “reciprocal measures.” The previous administration dropped these “reciprocal measures” temporarily in June 2020 to give way for negotiations on “economic normalization” with Serbia. Despite a White House-brokered set of commitments signed on September 4, 2020, in Washington, DC, by Kosovo’s then-Prime Minister Avdullah Hoti and Serbian President Aleksandar Vucic, there are numerous issues remaining that might lead to trade and investment barriers between the two countries. In addition, the lack of recognition also exposes Kosovo to subtle technical difficulties in carrying on day-to-day business activities. For example, Kosovo is not listed in the ISO 3166 list of countries, which results in numerous companies and services not listing Kosovo in the drop-down menu of countries and forces businesses in Kosovo to either register and divert their business through a third country or renders them unable to use such services. Due to Kosovo’s lack of Country Code Top-Level Domain (ccTLD), it is more difficult to track cyberattacks.

According to the Kosovo Statistical Agency, almost two thirds of Kosovo’s population of 1.8 million is of working age (15-64). The official unemployment rate is 25.8 percent. Youth unemployment is estimated at 48.6 percent. There are no reliable statistics on Kosovo’s informal economy, but a 2017 EU-commissioned report estimated the informal and black market at 32 percent of GDP. Informal businesses dominate in the agriculture, construction, and retail sectors. Because of pervasive informality and the slow pace of courts, informal and verbal agreements often carry more significance than formal agreements and contracts. Private-sector employers make a practice of not providing contracts to their employees and paying them in cash. In the public sector, employers sometime hire employees as contract workers and enroll them in the regular payroll when the budget for salaries becomes available.

Kosovo’s Labor Law requires employers to observe employee protections, including a 40-hour work week, payment of overtime, adherence to occupational health and safety standards, respect for annual leave benefits, and up to a year of maternity leave (six months of employer paid leave at a reduced rate, followed by three months of government paid leave and three months of unpaid leave). The Labor Law distinguishes between layoffs and firings, and mandates severance pay only for laid off workers (when at least 10 percent of employees are dismissed collectively).

The law also establishes a monthly minimum wage, which the government set in 2011 at €130 ($146) for employees under 35 and €170 ($191) for those over 35 years of age. Kosovo has no unemployment insurance or any other safety net programs for workers laid off for economic reasons. It is estimated that about one third of employees are employed in the public sector and SOEs. Although the country’s average monthly salary amounts to nearly €416 ($457) in take-home pay, there are stark differences between the private sector average of €342 ($376), the public administration average of €552 ($607), and the SOE average of €680 ($748).

The Labor Law has no nationality requirement and is not waived for investment purposes. There are no additional or different labor laws for special economic zones or free zones.

Labor unions are independent by law, but in practice, many of them are closely associated with political parties. The government, labor unions, and private sector representatives signed a collective bargaining agreement in 2014, which has been partially implemented. Kosovo’s Statistical Agency and the Ministry of Economy do not collect specific data on implementation. Public-sector employees – including doctors, teachers, and judges – sporadically go on strike to demand implementation of the entire agreement, better working conditions, or higher wages. In January 2019, education and health workers went on a month-long strike demanding higher wages, only stopping the strike after the Kosovo Assembly approve the Law on Wages, which granted some of their demands. Strikes and protests in the private sector are almost nonexistent. Local courts formally adjudicate labor disputes.

The Ministry of Finance, Labor, and Transfers established a compliance office with the authority to inspect employer adherence to labor laws. The International Labor Organization office in the country is project-focused and does not serve as a government advisor on labor legislation or international labor standards. The government plans to reform inspectorates, labor inspectorate included, and has already increased the labor inspectorate’s number of inspectors from 38 to 90. The Inspectorate issues fines and penalties depending on the extent of the violation of labor legislation. The Labor Inspectorate and the judicial system investigate and prosecute labor practice violations. Municipal social work centers at the Ministry of Finance, Labor, and Transfers investigate and report on child labor issues, while the Labor Inspectorate inspects violations of child labor practices for children aged 15-18 years.

Kosovo’s education system has been criticized for not sufficiently linking its curriculum to the needs of Kosovo’s business community. Kosovo’s large, young labor force often remains idle due to mismatches between applicant skills and employer needs.

Montenegro regained its independence in 2006, and since then, the country has adopted an investment framework that in principle encourages growth, employment, and exports. Montenegro, however, is still in the process of establishing a liberal business climate that fosters foreign investment and local production. The country remains dependent on imports from neighboring countries despite its significant potential in some areas of agriculture and food production. Although the continuing political transition has obstructed the elimination of all structural barriers, the government generally recognizes the need to remove impediments to remain competitive, reform the business environment, open the economy to foreign investors, and attract further FDI.

In general, there are no distinctions made between domestic and foreign-owned companies. Foreign companies can own 100 percent of a domestic company, and profits and dividends can be repatriated without limitations or restrictions. Foreign investors can participate in local privatization processes and can own land in Montenegro generally on the same terms as locals. Expropriation of property can only occur for a “compelling public purpose” and compensation must be made at fair market value. There has been no known expropriation of foreign investments in Montenegro, however long-standing property restitution cases dating back to WWII remain unresolved. International arbitration is allowed in commercial disputes involving foreign investors. Registration procedures have been simplified to such an extent that it is possible to complete all registration processes online. In addition, bankruptcy laws have been streamlined to make it easier to liquidate a company; accounting standards have been brought up to international norms; and custom regulations have been simplified. There are no mandated performance requirements.

Montenegro has enacted specific legislation outlining guarantees and safeguards for foreign investors. Montenegro has also adopted more than 20 other business-related laws, all in accordance with EU standards. The main laws that regulate foreign investment in Montenegro are: the Foreign Investment Law; the Enterprise Law; the Insolvency Law; the Law on Fiduciary Transfer of Property Rights; the Accounting Law; the Law on Capital and Current Transactions; the Foreign Trade Law; the Customs Law; the Law on Free Zones; the Labor Law; the Securities Law; the Concession Law, and the set of laws regulating tax policy. Montenegro has taken significant steps in both amending investment-related legislation in accordance with global standards and creating necessary institutions for attracting investments. However, as is the case with other transition countries, implementation and enforcement of existing legislation remains weak and inconsistent. While Montenegro has taken steps to make the country more open for foreign investment, some deficiencies still exist. The absence of fully developed legal institutions has fostered corruption and weak controls over conflicts of interest. The judiciary is still slow to adjudicate cases, and court decisions are not always consistently reasoned or enforced. Montenegro’s significant grey economy impacts its open market, negatively affecting businesses operating in accordance with the law. Favorable tax policies established at the national level are often cancelled out with taxes introduced by different municipalities on the local level.

To better promote investment and foster economic development, the government adopted in December 2019 a new Law on Public Private Partnerships and established the Montenegrin Investment Agency (MIA), merging the Montenegrin Investment Promotion Agency (MIPA) and the Secretariat for Development Projects. MIA seeks to promote Montenegro as a competitive investment destination by facilitating investment projects in the country. Together with the Privatization and Capital Investment Council, MIA promotes investment opportunities in various sectors of the Montenegrin economy, primarily focusing on the tourism, energy, technology, and agricultural sectors. These two institutions will maintain an ongoing dialogue with investors already present in Montenegro and, at the same time, seek to promote future projects and attract new investors to do business in Montenegro. MIA is also the state agency that leads the controversial Economic Citizenship Program, which started on January 1, 2019, and was designed to accelerate Montenegro’s economic development by creating new tourism, agriculture and processing capacities and create new jobs, especially in the underdeveloped northern part of the country. The program was intended to last three years and be available for up to 2,000 applicants. Thus far, 700 applications have been submitted, and in December 2021, the program was extended until the end of 2022. More information is available at http://www.mia.gov.me .

In September 2021, the U.S.-Montenegro Economic Dialogue was launched to provide a constructive bilateral platform to improve the business climate, explore promising commercial opportunities, and deepen shared prosperity between the two countries.

Montenegro’s Foreign Investment Law, which was adopted by the Parliament in 2011, establishes the framework for investment in Montenegro. The law eliminates previous investment restrictions, extends national treatment to foreign investors, allows for the transfer and repatriation of profits and dividends, provides guarantees against expropriation, and allows for customs duty waivers for equipment imported as capital-in-kind. There are no limits on foreign control and right to private ownership or on establishing companies in Montenegro. There are no institutional barriers to foreign investors, including U.S. businesses. As an aspiring EU Member State, Montenegro monitors and implements best practices regarding foreign investments, according to government officials, but the country still has no screening mechanism for inbound foreign investment in Montenegro. In December 2021, the Embassy hosted a presentation to Montenegrin officials by the U.S. Department of Treasury on the U.S. government’s Committee on Foreign Investment in the United States (CFIUS) investment screening mechanism. Montenegrin officials have stated the Government’s intention is to have a screening mechanism in place for investment in strategic national security sectors by 2023.

The WTO secretariat conducted its first review of Montenegrin trade policies and practices in April 2018 ( https://www.wto.org/english/tratop_e/tpr_e/tp469_e.htm ).

The American Chamber of Commerce (AmCham) in Montenegro prepares a biannual Business Climate Report (BCR), an assessment of issues on which the Government needs to take action to improve the country’s business environment. The most recent 2019-2020 edition was the sixth BCR to date, and recommends that the Government tackle the grey economy, improve public procurement procedures, address weak labor legislation, and correct inconsistencies in the implementation of existing laws. More information is available at http://www.amcham.me/advocacy/publications/

The White Book is the most recognized publication of the Montenegrin Foreign Investors Council. It is published every year and its main goal is to help the improvement of the business environment in the country through various recommendation provided by the Council’s members. All reports are available on the following website: http://mfic.me/activities/white-book 

Other useful links:

https://www.business-humanrights.org/en/latest-news/?&search=Montenegro&language=en 

https://ejatlas.org/country/montenegro 

The Central Register of the Commercial Court (CRPS) is responsible for business registration procedures ( www.crps.me ). The court maintains an electronic database of registered business entities, and contracts on financial leasing and pledges. The process to register a business in Montenegro takes an average of 4-5 working days. The minimum financial requirement for a Limited Liability Company (LLC) is just EUR 1 (USD 1.1), and three documents are required: a founding decision, bylaws, and a copy of the passport (if an individual is founding a company) or a registration form for the specific type of company. Samples of all documents are available for download at the CRPS website. Montenegrin law permits the establishment of six types of companies: entrepreneur, limited liability company, joint stock company, general partnership, limited partnership, and part of a foreign company. All included in the business activities need to open a bank account. Once a bank account is established, the company reports to the tax authority in order to receive a PIB (taxation identification number) and VAT (Value Added Tax) number. For classification of companies by size, based on number of employees, the government’s definition is as follows: (i) small enterprises (from one to 49 employees), (ii) medium-sized enterprises (from 50 to 249) and (iii) large enterprises (more than 250 employees).

While the Montenegrin government is very active in attracting and inviting foreign investors to do business in Montenegro, the government is not as dedicated to promoting outward investments. There are no government restrictions to domestic investors for their investments abroad.

Montenegro signed the Central European Free Trade Agreement (CEFTA) in July 2007. The agreement has been signed by seven other countries (Albania, North Macedonia, Moldova, UNMIK/Kosovo, Croatia, Serbia, and Bosnia and Herzegovina). A free trade agreement with Turkey has been in force since March 2010. Montenegro had a free trade agreement with Russia, but the agreement is not currently in force, nor are the free trade agreements with Kazakhstan and Belarus, which have a customs union with Russia. In 2011 Montenegro signed a free trade agreement with Ukraine and with the European Free Trade Association (EFTA) countries (Switzerland, Norway, Iceland, and Liechtenstein). Montenegro has not signed a Bilateral Investment Treaty (BIT) with the United States.  The United States restored Normal Trade Relations (Most-Favored Nation status) to Montenegro in December 2003.  This status provides improved access to the U.S. market for goods exported from Montenegro.  Montenegro has also been designated as a beneficiary developing country under the U.S. Generalized System of Preferences (GSP) program which expired on January 1, 2021. As a result, Montenegrin imports entering the United States that were eligible for duty free treatment under GSP up to December 31, 2020 (jewelry, ores, stones, and various agricultural products) are now subject to regular duties.

Montenegro does not have a double taxation treaty with the United States. On March 1, 2018, Montenegro’s Parliament approved the Foreign Account Tax Compliance Act (FATCA) agreement between the governments of Montenegro and the United States. Implementation of FATCA will help the countries better track and report tax evasion. The country has signed 43 taxation treaties with various countries on income and property, which regulate double taxation. The treaties in force are with the following countries: Albania, Austria, Azerbaijan, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, China, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Finland, France, Germany, Hungary, Italy, Ireland, India, Korea, Kuwait, Latvia, North Macedonia, Malaysia, Moldova, Malta, Netherlands, Norway, Poland, Portugal, Romania, Russia, Serbia, Slovak Republic, Slovenia, Sri Lanka, Sweden, Switzerland, Turkey, Ukraine, United Kingdom, and the United Arab Emirates. Treaties with Spain and Qatar are pending.

Investment treaties seek to ensure a stable framework for investment and better use of economic resources. They define the conditions for investments, allowing free transfer of funds, the right of subrogation, compensation in the event of expropriation and settlement of disputes between investors and countries, including the settlement of disputes between the countries themselves.

Montenegro has 24 BITs in force and more than half have been concluded with the EU member states. Additional information can be found at https://www.gov.me/clanak/ostali-sporazumi 

Montenegro joined the Inclusive Framework on BEPS in December 2019. More information available at https://www.oecd.https://www.oecd.org/tax/beps/search/?term=montenegro/tax/beps/search/?term=montenegro 

The main law governing foreign investment, the Montenegrin Law on Foreign Investment, is based on the national treatment principle, which is a basic principle of GATT/WTO that prohibits discrimination between imported and domestically produced goods with respect to internal taxation or other government regulation. All proposed laws and regulations put forth by the government are published in draft form and open for public comment, generally for a 30-day period.Regulations are often applied inconsistently, particularly at the municipal level. Many regulations are in conflict with other regulations, or are ambiguous, creating confusion for investors. As noted in the American Chamber of Commerce’s (AmCham) biannual Business Climate Survey conducted in 2020, many municipalities lack adequate detailed urban plans, complicating investment plans. Some municipalities have made efforts to speed up procedures in order to improve the business environment for investors. While at the national level there are fewer obstacles for investments and other activities, many larger-scale projects involve both local and national authorities, and it is often necessary to work with both administrations to complete a project. AmCham members surveyed are dissatisfied with the duration of the court proceedings (79.5 percent) and unequal implementation of the law (63.6 percent). At the same time, over 70 percent of AmCham member companies surveyed believe that conditions for doing business when it comes to the duration of the court proceedings, and unequal implementation of the laws have not changed in the past two years.

Foreign investors are subject to the same conditions as domestic investors when it comes to establishing a company and making an investment. There are no other regulations in place which might deprive a foreign investor of any rights or limit the investor’s ability to do business in Montenegro. The Law of Foreign Investments is currently fully harmonized with World Trade Organization (WTO) rules.In 2004, the Parliament established an Energy Regulatory Agency, which maintains authority over the electricity, gas, oil, and heating energy sectors. Its main tasks include approving pricing, developing a model for determining allowable business costs for energy sector entities, issuing operating licenses for energy companies and for construction in the energy sector, and monitoring public tenders. The energy law mandates that in the energy sectors, when prices are affected by monopoly positions of some participants, business costs will be set at levels approved by the Agency. In those areas deemed to function competitively, the market will determine prices. The price of gasoline is set nationally every two weeks and is uniform across all petrol stations.The Agency for Electronic Communication and Postal Services (known by its Montenegrin acronym EKIP) was established by the government in 2001. It is an independent regulatory body whose primary purpose is to design and implement a regulatory framework and to encourage private investment in the sector. In March 2021, EKIP prepared a “Study on the Strategy for the Introduction of 5G Mobile Communication Networks in Montenegro”.  In December 2021, the Government adopted the “Roadmap for the Introduction of 5G Mobile Communication Networks” and is planning an auction to allocate radio frequencies for the 5G network (700 MHz, 3.5 GHz and 26 GHz) at the end of 2022.  A “5G Strategy” is also expected to be adopted by mid-2022.

While there is a full legal and regulatory infrastructure in place to conduct public procurement, U.S. companies have complained in numerous cases about irregularities in the procurement process at the national level and maintain there is an inability to meaningfully challenge decisions they believe were erroneously taken through the procurement apparatus. In other cases, the system delivers appropriate outcomes, though in a complex and time-consuming way. Public procurement is conducted jointly by the Public Procurement Directorate, the Ministry of Finance (as the main line ministry for the procurement area), and the State Commission for Control of Public Procurement Procedures in the protection of rights area. The Public Procurement Directorate began operations in 2007 while the State Commission for the Control of Public Procurement Procedures was established in 2011. The State Commission takes decisions in the form of written orders and conclusions made at its meetings. The decisions are made by a majority of present members. The State Commission’s Rules of Procedure specify the method for this work. The revised Law of Public Procurement entered into force in December 2019. The Administrative Court oversees cases involving public procurement procedures.

The Montenegro State Audit Institution (SAI) is an independent supreme audit institution for verification of the entire government’s financial statements, including state-owned enterprises.  The audits are made publicly available on the SAI’s website (http://www.dri.co.me/).  Accounting standards implemented in Montenegro are transparent and consistent with international norms. In addition, various international companies that conduct accounting and auditing procedures are present in the country.

More information on whether Montenegrin Government publish or consult with the public about proposed regulations is available at https://rulemaking.worldbank.org/en/data/explorecountries/montenegro 

Montenegro is a candidate country for membership to the EU, with accession negotiations launched on June 29, 2012. All 33 negotiating chapters have been opened, while three are provisionally closed, the last one in 2017. Montenegro is currently taking steps to harmonize its regulations and accepted best practices with those of the EU, as part of the negotiation process.

The government has not notified the WTO of any measures that are inconsistent with the WTO’s Trade Related Investment Measures (TRIMs), nor have there been any independent allegations that the government maintains any such measures.

Montenegro’s legal system is of a civil, continental type based on Roman law.  It includes the legal heritage of the former Yugoslavia, and the State Union of Serbia and Montenegro.  As of 2006, when the country regained its independence, Montenegrin codes and criminal justice institutions were applicable and operational.  Montenegro’s Law on Courts defines a judicial system consisting of three levels of courts: Basic, High, and the Supreme Court.  Montenegro established the Appellate Court and the Administrative Court in 2005 for the appellate jurisdiction in criminal and commercial matters, and specialized jurisdiction in administrative matters.  The specialized Commercial Court has first instance jurisdiction in commercial matters. Apart from those, there are also specialized Misdemeanors Courts.

The Basic Courts have first instance jurisdiction in civil cases and criminal cases in which a prison sentence of up to 10 years is possible.  There are 15 Basic Courts for Montenegro’s 23 municipalities.  Two High Courts in Podgorica and Bijelo Polje have appellate review of basic court decisions.  The High Courts also decide on jurisdictional conflicts between the basic courts.  They are also first instance courts for serious crimes where prison sentence of more than 10 years is specified.  The Podgorica High Court has specialized judges and department who deal with organized crime, corruption, war crimes, money laundering, and terrorism cases.According to the Law on Courts, there is just one Commercial Court based in Podgorica.  The Commercial Court has jurisdiction in the following matters: all civil disputes between legal entities, shipping, navigation, aircraft (except passenger transport), and disputes related to registration of commercial entities, competition law, intellectual property rights (IPR), bankruptcy, and unfair trade practices.  The High Court hears appeals of Basic Court decisions, and High Courts’ first instance decision may be appealed to the Appellate Court which is also a second instance court for decisions of the Commercial Court. The Supreme Court is the third (and final) instance court for all decisions.  The Supreme Court is the court of final judgment for all civil, criminal, commercial, and administrative cases, and it acts only upon irregular (i.e., extraordinary legal remedies).  There is also the Constitutional Court of Montenegro, which checks constitutionality and legality of legal acts and acts upon constitutional complaints in relation to human rights violations.  The Commercial Court system faces challenges, including weak implementation of legislation and confusion over numerous changes to existing laws; development of a new system of operations, including electronic communication with clients; and limited capacity and expertise among the judges as well as a general backlog in cases. Over the last several years, the adoption of 20 new business laws has significantly changed and clarified the legislative environment.  Recently adopted legislative reforms improved the efficiency and effectiveness of court proceedings, a trend which is already visible through the introduction of Public Enforcement Agents.

In order to attract foreign investment and to lead interested investors through the process, the government established the Montenegrin Investment Agency (MIA) ( www.mia.gov.me ) and the Privatization and Capital Investment Council https://www.gov.me/cyr/vlada-crne-gore/savjet-za-privatizaciju-i-kapitalne-projekte ). These organizations aim to promote Montenegro’s investment climate and opportunities in the local economy, with a focus on the tourism, energy, infrastructure, and agriculture sectors.

In 2013, the Agency for Protection of Competition was established as a functionally independent entity after the Law on Protection of Competition entered into force and the Central Register of Economic Entities registered the law. The area of free market competition, regulated by the law, represents the area that has direct and significant impact on economic development and investment activity, by raising the level of the quality of goods and services, thus creating the conditions for lower prices and creation of a modern, open market economy. This, in turn, provides Montenegro with the possibility to participate in the single market of the EU and in other international markets. More information available on the Agency’s website: http://www.azzk.me/jml/index.php/en/ 

Montenegro provides legal safeguards against expropriation with protections codified in several laws adopted by the government. There have been no cases of expropriation of foreign investments in Montenegro. However, Montenegro has outstanding claims related to property nationalized under the Socialist Federal Republic of Yugoslavia. A number of unresolved restitution cases involve U.S. citizens. The cases are in various stages of adjudication and have languished for over a decade.

At the end of 2007, Parliament passed the new Law on Restitution, which supersedes the 2004 Act. In line with the law, three review commissions have been formed: one in Bar (covering the coastal region); one in Podgorica (for the central region of Montenegro); and one in Bijelo Polje (for the northern region of Montenegro). The basic restitution policy in Montenegro is restitution in kind, when possible, and cash compensation or substitution of other state land when physical return is not possible. In addition, Montenegro provides safeguards from expropriation actions through its Foreign Investment Law. The law states that the government cannot expropriate property from a foreign investor unless there is a “compelling public purpose” established by law or based on the law. If an expropriation is executed, compensation must be provided at fair market value plus one basis point above the London Interbank Offered Rate (LIBOR) rate for the period between the expropriation and the date of payment of compensation.

The Bankruptcy Law, adopted in 2011, mandates that debtors are designated insolvent if they cannot meet financial obligations within 45 days of the date of maturity of any debt obligation. However, the law still offers some latitude for restrictive measures and discretionary government interference. Bankruptcy is criminalized in Montenegro and a responsible officer in a business entity who caused bankruptcy and damage to another person by irrational spending of assets or their bargain selling, by excessive borrowing, undertaking disproportional obligations, recklessly concluding contracts with insolvent entities, omitting to collect claims in time, by destroying or concealing property or by other acts which are not in compliance with  prudent business practices shall be punished by a prison term from six months to five years.

The Ministry of Economic Development, in cooperation with the World Bank Group (WBG), has created an Investment Incentives Inventory, which provides a comprehensive list of available financial and non-financial support programs for the private sector as well as domestic and foreign investors offered by the Government of Montenegro. This initiative is part of the WBG-supported Regional Investment Reform Agenda, whose objective is the development of commonly accepted investment standards for the Western Balkans region in order to improve the attractiveness of the region for regional and other foreign investors. Montenegro’s goals are to leverage this program to spur a higher inflow of investments and achieve a higher level of entrepreneurship, trade and job creation. The inventory contains data on 40 incentive measures that are available to domestic and foreign investors through various support programs intended for the private sector. The MIA overseas the incentive program implementation. More information is available on the Agency’s website ( https://mia.gov.me/investment-incentive-inventory ).

In 2004, Montenegro adopted the Law on Free Zones, which offers businesses benefits and exemptions from custom duties, taxes, and other duties in specified free trade zones. The Port of Bar is currently the only free trade zone in Montenegro.  All free zone users have many benefits provided by the law and other regulations (import free of customs duties, customs fees and VAT; storage of goods in a duty-free regime for an unlimited period of time; low corporate tax, simplified procedures) in addition to the use of infrastructure, port handling services, and telecommunication services. All regulations relating to free trade zones are in compliance with EU legal standards. Complete equality has been guaranteed to foreign investors in reference to ownership rights, organizing economic activities in the zone, complete free transfer of profit and deposit, and the security of investments. More info is available at http://www.lukabar.me/  

The government does not impose any performance requirements as a condition for establishing, maintaining, or expanding an investment. There is a defined package of incentives offered to foreign investors, including duty exemptions for imported equipment.

AmCham Montenegro and the Foreign Investors’ Council announced that Montenegro has improved and liberalized its business environment due to amendments to the Law on Foreigners.  This law addressed previous requirements placed on hiring practices. According to revisions to the law, businesses no longer need to prove that there are no local citizens of the required vocational profile that are available for a particular job before the company decides to hire a foreigner.

The government does not use “forced localization,” the policy in which foreign investors must use domestic content in goods or technology. The only exception is an agreement with a Chinese company that is constructing the country’s first national highway. The agreement for this project, which is currently the largest infrastructure project in Montenegro, requires that 30 percent of the labor contract be engaged locally.

In 2002 Montenegro enacted the Law on Secured Transactions and established a collateral registry at the Commercial Court in 2003. The registry’s operational guidelines have been drafted and approved by the Commercial Court. The main goal of the Law on Secured Transactions is to establish a clear and transparent framework for property transactions. In 2004, Montenegro adopted a new Law on Mortgages by which immovable property may be encumbered by security interest (mortgage) to secure a claim for the benefit of a creditor who is authorized, in the manner prescribed by the law, to demand satisfaction of the claim by foreclosing the mortgaged property with priority over creditors who do not have a mortgage created on that particular property, as well as over any subsequently registered mortgage, regardless of a change in the owner of the encumbered immovable property. The Real Estate Administration has taken progressive steps over the last few years to improve the quality and service provided in the registry, though additional improvements are needed.

The acquisition and disposition of IPR are protected by the Law on the Enforcement of Intellectual Property Rights, which entered into force in 2006. The law provides for fines for legal entities of up to EUR 30,000 (approximately USD 37,000) for selling pirated and/or counterfeited goods. It also provides ex-officio authority for market inspectors in the areas mentioned above. An additional set of amendments to the existing Law on the Enforcement of Intellectual Property Rights were adopted over the last several years (beginning in 2006) in line with the EU regulations, and it is expected to bring more efficiency in implementation as well as a multifunctional approach to property-rights protection. In 2005, the Montenegrin Parliament adopted the Regulation on Trade-Related Aspects of Intellectual Property Rights (TRIPS) Border Measures that provides powers to customs authorities to suspend customs procedures and seize pirated and counterfeit goods. Statistics on seizures of counterfeit goods is published by the Revenue and Customs Administration and available on their webpage www.upravaprihoda.gov.me . Montenegro’s Penal Code penalizes IPR violations, allows ex-officio prosecution, and provides for stricter criminal penalties; however, copyright violation is a significant problem in the outerwear and apparel market, and unlicensed software can be easily found on the general market. The Law on Optical Disks was adopted in 2006; it requires the registration of business activity when reproducing optical disks for commercial purposes and provides for surveillance of optical disk imports and exports, as well as imports and exports of polycarbonates.

The Montenegrin Intellectual Property Office is the competent authority within the state administration system for the activities related to industrial property rights, copyrights, and related rights. The Intellectual Property Office was established under the Regulation on Organization and Manner of Work of the State Administration in 2007, and officially started working on in 2008. At the end of 2007, the Customs Administration signed a Letter of Intent for acceptance of Standards to be Employed by Customs for Uniform Rights Enforcement (SECURE) Standards, adopted by the World Customs Organization (WCO), to promote the efficient protection of IPR by customs authorities.Montenegro is not on the Special 301 Watch List. Montenegro is not listed in the Notorious Markets List. However, the sale of pirated optical media (DVDs, CDs, software) as well as counterfeit trademarked goods, particularly sneakers and clothing, is widespread. According to the 2018 joint survey of Business Software Alliance and the International Data Corporation (IDC), the most recent report available, the software piracy rate in Montenegro is among the highest in Europe constituting 74 percent of the market, two percentage points below the 2015 study. Enforcement is slowly improving as customs, police, and judicial authorities obtain the necessary tools, but institutional capacity and public awareness is still limited.

To further improve intellectual property protection, AmCham Montenegro established an IPR Committee in April 2009, which currently operates under the Grey Economy Committee. The main goal of the committee is to work closely with the Montenegrin institutions which deal with IPR, to increase public awareness of the importance of intellectual property protection, and to help the Government of Montenegro strengthen its administrative capacities in this field. More information about the committee’s activities can be found on AmCham’s website http://www.amcham.me/ .

Montenegro became a member of the World Intellectual Property Organization (WIPO) in 2006, with more information available on the WIPO’s website http://www.wipo.int/members/en/details.jsp?country_id=193 

The banking sector in Montenegro is fully privatized with 11 privately owned banks operating in the country. The banking sector operates under market terms. Foreign investors can get credit on the local market, and they have access to a variety of credit instruments since the majority of the banks in Montenegro belong to international banking chains.

The largest foreign banks are OTP (Hungary) operating as CKB in Montenegro, Erste Bank (Austria) and NLB (Slovenia). The remaining, smaller foreign banks do not belong to large international groups. A new set of banking laws were adopted in December 2019, and some of the existing laws have been amended to improve regulation of the banking sector, provide a higher level of depositor safety, and increase trust in the banking sector itself. The Law on the Protection of Deposits was adopted in the same year to bring local legislation on protecting deposits up to European standards. In accordance with the law, a fund for protecting deposits has been established and deposits are guaranteed up to the amount of EUR 50,000 (approximately USD 55,000).

Until 2010, Montenegro had two stock exchanges. After a successful merger (in 2010), only one stock exchange operates on the capital market under the name of Montenegro Stock Exchange (MSE). The turnover of the MSE included 1,618 transactions, which totaled EUR 46.5 million in 2021, a 50 percent increase over 2020. In December 2013, the Istanbul Stock Exchange purchased 24.38 percent of the MSE ( www.montenegroberza.com ). Three types of securities are traded: shares of companies, shares of investment funds, and bonds (old currency savings bonds, pension fund bonds, and bonds from restitution.) The MSE is organized on the principle of member firms, which trade in their own names and for their own account (dealers) in the name and for the account of their clients (brokers). Members of the MSE can be a legal entity registered as a broker under the Law on Securities provided, they meet conditions laid down by the Statute of the Stock Exchange. In addition, members may include banks and insurance companies, once approved by the Commission for Securities to perform stock exchange trade. MSE currently has 6 stockbrokers.

According to Central Bank of Montenegro, the banking sector remained solvent and liquid. Total bank assets amounted to EUR 5.33 billion at the end of 2021, an increase of EUR 741.6 million or 16.2 percent over the previous year. Loans make up the dominate share of bank balance sheets, amounting to EUR 3.36 billion at the end of 2021, a 6.4 percent increase over 2020. Non-performing loans accounted for 6.2 percent of the total. In 2021, lending activity grew by 13.9 percent over 2020, while the interest rate dropped to 5.66 percent due to increased competition.

Montenegro is one of a few countries that does not belong to the Euro zone but uses the Euro as its official currency (without any formal agreement). Since its authority is limited in monetary policies, the Central Bank, in its role as the state’s fiscal agent, has focused on control of the banking system and maintenance of the payment system. The Central Bank also regulates the process for establishing a bank. A bank can be founded as a joint-stock company and acquire the status of a legal entity by registering in the court register. An application for registration in the court register must be submitted 60 days from when the bank is first licensed.

On March 1, 2018, Montenegro’s Parliament approved the Foreign Account Tax Compliance Act (FATCA) agreement between the governments of Montenegro and the United States.

There are no difficulties in the free transfer of funds exercised on the basis of profit, repayment of resources, or residual assets. The Central Bank of Montenegro publishes statistics on remittances as a proportion of GDP, with the latest data available indicating that in 2020 remittances accounted for approximately 12.3 percent of GDP.

There are no sovereign wealth funds in Montenegro.

Montenegro has a multi-party-political system with a mixed parliamentary and presidential system.  Seventeen months after the August 2020 national elections removed the ruling Democratic Party of Socialists (DPS) after almost three decades in power and a new Government was formed, the coalition government of Prime Minister Zdravko Krivokapic collapsed on February 4, after Parliament backed a vote of no confidence called by the smallest block within the coalition, Black and White, along with DPS and other opposition parties. President and DPS leader Milo Djukanovic on March 3, 2022, named Deputy Prime Minister and Black and White leader Dritan Abazovic as the Prime Minister designate. The Krivokapic cabinet continued to operate under a “technical mandate” while negotiations on forming a new minority government took place, with the DPS and other opposition parties announcing they would offer their support. As of late March 2022, a caretaker government managed the country’s day-to-day activities; if negotiations to form a new government fail, national elections would be held.

Former Prime Minister Milo Djukanovic was elected President of Montenegro in April 2018 for a five-year term.

Montenegro’s total labor force consists of approximately 250,000 people with almost 50,000 workers, or close to 20 percent of the labor pool, employed in the public sector.  The unemployment rate was 24 percent as of December 2021, according to the country’s Unemployment Agency. As the result of the Europe Now reform program passed in December 2021 and taking effect as of January 2022, the minimum wage in Montenegro has almost doubled from EUR 250 to EUR 450 per month, which has also led to the increase of the country’s average salary from EUR 537 to EUR 686 per month. A stated goal of the reform program was to tackle the informal economy, estimated at almost 30 percent of GDP, with large numbers of workers officially earning only the minimum wage, but receiving additional payments in cash out of sight of the tax authorities.

According to AmCham, finding skilled middle managers represents a serious challenge for its member companies, and many foreign companies choose instead to hire foreigners for skilled positions. To tackle youth unemployment, Montenegro is prioritizing efforts to improve practical job skills, including English language training and digital literacy. However, university students in Montenegro obtain little or no practical work experience while studying for their bachelor’s degree. It is widely mentioned in business circles that Montenegrin young adults prefer public sector work to private companies, despite the higher salaries, due to the perceived job security and less demanding workload. 2019 was marked by the intensive work on the Labor Law in a form of a dialogue among social partners regarding disputable legal solutions and the new Labor Law has been adopted in December 2019.

Over the past few years, private sector employment has increased, and total employment in the public sector (including SOEs) has decreased.  Employment in Montenegro is led by three major sectors: tourism, maritime and offshore jobs (including on cruise ships or freighters), and manufacturing.

The new Montenegrin Labor Act introduced important employment regulations. The maximum duration of a fixed-term contract has been extended from 24 months to 36 months. Employers that employ more than 10 employees must adopt an internal general policy which lists positions and sets out job descriptions. Part-time positions cannot be for fewer than 10 hours per week, except for the GM/CEO. Full-time positions are 40 hours per week. Minimum statutory annual leave is 20 working days for regular jobs and 30 working days for jobs with severe conditions where full-time work hours are reduced from 40 to 36 hours per week. As of October 2019, Sunday became a non-working day for trade shops in Montenegro. Employees who have a six-day long work week are entitled to a minimum of 24 working days of annual leave. Employers are obliged to adopt an annual leave plan prior to April 30 each calendar year for the current year. Employers are not allowed to compensate employees for unused annual leave, except in the case of employment termination that occurs before the employee has consumed his or her entire annual leave allowance for the given year. Should an employer’s operations be shut down, employees can receive 60 percent of their average salary earned over the previous six months, but not less than the minimum wage, for a maximum period of four months within a given calendar year.

The new Labor Law contains an explicit provision stating that an employer may only pay salaries to the employee’s bank account. Employment may not be terminated during pregnancy or maternity/ parental leave, except in case of a serious breach of work duties. Maternity leave may be taken for 365 days, beginning 28 days prior to childbirth. In cases in which employees claim unlawful termination, the employee must initiate proceedings before the Agency for Peaceful Resolution of Labor Disputes or before the Centre for Alternative Dispute Resolution. After doing so, the employee may initiate court proceedings against the employer. Court proceedings must be initiated within 15 days from the end of the mandatory mediation. The statute of limitations for monetary claims arising out of employment is four years from the date on which the obligation became due. Claims for payment of pension and disability insurance contributions are not subject to any statute of limitations.

The procedure for determining a breach of work duties has been adjusted, now allowing for dismissal for breach without having to first conduct disciplinary proceedings in the following cases: (i) if the employee’s behavior is such that he/she cannot continue to work for the employer (e.g. coming to work intoxicated; drinking or using narcotics during work; refusing to undergo a medical examination to determine intoxication; abusive, offensive, or inappropriate behavior towards customers or employees, etc.); (ii) if the employee knowingly provided inaccurate data during the hiring process; (iii) abuse of sick leave; (iv) failure to return to work after the end of unpaid leave.

The Law on Peaceful Resolution of Labor Disputes was adopted in 2007. It introduces out-of-court settlements of labor disputes. The Law on the Employment of Nonresidents took effect in 2009 and mandates the government to set a quota for nonresident workers in the country. In December 2020, the Government established a quota 20,454 work permits for foreigners in 2021. Procedures for hiring foreign workers were simplified, and taxes for nonresident workers have been significantly decreased to help domestic companies that are experiencing problems engaging domestic staff, particularly for temporary and seasonal work.

The Law on Foreigners in Montenegro came into force in 2015. At the beginning of 2016, amendments suggested by AmCham Montenegro and business organizations (including the Montenegrin Employers’ Federation, Montenegrin Chamber of Economy, Montenegro Business Alliance, and Montenegrin Foreign Investors Council) were adopted that improve and liberalize Montenegro’s business environment.  According to changes to the law, businesses are no longer required to provide official records proving that the company was unable to hire Montenegrin nationals with the required skills before hiring foreigners.

Changes were made to the Law on Pensions and Care of Invalids in 2017, including gradually increasing the age of retirement from 65 to 67 years (for both men and women) by 2042. These revisions are designed to eliminate anticipated shortfalls in the pension fund. The amended Law on Pensions and Care of Invalids which improves the conditions for retirement and harmonization of pensions, and increases the minimum pension was adopted in July 2020. The new Law improves the conditions for retirement, because one quarter of the period of service that was the most unfavorable for future retirees is excluded from the accounting period.

Until 2008, there was only one trade union confederation at the national level in Montenegro, the Confederation of Trade Unions of Montenegro (SSCG). SSCG is the successor of the former socialist trade union and inherited the property, organizational structure, and rights to participation in the tripartite bodies on the national level. As of 2008, a new confederation, the Union of Free Trade Unions of Montenegro (USSCG), split away from SSCG.

All international labor rights are recognized within domestic law, such as freedom of association, the elimination of forced labor, child labor employment discrimination, minimum wage, occupation safety and health, as well as weekly working hours.

Attracting FDI remains one of the government’s main pillars of economic growth and job creation, although the COVID-19 pandemic prevented government officials from greater engagement with potential investors in 2021. There are no laws or practices that discriminate against foreign investors. In March 2018, the government passed its “Plan for Economic Growth” ( https://vicepremier-ekonomija.gov.mk/?q=node/275 ), and in 2021 it amended the Law on Financial Support of Investments ( https://vicepremier-ekonomija.gov.mk/sites/default/files/dokumenti/Izmeni%20i%20dopolnuvanja%20ZFPI%202021.pdf ), which provides substantial incentives to foreign companies operating in the 15 free economic zones. The incentives include a variety of measures such as job creation subsidies, capital investment subsidies, and financial support to exporters. North Macedonia is a signatory to multilateral conventions protecting foreign investors and is party to a number of bilateral investment protection treaties, though none with the United States.

Since August 2020, the office of the Deputy Prime Minister for Economic Affairs ( https://vicepremier-ekonomija.gov.mk ) has coordinated the government’s activities related to foreign investments. Invest North Macedonia—the Agency for Foreign Investments and Export Promotionis the primary government institution in charge of facilitating foreign investments. It works directly with potential foreign investors, provides detailed explanations and guidance for registering a business in North Macedonia, produces analysis on potential industries and sectors for investing, shares information on business regulations, and publishes reports about the domestic market. The North Macedonia Free Zones Authority, http://fez.gov.mk/  , a governmental managing body responsible for developing free economic zones throughout the country, also assists foreign investors interested in operating in the zones. It manages all administrative affairs of the free economic zones and assists foreign investors to identify appropriate investment locations and facilities. North Macedonia does not maintain a “one-stop-shop” for FDI, requiring investors to navigate through several bureaucratic institutions to implement their investments.

The government maintains contact with large foreign investors through frequent meetings and formal surveys to solicit feedback. Large foreign investors have direct and easy access to government leaders, whom they can contact for assistance to resolve issues. The Foreign Investors Council, https://www.fic.mk/Default.aspx?mId=1 , advocates for foreign investors and suggests ways to improve the business environment.

Foreign investors can invest directly in all industry and business sectors except those limited by law. For instance, investment in the production of weapons and narcotics remains subject to government approval, while investors in sectors such as banking, financial services, insurance, and energy must meet certain licensing requirements that apply equally to domestic and foreign investors. Foreign investment may be in the form of money, equipment, or raw materials. Under the law, if assets are nationalized, foreign investors have the right to receive the full value of their investment. This provision does not apply to national investors. North Macedonia does not have a national investment screening mechanism in line with international standards. Invest North Macedonia conducts screening and due diligence reviews of foreign direct investments in a non-standard, non-public procedure and on an ad-hoc basis. The main purpose of the screening is to ensure the investment will bring economic benefits for the country and to protect national security. The process does not disadvantage foreign investors. More information about the screening process is available directly from Invest North Macedonia, at https://investnorthmacedonia.gov.mk/. U.S. investors are not disadvantaged or singled out by any of the ownership or control mechanisms, sector restrictions, or investment screening mechanisms.

The World Trade Organization’s (WTO) latest review of North Macedonia’s trade policy (2019) is available at https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/TPR/S390R1.pdf&Open=True . The most recent United Nations Conference on Trade and Development (UNCTAD) investment policy review on North Macedonia, from March 2012, is available at https://unctad.org/en/PublicationsLibrary/diaepcb2011d3_en.pdf . A 2017 regional investment policy review of South-East Europe covering seven economies, including North Macedonia, is available at https://unctad.org/en/PublicationsLibrary/diaepcb2017d6_en.pdf . The Organization for Economic Cooperation and Development (OECD) has not done an investment policy review on North Macedonia to date. The International Monetary Fund (IMF) and the World Bank have mentioned aspects of the government’s policies for attracting foreign investment in their regular country reports but have not provided specific policy recommendations. There have been no useful reviews of investment policy and practice from domestic or third country civil society organizations.

All legal entities in the country must register with the Central Registry of the Republic of North Macedonia (Central Registry). Foreign businesses may register a limited liability company, single-member limited liability company, joint venture, or joint stock company, as well as branches and representative offices. There is a one-stop-shop system which enables investors to register their businesses within a day by visiting one office, obtaining the information from a single place, and addressing one employee. Once the company is registered with the Central Registry, the registration is valid for all other agencies. In addition to registering, some businesses must obtain additional working licenses or permits for their activities from relevant authorities. More information on business registration documentation and procedures is available at the Central Registry’s website, http://www.crm.com.mk . All investors may register a company online at http://e-submit.crm.com.mk/eFiling/en/home.aspx . Applications must be submitted by an authorized registration agent. The online business registration process is clear, complete, and available for use by foreign companies.

The government does not restrict domestic investors from investing abroad, but it does not promote or provide incentives for outward investments. The publicly reported total stock of outward investments is small, worth approximately $138 million, the majority of which is in production facilities, pharmaceuticals, metal processing, and wholesale and retail trade in the Balkan region, the Netherlands, Germany, and Russia.

The government has made progress adopting reform priorities called for by the EU, NATO, and other bodies, leading to well-defined laws, institutional structures, and regulatory legal frameworks. However, laws are not regularly drafted based on data-driven evidence or assessments and, at times, move through parliament using shortened legislative procedures. While laws are in place, enforcement and universal implementation of laws and regulations are generally lacking and can be a problem for businesses and citizens.

North Macedonia has simplified regulations and procedures for large foreign investors operating in the Technological Industrial Development Zones (TIDZ). While the country’s overall regulatory environment is complex and not fully transparent, the government is making efforts to improve transparency. The government is implementing reforms designed to avoid frequent regulatory and legislative changes, coupled with inconsistent interpretations of the rules, which create an unpredictable business environment that enables corruption. The current government has published all incentives for businesses operating in North Macedonia, which are standardized and available to domestic and international companies. However, companies worth more than $1 billion that want to invest in North Macedonia can negotiate terms different from the standard incentives. The government can offer customized incentive packages if the investment is of strategic importance.

Rule-making and regulatory authorities reside within government ministries, regulatory agencies, and parliament. Almost all regulations most relevant to foreign businesses are on the national level. Regulations are generally developed in a four-step process. First, the regulatory agency or ministry drafts the proposed regulation. The proposal is then published in the Unique National Electronic Register of Regulations (ENER: https://ener.gov.mk/ ) for public review and comment. After public comments are considered and properly incorporated into the draft, it is sent to the central government to be reviewed and adopted in an official government session. Once the government has approved the draft law, it is sent to parliament for full debate and adoption. The public consultation process has improved, with businesses, the public, and NGOs having an increasing role in commenting on draft regulations and proposing changes through ENER.

There is no single centralized location which maintains a copy of all regulatory actions. All newly adopted regulations, rules, and government decisions are published in the Official Gazette of the Republic of North Macedonia after they are adopted by the government or parliament or signed by the corresponding minister or director. Public comments are neither published nor made public as part of the regulation, and limited information is available in English.

North Macedonia accepts International Accounting Standards, and the legal, regulatory, and accounting systems used by the government are consistent with international norms. North Macedonia has aligned its national law with EU directives on corporate accounting and auditing.

The government has systems in place to regularly communicate and consult with the business community and other stakeholders before amending and adopting legislation, through ENER and through dialogues with businesses, the civil sector, and academia. Interested parties, including chambers of commerce, can review the legislation published on ENER. The online platform is intended to facilitate public participation in policymaking, increase public comment, and provide a phase-in period for legal changes to allow enterprises to adapt. Key institutions influencing the business climate publish official and legally-binding instructions for the implementation of laws. These institutions are obliged to publish all relevant laws, by-laws, and internal procedures on their websites; however, some do not make regular updates. The government makes significant efforts to ensure respect for the principles of transparency, merit, and equitable representation.

The government continued to implement the Strategy for Public Administration Reform and Action Plan (2018-2022), and the National Plan for Quality Management of Public Administration, which focus on policy creation and coordination, strengthening public service capacities, and increasing accountability and transparency, in close coordination with the EU. The Open Data Strategy (2018-2020) and Transparency Strategy (2019-2021) put forth measures to encourage the release and use of public data as an effective tool for innovation, growth, and transparent governance and contributed to greater transparency of government bodies, both at the central and local levels. In 2022, Prime Minister Dimitar Kovachevski introduced a new Deputy Prime Minister for Good Governance Policies, who is responsible for good governance, anticorruption policies, and the digitalization of government services. The DPM’s office will replace the previous Cabinet for the Fight Against Corruption and Crime, Sustainable Development and Human Resources.  The new DPM is expected to oversee the implementation of the Public Administration Reform Strategy under development by the Ministry of Information Society and Administration during 2022.

Public finances and debt obligations are fairly transparent. The Ministry of Finance publishes budget execution data monthly; public debt figures, including contingent liability, quarterly; and the fiscal strategy is updated annually.

As a candidate country for accession to the EU, North Macedonia is gradually harmonizing its legal and regulatory systems with EU standards. As a member of the WTO, North Macedonia regularly notifies the WTO Committee on Technical Barriers to Trade of proposed amendments to technical regulations concerning trade. North Macedonia ratified the Trade Facilitation Agreement (TFA) in July 2015, the 50th out of 134 members of the WTO to do so. In October 2017, the government formed a National Trade Facilitation Committee, chaired by the Minister of Economy, which includes 22 member institutions. The Committee identified areas which need harmonization with the TFA and is working toward implementation.

North Macedonia’s legal system is based on the civil law tradition, with increasing adversarial-style elements, and includes an established legal framework for both commercial and contract law. The Constitution established independent courts to rule on commercial and contractual disputes between business entities, and court rulings are legally executed by private enforcement agents. Enforcement actions may be appealed before the court. The enforcement procedure fees were lowered and simplified in 2019. Commercial disputes up to €15,000 require mediation as a precondition to initiating legal action within the courts. Cases involving international elements may be decided using international arbiters. Ratified international instruments are considered an integral part of national legislation and cannot be altered by a national law, per the Constitution.

Throughout 2021, businesses complained that lengthy and costly commercial disputes adjudicated through the court system created legal uncertainty. Businesses, however, have not been inclined to use mediation, despite it being a swifter and often less costly way to resolve disputes. In December 2021, Parliament adopted a new and improved Mediation Law providing for broader use of mediation as a voluntary, contract-based, or legally-mandated alternative prior to addressing a matter in court. Numerous international reports note rule of law remains a key challenge in North Macedonia, pointing to undue executive, business, and political interference in the judiciary, and poor funding for and management of administrative courts. These obstacles often result in lengthy and costly trials. The government continued major reforms throughout 2021 to improve judicial independence and impartiality, but contract enforcement and a perceived lack of transparent public procurement practices remain challenges for businesses.

There is no single law regulating foreign investments, nor a “one-stop-shop” website which provides all relevant laws, rules, procedures, and reporting requirements for investors. Rather, the legal framework is comprised of several laws including the Trade Companies Law, the Securities Law, the Profit Tax Law, the Customs Law, the Value Added Tax (VAT) Law, the Law on Trade, the Law on Acquiring Shareholding Companies, the Foreign Exchange Operations Law, the Payment Operations Law, the Law on Foreign Loan Relations, the Law on Privatization of State-owned Capital, the Law on Investment Funds, the Banking Law, the Labor Law, the Law on Financial Discipline, the Law on Financial Support of Investments, and the Law on Technological Industrial Development Zones (free economic zones). An English language version of the consolidated Law on Technological Industrial Development Zones is available at https://fez.gov.mk/wp-content/uploads/2018/01/law-in-tidz-eng.pdf , and additional information at https://www.worldfzo.org/Portals/0/OpenContent/Files/487/Macedonia_FreeZones.pdf . No new major laws, regulations, or judicial decisions related to foreign investments were passed during the past year; however, some existing laws were amended slightly.

The Commission for the Protection of Competition (CPC) is responsible for enforcing the Law on Protection of Competition. The CPC issues opinions on draft legislation which may impact competition. The CPC reviews the impact on competition of proposed mergers and can prohibit a merger or approve it with or without conditions. The CPC also reviews proposed state aid to private businesses, including foreign investors, under the Law on Control of State Aid and the Law on State Aid . The CPC determines whether the state aid in question gives economic advantage to the recipient, is selective, or adversely influences competition and trade. More information on the CPC’s activities is available at http://kzk.gov.mk/en  . There were no significant competition cases in 2021.

The Law on Expropriation ( http://www.mioa.gov.mk/sites/default/files/pbl_files/documents/legislation/zakon_za_eksproprijacija_konsolidiran_032018.pdf ) states the government can seize or limit ownership and real estate property rights to protect the public interest and to build facilities and carry out other activities of public interest. According to the Constitution and the Law on Expropriation, property under foreign ownership is exempt from expropriation except during instances of war or natural disaster, or for reasons of public interest. Under the Law on Expropriation, the state is obliged to pay market value for any expropriated property. If the payment is not made within 15 days of the expropriation, interest will accrue. The government has conducted a number of expropriations, primarily to enable capital projects of public interest, such as highway and railway construction, for which the government offered market value compensation. Expropriation procedures have followed strict legal regulations and due process. The government has not undertaken any measures that have been alleged to be, or could be argued to be, indirect expropriation, such as confiscatory tax regimes or regulatory actions that deprive investors of substantial economic benefits from their investments.

North Macedonia’s bankruptcy law governs the settlement of creditors’ claims against insolvent debtors. Bankruptcy proceedings may be initiated over the property of a debtor, be it a legal entity, an individual, a deceased person, joint property of spouses, or a business. However, bankruptcy proceedings may not be implemented over a public legal entity or property owned by the Republic of North Macedonia. The Government of North Macedonia’s suspension of bankruptcy proceedings for the duration of the COVID-19 crisis continued throughout 2021. The 2020 World Bank Doing Business Report ranked North Macedonia 30th out of 190 countries for resolving insolvency.

The Macedonian Credit Bureau ( https://mkb.mk/en/ ), commercial banks, and the National Bank of the Republic of North Macedonia serve as credit monitoring authorities.

Both the Law on Technological Industrial Development Zones (TIDZ) and the Law on Financial Support of Investments offer incentives to investors. Investors in the TIDZ are eligible for tax exemptions for a period of up to 10 years of operation in proportion to the size of investment and number of employees. Investors in the TIDZ are exempt from paying duties for equipment and machines as well as from municipality construction taxes. The land lease rate is so low as to be merely symbolic, and investors are eligible for a grant equal to 10 percent of the cost of plant construction and new machinery, as well as a grant for improving competitiveness. North Macedonia’s legislative framework for FDI is generally harmonized with EU state aid regulations.

The salaries of employees working for TIDZ employers are exempt from personal income tax for a period of up to ten years after the first month in which the employer starts paying out salaries.

The government does not issue guarantees or jointly finance foreign direct investment projects. Depending on the industry and size of the investment, the government may decide to cover up to 50 percent of eligible investment costs over a period of 10 years.

To date, the government has not announced any incentives to stimulate clean energy investments.

North Macedonia currently has 15 free economic zones in various stages of development throughout the country. The Directorate for Technological Industrial Development Zones ( HYPERLINK “http://fez.gov.mk/” h http://fez.gov.mk/) is responsible for establishing, developing, and supervising 14 of them, including seven fully operational TIDZ: Skopje 1 and 2, Prilep, Stip, Kicevo, Struga, and Strumica. The Tetovo TIDZ is a public-private partnership. U.S. companies operate in TIDZ throughout North Macedonia, including automotive components manufacturers ARC Automotive (Skopje 1), Adient (Stip and Strumica), Aptiv (Skopje 1), Gentherm (Prilep), Lear (Tetovo), and Dura Automotive and Dura Structures & Extrusion (Skopje 2), and electronic component manufacturer Kemet (Skopje 1).

North Macedonia does not normally impose performance requirements, such as mandating local employment (working level or management level) or domestic content in goods or technology, as a condition for establishing, maintaining, or expanding an investment. Foreign investors in the TIDZ may employ staff from any country. In 2016, North Macedonia simplified the procedure for expatriates to obtain permission to live and work in the country.

North Macedonia does not impose a “forced localization” policy for data. The government does not prevent or unduly impede companies from freely transmitting customer or other business-related data outside the country. Post is not aware of any requirements for foreign IT providers to turn over source code or provide access to encryption. However, based on the new EU General Data Protection Regulation (GDPR), which came into force in May 2018, North Macedonia’s Directorate for Personal Data Protection adopted in February 2020 amendments to the Law on Personal Data Protection to harmonize North Macedonia’s laws with the new EU regulations.

Depending on the sector and type of investment, various government authorities oversee and assess the fulfillment of investment promises made by foreign investors. Government entities include the Agency for Foreign Investments and Export Promotion (Invest North Macedonia), the Directorate for Technological Industrial Development Zones , and the Ministry of Economy.

There is no discriminatory export or import policy affecting foreign investors. Almost 96 percent of total foreign trade is unrestricted. Current tariffs and other customs-related information are published on the website of the Customs Administration ( https://customs.gov.mk/index.php/en/ ).

Laws protect ownership of both movable and real property, but implementation of these laws remains inconsistent. Mortgages and liens are regularly utilized, and the recording system is reliable. Highly centralized control of government owned “construction land,” the lack of coordinated local and regional zoning plans, and the lack of an efficient construction permitting system continue to impede business and investment. However, the government has improved the cadaster system by fully digitalizing all investment and holdings records, which has increased the security and speed of real estate transactions.

Land leased or acquired by foreign and/or non-resident investors is regulated by the Law on Ownership and Other Real Rights. EU and OECD residents have the same rights as local residents in lease or acquisition of construction land or property, whereas for non-EU and non-OECD residents, property ownership is regulated under terms of reciprocity. Foreign residents cannot acquire agricultural land in North Macedonia. Foreign investors may acquire property rights for buildings used in their business activities, as well as full ownership rights over construction land through a locally registered company. If a foreign company registers a local company in any form (subsidiary, local partner, or joint venture representation office), it can acquire land with full ownership rights similar to a domestic company.

Purchased land belongs to the owner and, even if it remains unoccupied, cannot revert to other owners such as squatters. The exception to this is agricultural land granted by the government as concessions. If the consignee does not use the land per the agreement, then the government can cancel the concession and take back possession of the land.

Responsibility for safeguarding intellectual property rights (IPR) is distributed among numerous institutions. The State Office of Industrial Property governs patents, trademarks, service marks, designs, models, and samples. A unit within the Ministry of Culture administers the protection of authors’ rights and other related rights (e.g., music, film, television). The State Market Inspectorate is responsible for monitoring markets and preventing the sale of counterfeit and pirated goods. The Ministry of Interior is responsible for IPR-related crimes committed on the internet. The Customs Administration has the right to seize suspect goods to prevent their distribution pending confirmation from the rights holder of the authenticity of the goods. The National Coordination Body for Intellectual Property, which previously organized interagency raids to seize counterfeit products, usually focused on small sellers in open-air markets and mostly targeted trademark infringements. The body has been inactive for the past three years.

As North Macedonia awaits a date to begin EU accession negotiations, it continues to harmonize its IPR laws and regulations with EU standards, but still needs to demonstrate adequate enforcement of those laws. The European Commission’s 2021 report on North Macedonia noted progress in raising awareness in the fight against counterfeiting, smuggling, and the importation of counterfeit goods, as well as an increase in seized goods. The EU report noted the creation of an information platform for law enforcement institutions to exchange data on IPR, but said it needs to be fully functional in order to create a credible enforcement record and gather reliable statistics on the institutional handling of IPR infringements. The EU also noted the need for further improvement of the legal framework on IPR, notably the collective rights management system, by aligning with the Collective Rights Management Directive, and industrial property rights, by aligning with the Enforcement Directive and the Trade Secrets Directive.

The new draft National Intellectual Property Strategy and Action Plan 2022-2026 was prepared in December 2021 and is pending adoption by the Government. The Strategy proposes transfer of competences for all tasks related to the protection of copyright and all related rights from the Ministry of Culture to the State Office of Industrial Property, incorporating all IPR segments into one regulatory institution. The strategy also anticipates better coordination with other government agencies on the mapping and cataloging of autochthonous agricultural products.

While North Macedonia has many laws in place to protect IPR, infringement is frequent, and the court system should be improved. Prosecutors and judges for both civil and criminal cases are aware of IPR but lack adequate experience due to the small number of IPR cases. There are no specialized courts to handle IPR cases. Many rights holders do not pursue legal action since IPR violators usually lack the financial resources to pay damages. Courts are sometimes reluctant to find accused IPR violators guilty due to stiff mandatory minimum sentences for small-time distributors of counterfeit goods. The penalties for IPR infringement range from 30 to 60 days closure of businesses, monetary fines of up to €5,000 ($5,492), or a prison sentence of up to five years. North Macedonia does not track and report cumulative statistics on IPR infringement or seizures of counterfeit goods, and therefore lacks a credible enforcement record. North Macedonia is not included in the U.S. Trade Representative’s Special 301 Report or the Notorious Market List.

North Macedonia is a member of the World Intellectual Property Organization (WIPO) and party to a number of its treaties, including the Berne Convention, the Paris Convention, the Patent Cooperation Treaty, the WIPO Copyright Treaty, and the WIPO Performances and Phonograms Treaty.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/  .

The government openly welcomes foreign portfolio investors. The establishment of the Macedonian Stock Exchange (MSE) in 1995 made it possible to regulate portfolio investments, although North Macedonia’s capital market is modest in turnover and capitalization. Market capitalization in 2021 was $4.3 billion, a 22.2 percent increase from the previous year. The main index, MBI10, increased by 30.8 percent, reaching 6,153 points at year-end. Foreign portfolio investors accounted for an average of 10.5 percent of total MSE turnover, 2.9 percentage points more than in 2020. The current regulatory framework does not appear to discriminate against foreign portfolio investments.

There is an effective regulatory system for portfolio investments, and North Macedonia’s Securities and Exchange Commission (SEC) regulates the market and licenses all MSE members to trade in securities. In 2021, the total number of listed companies was 96, four less than in 2020, and total turnover increased by 56.8 percent. Compared to international standards, overall liquidity of the market is still modest for entering and/or exiting sizeable positions. Individuals generally trade on the MSE as individuals, rather than through investment funds, which have been present since 2007.

There are no legal barriers to the free flow of financial resources into the products and factor markets. The National Bank of the Republic of North Macedonia (NBRNM) respects IMF Article VIII and does not impose restrictions on payments and transfers for current international transactions. A variety of credit instruments are provided at market rates to both domestic and foreign companies.

In its regular report on Article IV consultations, published January 2021, the International Monetary Fund noted that North Macedonia’s banking system was well-capitalized and profitable, but emphasized the need for continued vigilance. It assessed the monetary policy as appropriately accommodative and encouraged the Central Bank to stand ready to tighten monetary policy if inflation were expected to become persistently higher than in the euro area, or if sustained pressure on foreign currency reserves materialized.

Besides their own cash flow, domestic companies secure their financing mostly from bank loans due to the lack of corporate bonds and other securities as credit instruments.

Financial resources are almost entirely managed through North Macedonia’s banking system, consisting of 13 banks and a central bank, the National Bank of the Republic of North Macedonia (NBRNM). The number of banks dropped by one with the merger of Austrian-owned Sparkasse Bank with French-owned Ohridska Bank, completed in July 2021. The banking sector is highly concentrated, with three of the largest banks controlling 58.2 percent of the banking sector’s total assets of about $11.7 billion and collecting 71 percent of total household deposits. The largest commercial bank in the country had total assets of $2.8 billion, or 27.3 percent of the banking sector’s total assets. The seven smallest banks, which have individual market shares of less than 5 percent each, accounted for 12.7 percent of total banking sector assets. Foreign banks or branches are allowed to establish operations in the country on equal terms as domestic operators, subject to licensing and prudent supervision from the NBRNM. In 2021, foreign capital was present in 12 of North Macedonia’s 13 banks, and was dominant in 9 banks, controlling 71.1 percent of total banking sector assets, 81.8 percent of total loans, and 69.1 percent of total deposits.

According to the NBRNM, the banking sector’s non-performing loans at the end of Q3 of 2021 ( were 3.6 percent of total loans, increasing by 0.2 percentage points on an annual basis. Non-performing loans remained low despite the lifting of the NBRNM’s anti-COVID crisis measures in March 2021, which for almost a year allowed temporary postponement of loan installment payments. Total profits at the end of Q3 of 2021 reached $138 million, 22.1 percent higher than the same period in 2020.

Banks’ liquid assets at the end of Q3 of 2021 were 31.6 percent of total assets, 1.7 percentage points higher than in the same period in 2020, remaining comfortably high. In 2021, the NBRNM conducted different stress-test scenarios on the banking sector’s sensitivity to increased credit risk, liquidity shocks, and insolvency shocks, all of which showed the banking sector is healthy and resilient, with a capital adequacy ratio remaining above the legally required minimum of eight percent. The actual capital adequacy ratio of the banking sector at the end of Q3 of 2021 was 17.3 percent, 0.4 percentage points higher than the same period in 2020, with all banks maintaining a ratio above 15 percent.

There are no restrictions on a foreigner’s ability to establish a bank account. All commercial banks and the NBRNM have established and maintain correspondent banking relationships with foreign banks. The banking sector lost no correspondent banking relationships in the past three years, nor were there any indications that any current correspondent banking relationships were in jeopardy. There is no intention to implement or allow the implementation of blockchain technologies in banking transactions in North Macedonia. Alternative financial services do not exist in the economy. The transaction settlement mechanism is solely through the banking sector.

North Macedonia does not have a sovereign wealth fund.

North Macedonia generally has been free from political violence over the past decade, although interethnic relations have been strained at times. Public protests, demonstrations, and strikes occur sporadically, and often result in traffic jams, particularly near the center of Skopje.

Following 2016 parliamentary elections, an organized group of protestors leveraged ongoing protests and eventually stormed the parliament building on April 27, 2017, in reaction to the change of government and the election of Talat Xhaferi as Speaker of Parliament, the first ethnic Albanian to assume that post since the country’s independence. More than 100 people were injured, including several members of the government and seven MPs. On March 18, 2019, 16 individuals were convicted and given lengthy prison sentences for their involvement in the attack, including the former head of the Public Security Bureau (who had previously served as Minister of Interior) and former security officers. On July 26, 2021, in the so-called Parliament Violence Organizers’ case, the trial court issued roughly six-year prison sentences against the former VMRO-DPMNE Speaker of Parliament Trajko Veljanoski, former Minister of Education and Science Spiro Ristovski, former Minister of Transport and Communications Mile Janakieski, and former Administration for Security and Counterintelligence Director Vladimir Atanasovski, for organizing the attack on Parliament.  Prosecutor and defense appeals were pending before the appellate court as of March 8, 2022. The related cases against the former VMRO-DPMNE Prime Minister Nikola Gruevski and former counter-intelligence official Nikola Boshkoski, both fugitives, were ongoing.

There is neither widespread anti-American nor anti-Western sentiment in North Macedonia. A poll released February 2022 showed that 45.2 percent of all respondents saw the United States as the most influential foreign actor in country. There have been no incidents in recent years involving politically motivated damage to U.S. projects or installations. Violent crime against U.S. citizens is rare. Theft and other petty street crimes do occur, particularly in areas where tourists and foreigners congregate.

North Macedonia has been a member of NATO since 2020. The country has been an EU candidate country since December 2005 and, in March 2020, the General Affairs Council of the European Union decided to open accession negotiations with North Macedonia, which was endorsed by the European Council the following day. However, Bulgaria refused to approve North Macedonia’s EU negotiating framework in November 2020, effectively blocking the official launch of EU accession talks. In January 2022, the new governments of North Macedonia and Bulgaria re-launched efforts to resolve outstanding bilateral issues through intensified talks with a view to lifting Bulgaria’s veto.

Foreign investors, especially those in labor-intensive industries, find North Macedonia’s competitive labor costs and high number of English speakers attractive. The average net wage in December 2021 was MKD 29,943 ($534) per month. Тhe minimum net wage for April 2021 through March 2022 was set to MKD 15,194 ($270) per month. In January 2022, the government raised the minimum wage to 18,000 MKD ($321), effective April 2022.

In the fourth quarter of 2021, North Macedonia’s labor force consisted of 934,482 people, of which 795,276 (84.8 percent) were officially employed and 142,206 (15.2 percent) were officially unemployed. North Macedonia’s employed labor force is roughly 60.4 percent male and 39.6 percent female. The largest number of employees are engaged in manufacturing (20 percent), trade (15.9 percent), and agriculture (11 percent). The total unemployment rate for youth ages 15 to 24 years old is 30.9 percent. About 18 percent of the unemployed have a university education. Informal sectors of the economy, including agriculture, are estimated to account for 22 percent of employment.

According to the IMF and domestic experts, the informal economy is estimated at approximately 40 percent of the overall economy. In 2019 the government adopted an Action Plan for Combating the Informal Economy 2020-2021 which includes priorities such as improving, measuring and monitoring, raising public awareness of the negative impact to society, and strengthening the tax code.

Despite the relatively high unemployment rate, foreign investors report difficulties in recruiting and retaining workers. Positions requiring technical and specialized skills can be especially difficult to fill due to a mismatch between industry needs, the educational system, and graduates’ aspirations. Many well-trained professionals with highly marketable skills, such as IT specialists, outsource to foreign companies or choose to work outside the country. To address shortages of factory workers, the government encourages the dispersal of labor-intensive manufacturing investments to different parts of the country, and companies often bus in workers from other areas. The Operational Plan for Active Programs and Measures for Employment and Services in the Labor Market for 2021 defines active government measures, programs, and services for self-employment and employment to stimulate job creation. The Plan also provides subsidies for new and existing jobs, internships, specialized skills training, vocational training for unemployed persons, and re-qualification or retraining. The Labor Law and accompanying measures do not discriminate against gender, rase or ethnicity.

Relations between employees and employers are regulated by individual employment contracts, collective agreements, and labor legislation. The Law on Working Relations regulates all forms of employment relations between employees and employers to include retirement, lay-offs, and union operations. Severance and unemployment insurance are also covered by the same law. Most labor-related laws are in line with international labor standards and generally align with recommendations of the International Labor Organization (ILO). Labor laws apply to both domestic and foreign investments, including those in the free economic zones, and employees under each are equally protected.

The Employment Agency ( http://www.av.gov.mk/home.nspx ) provides professional, organizational, administrative and other services related to employment and unemployment insurance and provides support, assistance and services to all stakeholders in the labor market.

Employment of foreign citizens is regulated by the Law on Employment and Work of Foreigners: http://mtsp.gov.mk/content/pdf/zakoni/Zakon_vrabotuvanje_stranci_21715.pdf .

There is no limitation on the number of employed foreign nationals or the duration of their stay. Work permits are required for foreign nationals, and an employment contract must be signed upon hiring. The employment contract, which must be in writing and kept on the work premises, should address the following provisions: description of the employee’s duties, duration of the contract (finite or indefinite), effective start and termination dates, workplace location, hours of work, rest and vacation periods, qualifications and training, salary, and pay schedule. The law establishes a 40-hour work week with a minimum 24-hour rest period, paid vacation of 20 to 26 workdays, and sick leave benefits. Employees may not legally work more than an average of eight hours of overtime per week over a three-month period, or 190 hours per year. According to the collective agreement for the private sector between employers and unions, employees in the private sector have a right to overtime pay at 135 percent of their regular rate. In addition, the law entitles employees who work more than 150 hours of overtime per year to a bonus of one month’s salary. Although the government sets occupational safety and health standards for employers, those standards are not enforced in the informal sector.

The Law allows free associating in trade unions if workers agree to organize themselves in such a format. Trade unions are interest-based, legally autonomous labor organizations. Membership is voluntary, and activities are financed by membership dues. About 22 percent of legally employed workers are dues-paying union members. Although legally permitted, there are no unions in the factories operating in the free economic zones. Most unions, with exception of a few local branches, are generally not independent of the influence of government officials, political parties, and employers.

There are two main associations of trade unions: The Union of Trade Unions and the Confederation of Free Trade Unions. Each association is comprised of independent branch unions from the public and private sectors. Both associations, along with representatives from the Organization of Employers of North Macedonia and relevant government ministries, are members of the Economic – Social Council. The Council meets regularly to discuss issues of concern to both employers and employees, and reviews amendments to labor-related laws.

The rights of workers in industrial divisions are regulated by National Collective Bargaining Agreements, and there are two on the national level—one for the public sector and one for the private sector. Only about 25 percent of the labor force is covered by these agreements. National collective agreements in the private sector are negotiated between representative labor unions and representative employer associations. The national collective agreement for the public sector is negotiated between the Ministry of Labor and Social Policy and labor unions. Separate contracts are negotiated by union branches at the industry or company level. Collective bargaining agreements are most prevalent in the metal industry, private sector education, and court administration.

An out-of-court mechanism for labor dispute resolution was introduced in 2015 with ILO assistance. North Macedonia’s labor regulations comply with international labor standards and are in line with the ILO. In 2018, the government adopted a number of changes to the Law on Labor relations, most of which related to workers’ rights in procedures for termination of work contracts, severance pay, and apprenticeships. http://www.mtsp.gov.mk/content/pdf/zakoni/2018/ZRO%20izmeni%202018.pdf