Mongolia is a country which has come a long way turning around its economy in a short space of time, generating an average of 6-8 per cent growth of GDP over the past five years. Recent World Bank reports have announced Mongolia as one of the fastest growing and most stable economies in current turbulent times.

The Euromoney Mongolia-Asia Investment Forum will bring together top level government officials, world class economists, some of the biggest investors investing in Mongolia and multilateral companies as speakers to help you identify where the best investment opportunities are in Mongolia and how best to access these opportunities.

Some of the topics the conference will discuss include:

• Mongolia’s economic outlook in the face of a global economic turmoil
• Work in progress: political, economical and legal reforms: what changes need to be made?
• Financing Mongolia’s infrastructure needs
• Developments and reforms in the mining sector

Attendance is by invitation only. If you would like to be considered for a free place please e-mail rsvp@euromoneyasia.com.

In an effort to take some of the burden off Ulaanbaatar’s congested roads, the government plans to reduce auto imports. This year Ulaanbaatar had about 150,000 registered motor vehicles.
The growing need of vehicles in Mongolia will likely increase as the nation’s young population reaches driving age. According to US International Census data, there are 300,000 Mongolian boys and girls aged 15-19, making it the nations largest 5-year span demographic. Soon, these teenagers and young adults will be looking for affordable cars. For them, it is primarily a choice between used Chinese, Korean, or Japanese cars. Currently, Japanese cars dominate the market.

Current excise tax law imposes a fee ranging from US$500 to US$4,000 per vehicle depending on the automobile’s engine capacity and year of production, as well as its additional value-added tax, and import duty. Importing a 1997 Nissan Sunny with a 1,500 cc engine, for example, currently requires US$1,000 in taxes. Passing the new tax law would increase that fee to US$2,000 next month.

Small hatchback-type cars, which have become widely popular on Ulaanbaatar’s roads because of their small engine, require a smaller fee. According to Kh.Baatar, a used Japanese-car dealer, those increased taxes will go straight to consumers. “By mid-October, used car prices would increase by US$2,000 in average,” he said. “The price of Japanese used passenger car, which is now US$5,500, may become US$7,500 next month.”
According to Japan’s Customs Statistics Office, Mongolia has imported 14,322 used passenger cars from Japan in the first half of 2008, making the country one of the top five used car importers in the world after Russia, Chile, the United Arabian Emirates, and New Zealand.

Recently gathered statistics, which do not include data on trucks or commercial vehicles, indicate the total market value of used cars in Mongolia is approximately JPY4.3 trillion, JPY303,000 per unit in average. In 2004, Mongolia imported 6,000 used cars from Japan only. Just last year, when Mongolia placed 11th out of all country’s importing used Japanese passenger vehicles, that number increased to 17,000 units. This year some predict that figure will reach 30,000 units.

“Mongolia sounds like a very interesting place. We are very interested in developing our sales there. I hear that bigger cars will become more expensive. Smaller capacity cars may not be so affected,” said Simon Doherty, a sales and marketing manager of Japan Partner Company.

“Mongolia is a growing market. Japanese cars are a good value because they have a very strict inspection system here and the cars are in good condition. The roads here are very good so the cars are in good condition and because the roads are busy, the cars have low mileage,” Doherty said.
Delegates from the Japan Used Motor Vehicle Exporters Association (JUMVEA) attended a business forum held on September 22 in Ulaanbaatar to talk about Mongolia’s growing market for used cars. “The used car sales market of Mongolia has attracted member companies to do business with both Mongolian traders and individual buyers,” said Hiroshi Sato, Chairman of JUMVEA.

On September 12, the nation’s two major political parties, Mongolian People’s Revolutionary Party and Democratic Party, signed an agreement to form the coalition government until 2012. According to the agreement, the Government will support the importation of hybrid and low-emission engine vehicles in an effort to reduce Ulaanbaatar’s air pollution.

Go to Auto Trading Business Blog of Mongolia at http://autotrading.bblog.mn (in Mongolian)

The Mongolia Investment Forum 2008
10-11 September 2008
State Palace, Ulaanbaatar

Following on from the huge success of the previous two years, Euromoney is proud to host the 3rd Annual Mongolia Investment Forum, which will take place on 10-11 September 2008 in Ulaanbaatar.

With a growth rate of 8.7% GDP in 2007, Mongolia has witnessed a remarkably strong growth rate against a backdrop of a gloomy slowing global economy. The Forum will bring together over 500 participants including decision makers, international investors, corporate financiers and key market players to help identify where the best investment opportunities are in Mongolia

Supported by the Mongolian government, Euromoney’s Mongolia Forum is regarded as the most prestigious forum in the country.

Some of the topics to be discussed at this year’s conference include:

- What reforms need to be implemented by the Mongolian government to ensure sustainable levels of economic growth?
- To what extent do the bond markets provide an efficient means for building a healthy financial system?
- What further banking reforms are required to increase financing opportunities?
- What are the key projects in the infrastructure sector to look out for in the year ahead?
- How will legislation, tariff reforms and restructuring of the energy sector improve energy distribution?
- How are mining companies responding to China’s increasing demand for minerals?
- To what extent will environmental concerns impact the development of the industry?

For more information, please contact Alexander Pang on tel: +852 2842 6991 or fax: +852 2842 7067 or email: alexander.pang@euromoneyasia.com.

Lead Sponsors

Co-Sponsors

Exhibitors

Supporting Government Organisation

Supporting Organisations

Media Partner

TARIFF SCHEDULE FOR IMPORTED GOODS

All merchandise imported is subject to a value-added tax (VAT) of 13%, and a 5% import duty. Import duty does not apply to equipment and tools imported to Mongolia for hospitals.

Vehicles are subject to an additional excise tax (in addition to import duty and VAT):

Customs Declaration Fees:

• US$5 for basic declaration;
• US$8 for basic intensive and simplified customs declaration;
• US$5 for every additional declaration.
• Payment for the charged services are to be made in MNT at the US Dollar rate of the day.

Other Costs:

• Annual Vehicle Tax
  • 2,000MNT to 100,000MNT depending on engine size and capacity.
  • Annually, must be returned by Feb 15th of next year.

REQUIRED DOCUMENTS

DOCUMENTS REQUIRED BY MONGOLIAN CUSTOMS TO IMPORT GOODS
The following documents are required by Mongolian Customs:

• Contract for import
• License for import
• Cargo Manifest
• Bill of Lading
• Transportation Invoice (railway bill, road shipment bill, airfreight bill, and/or combined transportation bill)
• Merchandise Customs Declaration
• Declaration of Merchandise Value
• Proof of Insurance
• Commercial Invoice
• Payment Receipt
• Status on quality control of goods
• Packing List
• Certificate of Origin
• License from responsible agency
• Receipts of payment for related duties and taxes

WHAT MUST BE DONE

CUSTOMS CLEARING PROCEDURES TO IMPORT GOODS VIA RAILROAD

Goods are cleared based on a Customs Merchandise Declaration, which is filled out by the importer/exporter in Mongolian. The importer/exporter can use the service of broker companies such as MONGOLTRANS, TUUSHIN and IFFC, to prepare the Merchandise Customs Declaration.

The general steps to clear imported goods are shown below and should be followed in sequence:

1. 1. Importer/ Exporter (I/E) obtains shipment documents from the Transport Dispatcher at the point of arrival of goods (UB Train Station, Toolkit Station or “Gurvaljin” container yard, etc.).
2. An inspector at the Ulaanbaatar Railroad Customs makes sure that the packet of papers is complete and reviews shipment documents.
3. I/E goes to one of the broker companies (MONGOLTRANS, TUUSHIN and IFFC) to prepare a Merchandise Customs Declaration.
4. Payment of taxes and fees to the bank (located in the same building as the Ulaanbaatar Railroad Customs).
5. I/E brings all collected documents to a goods clearance officer at the UB Railroad Customs and obtains a number for the Merchandise Customs Declaration.
6. Importer/Exporter and Customs Inspector go to the container yard to inspect the goods.
7. Goods are inspected and released.

Source: http://japan-used-car-exporting.info All tax informations here should be checked for any updates.

• Prospects for 2005-2006: Surging to 10% in 2004, growth was led by higher commodity prices for gold, copper, etc. spurred by demand from Mongolia’s chief trading partner, China. Government estimates predict 8% growth in 2005. However, 8% may be too optimistic as the impact of the end of the Multi-Fiber Agreement on Mongolia’s 2^nd biggest export earner—apparel—will lower overall growth. Economic tightening coupled with a high rate of public indebtedness promise to make 2005 and 2006 leaner years for Mongolia.

• Political Situation: Mongolia has held eight presidential and parliamentary elections in the past 12 years, during which power changed political hands peacefully. In 2004, the Democratic opposition won 34 seats, leaving the former communists (MPRP) with 36, with 3 seats going to independents and two still in dispute (seven months after the election). There was some initial worry that the even split between rivals would render Mongolia ungovernable; however both parties formed a Grand Coalition government that has held together and governed so far. Changes have yet to disrupt the local business environment or the administrative apparatus.

• Mongolian-U.S. Relations: Good Mongolian-US relations have developed rapidly over the last 15 years to include humanitarian and technical assistance, military to military relations, business development, and a host of smaller programs. Mongolia calls the US its “third neighbor” to balance relations with China and Russia. Mongolia has contributed peacekeeping forces to both Iraq and Afghanistan. Over the past decade, we record no incidents of anti-American sentiment or politically motivated damage to American projects or installations.

• Russo-Sino-Mongolian Relations: Relations with Russia and China are critical because Mongolia depends on both for power, petroleum and transportation. Sour relations among these neighbors invariably affects Mongolia’s business environment. When the Dalai Lama visited in spring 2003, the Chinese temporarily halted all commercial rail shipments for “technical reasons.”

Market Challenges:

• Weak rule of law
• Corruption in the bureaucracy
• Ignorance of best commercial practices in the government and private sectors
• Lack of transparency in regulatory and legislative processes
• Some abuse of phyto-sanitary and licensing regimes in both the pharmaceutical and food production industries to protect existing state and private interests

Market Opportunities:

• Mining: Over 6000 deposits of approximately 80 minerals exist in Mongolia, among them coal, copper, uranium, iron ore, oil, tungsten, molybdenum and phosphate. Of particular note are Mongolia’s excellent metallurgic coal deposits. Currently, 160 are being exploited. Mongolia’s location next to resource needy Chinese provides a ready market for Mongolia’s mineral wealth. As with all industrial sectors in Mongolia, the developing infrastructure is a concern.

• Construction: The population of the Mongolian capital Ulaanbaatar has more than doubled in 7 years from 450,000 to over a million. Quality commercial and residential stock is in short supply and demand shows no signs of slacking. By 2010, Ulaanbaatar’s population is expected to grow by over 60%, bringing a demand of 700,000 additional family units as well increased need for expanding municipal facilities.
• Tourism: Mongolia is an attractive venue for adventure and cultural tourism. In 2004, the government estimates that over 200,000 visitors saw famed fossil discoveries, a legendary history, religious sites, and a vibrant, living nomad culture. However, long, cold winters limit the length of the tourist season. Inadequate tourism infrastructure requires upgrading.
• Meat Processing: Mongolia has vast herds of sheep and cattle, and hungry neighbors. Satisfying demand in Russia, China, Korea, and Japan offers an opportunity to American ranchers and meat processing and marketing technologies. However quotas and restrictive health regulations inhibit the meat trade among Mongolian and her neighbors. Existing Mongolian processing facilities require upgrading to increase production capacity, quality, and sanitation. For this and for other opportunities to export American agricultural products and technologies into Mongolia, contact the USDA supported Mongolia-based AGPROMO at agpromo@magicnet.mn.

Market Entry Strategies:

• Personal Relations are key: Mongolians like to deal with old friends. Investors must establish and maintain close relationships with their Mongolian counterparts and relevant government agencies. Family and school ties are still very strong in Mongolia. Learn who is related to whom when establishing business connections.

• Use of Agents: Find a Mongolian advisor to guide through the ins and outs of local customs and business practices.

• Structure of ownership: The Foreign Investment Law of Mongolia does not require foreign investors to have a Mongolian partner. All investment may be 100% foreign-owned and operated (with the exception of land ownership).

• Product Pricing: Sensitive to price, Mongolian consumers will choose the less expensive product–unless they can be swayed by after-sales service or clear product superiority. They perceive American- branded goods as superior to all others, and will more often than not pay a premium to avoid purchasing lower cost, lower quality items

Imported cars are subject to customs tax and excise tax. The government imposes excise tax on imported cars depending on their cylinder capacity and year of production.

Source: Excise Tax Law
Although the world’s big companies, Toyota, Hyundai, Nissan, Suzuki, Ford, Mercedes Benz, and BMW, have authorized sales agents in Mongolia, people still prefer driving cheaper and used cars.

“Many Japanese used car exporter companies expressed their interests in cooperating on sales in the Mongolian market, which is rapidly growing,” said a businessman of an auto trading company.
“But our government lacks attention and checks on the imported cars whether they are stolen cars. The government only cares about collecting taxes. We [importers] don’t declare the price of vehicles truly because the customs tax is high.”

Japan exports used vehicles to over 180 countries; the largest markets are Russia and New Zealand, according to Japan Used Motor Vehicle Exporters Association. “In the future, further increases of Japanese used export are expected, especially to developing countries,” noted Hiroshi Sata, chairman of the association.

“We sell used Toyota Mark II for US$5,000, Land Cruiser US$25,000, Mitsubishi Pajero for US$9,000, and Toyota Raum for US$4,500. Buyers like Japanese ones because of safety, but the spare parts are more expensive than Korean ones,” said a retailer of Dako Auto, one of the largest auto vehicle importing companies in Mongolia.

In an effort to promote automobile manufacturing in the country, the government committed to not charge any excise tax on exporting cars, which were manufactured in Mongolia, by the Excise Tax Law of Mongolia.
Up till today, this sector is still vacant, awaiting potential investors.
“We have no record of this type of proposal submission. If someone foreign investor proposes, we will support it,” said an officer of the Mongolian Chamber of Commerce and Industry.

Source: www.newswire.mn. All tax information and prices here should be checked for any updates.

The ever need of vehicles growing in Mongolia will be dramatically rising as the baby boom generation are starting become adults. In fact, according to US International Census data, the largest 5-year span group in Mongolia is 15-19 at about 300 thousands boys and girls.

Soon, these teenagers and young adults will be looking for affordable cars. For them, it is a choice between used Chinese, Korean, or Japanese cars. Currently, the market is very open and growing rapidly and is good time for Japanese used vehicle exporters to enter the market.

• No initiatives from policy makers to incorporate business interest and comments in the process of policy formulation, elaboration of policy documents;
• Methodology for determining of net weight and total weight;
• Information database developed by State Customs Administration used for determination of customs value
• Poor capacity of laboratory facilities for export and import goods;
• Non acceptance by trading partners of some documents required by Customs for customs necessary documents;

Bribery, corruption

• According to Red Tape Perception Index developed by MNCCI, State Customs Administration ranked at 2 place, implying poor performance.
• Financial courses
• Lack of long term investment capital in domestic financial market;
• Lack of foreign trade documentation services provided by banks and financial institutions

Lack information and knowledge

• Information source and database of foreign and domestic market;
• Standards and technical requirement of goods to supply in foreign markets,information source of advanced technology;
• Lack of trainings for foreign trade managers;
• Lack of information in terms of foreign and international aid programs for Mongolia.

Chapter One
General Provisions
Article 1. Purpose of the law
The purpose of this law shall be to encourage foreign investment, to protect the rights and
property of foreign investors in Mongolia, and to regulate matters relating to the foreign
investment. /This paragraph was rephrased by the Law of January 3, 2002/
Article 2. Legislation on foreign investment
1. The legislation on foreign investment is comprised of the Constitution of Mongolia, this
law and other relevant legislation which is consistent with those laws.
2. If an international treaty to which Mongolia is a party is inconsistent with this law, then the
provisions of the international treaty shall prevail.
Article 3. Definitions
1. “Foreign investment” means every kind of tangible and intangible property which is invested
in Mongolia by a foreign investor for the purpose of establishing a business entity with
foreign investment within the territory of Mongolia or for the purpose of jointly operating
with an existing business entity of Mongolia.
2. “Foreign investor” means a foreign legal person or individual (a foreign citizen or stateless
person not residing permanently in Mongolia or a citizen of Mongolia permanently residing
abroad) who invests in Mongolia.
3. “Mongolian investor” means a Mongolian legal person or individual (a citizen of Mongolia,
immigrant or stateless person permanently residing in Mongolia) who invests.
4. “Investment agreement” is an agreement and/or a contract on concession, product sharing,
marketing, management, financial leasing and franchise investment concluded by foreign
investors for implementation of concrete project without having to establish a legal entity.
/This paragraph was added by the Law of January 3, 2002/
5. “One stop service” is a complex service including to receive applications and other relevant
materials on establishing a business entity with foreign investment or a branch of foreign
legal entity, issuing certificate, license and special permission in order to start a business
activity, making a conclusion, appraisal at one place and to organize activities to solve of
these issues by relevant authorities, and to provide investors with necessary information
as well as consultancy service.” /This paragraph was added by the Law of January 3,
2002/
Article 4. Areas for foreign investment
1. Foreign investment may take place in all areas of production and all services other than
those prohibited by the laws of Mongolia.
2. Foreign investment may take place in all parts of the territory of Mongolia where the
types of production to be undertaken or services to be provided are not prohibited by the
laws of Mongolia.
Article 5. Types of foreign investment
A foreign investor may invest in the following:
1) freely convertible currencies and reinvestment of togrogs yielded by investments;
2) moveable and immovable property and property rights;
3) intellectual and industrial property rights.
Article 6. Forms of foreign investment
Foreign investment shall be made in the following ways:
1) by establishing wholly foreign-owned business entities or local branches or subsidiaries
of foreign enterprises;
2) by establishing business entities jointly with Mongolian investors;
3) a foreign investor makes a direct investment by buying stocks, shares and other securities
of the Mongolian business entities under the legislation of Mongolia; /This paragraph
was rephrased by the Law of January 3, 2002/
4) by acquiring rights by law, concession and product sharing contract to exploit and process
natural resources. /This paragraph was amended by the Law of January 3, 2002/
5) Conclude a contract for marketing and management,
6) Make an investment through financial leasing and franchise. /The paragraphs 5, 6 were
added by the Law of January 3, 2002/
Article 7. Purchase of shares or other securities
Foreign investors may purchase shares or other securities in any business entity which is
operating within the territory of Mongolia in accordance with the laws of Mongolia.
Chapter Two
Protection of Foreign Investment
Article 8. Legal guarantees for foreign investment
1. Foreign investment within the territory of Mongolia shall enjoy the legal protection
guaranteed by the Constitution, this law and other legislation which is consistent with
those laws and as guaranteed by the international treaties to which Mongolia is a party.
2. Foreign investment within the territory of Mongolia shall not be unlawfully expropriated. /
The word “nationalized” was cancelled from this paragraph by the Law of January 3,
2002/
3. Investments of foreign investors may be expropriated only for public purposes or interests
and only in accordance with due process of law on a non-discriminatory basis and on
payment of full compensation.
4. Unless provided otherwise in any international treaties to which Mongolia is a party, the
amount of compensation shall be determined by the value of the expropriated assets at
the time of expropriation or public notice of expropriation. Such compensation shall be
paid without delay.
5. Losses suffered by foreign investors due to a state of emergency or war in Mongolia shall
be treated equally with losses suffered by Mongolian investors.
Article 9. Treatment of foreign investors
Mongolia shall accord to foreign investors no less favourable treatment in respect of the
possession, use, and disposal of their investments than that accorded Mongolian investors.
Article 10. Rights and obligations of foreign investors
1. Foreign investors shall enjoy the following rights:
1) to possess, use, and dispose of their property including the repatriation of investments
which contributed to the equity of a business entity with foreign investment; This
subparagraph was amended by the Law of January 3, 2002/
2) to manage or to participate in managing a business entity with foreign investment;
3) to transfer their rights and obligations to other persons in accordance with the law;
4) Remit the following income, profit and payments to abroad without any barriers:
(a) allotted stockholders income and share dividends;
(b) allotted income after property and securities’ sale, transfer of property right to
other party, completion of an investment agreement and liquidation of an entity;
(c) principal and interest of debt or other identical payments;
(d) compensation payment for confiscated property;
(e) other income gained under the legislation of Mongolia. /This subparagraph was reedited
by the Law of January 3, 2002/
5) any other rights conferred by law.
2. Foreign investors shall have the following obligations:
1) to observe the laws of Mongolia;
2) follow commitments stated in the Agreement and Statute of the business entity
with foreign investment, branch of a foreign legal entity and in Investment
agreement; /This subparagraph was re-edited by the Law of January 3, 2002/
3) to implement measures to ensure the protection and restoration of the natural
environment;
4) to respect the customs and traditions of the people of Mongolia.
Chapter Three
Activities of a foreign entity and a branch of a foreign legal entity
Article 11. Business entities with foreign investment
1. Business entity with foreign investment is a entity, established in accordance
with the
legislation of Mongolia, of which not less than 25 percent of the equity is
constituted
with an investment of a foreign investor. /This paragraph was re-edited by the
Law of
January 3, 2002/
2. A business entity with foreign investment shall become a legal person of Mongolia from
the date of its registration and shall conduct its operations in accordance with the laws of
Mongolia.
/The article 12 was annulled by the Law of January 3, 2002/
Article 13. Valuation of tangible and intangible property
1. Investors of a business entity with foreign investment shall negotiate on evaluation
of the property and intellectually valuable items invested from them to form the
equity of the entity following the same principle sued for convertible currency and
tugrug (local currency). If investor considers it as necessary, the evaluation can be
done by either Mongolian or foreign specialized company licensed to conduct asset
evaluation. /This paragraph was re-edited by the Law of January 3, 2002/
2. Conversion of togrogs into freely convertible currency shall be done at the rate of exchange
set by the Bank of Mongolia and applicable at the time of valuation.
Article 14. Plenary rights of the state administrative body in charge of foreign
investment
1. The State Central administrative body in charge of foreign investment shall have the following
plenary rights with respect to foreign investment:
1) to formulate foreign investment policy in accordance with the Government general
action plan on development country’s economy and society, and monitor its
implementation;
2) to ensure and supervise the implementation of legislation regard to foreign investment;
3) to work out a proposal on leading sectors and directions of foreign investment.
2. The State administrative body in charge of foreign investment shall have the following
plenary
rights:
(1)to implement policies and legislation with respect to foreign investment;
(2)to research possibilities to increase foreign investment, to organize investment
promotional activities, to provide investors with relevant information, and to involve
foreign investors to project tender;
(3) to render foreign investors with complex “One-stop service”;
(4) to prepare information on foreign investment statistics;
(5) to approve and/or disapprove establishment of a business entity with foreign
investment or a branch of a foreign legal entity;
(6) to terminate, temporarily or completely, the activities of a business entity with foreign
investment or a branch of a foreign legal entity;
(7) other rights specified in legislation.
3. The State administrative body in charge of foreign investment issue shall render some of
the
services specified in the provision 3 of section 2 of this Article on charge base. /This article
was
re-edited by the Law of January 3, 2002/
Article 15. Registration of Business entity with foreign investment, branch of a foreign
legal entity and Investment agreement
1. A business entity with foreign investment and a branch of a foreign legal entity that
received a certificate from the State administrative body in charge of foreign investment
shall be registered by the National General Taxation Office with state registration.
2. Any amendment to the Agreement or Statute of a business entity with foreign
investment and a branch of a foreign legal entity shall be registered with the National
General Taxation Office as approved by the State administrative body in charge of foreign
investment.
3. The State administrative body in charge of foreign investment will register an
Investment agreement based on an application to register an investment agreement and
a notarized copy of the investment agreement, and will issue a certificate within 10 business
days after the receipt of the application. /This article was re-edited by the Law of January
3, 2002/
Article 16. Terminating a foreign invested entity and branch of a foreign legal
entity
1. The operations of business entities with foreign investment and a branch of a foreign
legal entity may be suspended or terminated on the grounds provided in the laws of
Mongolia. /This paragraph was amended by the Law of January 3, 2002/
2. /This paragraph was annulled by the Law of November 30, 2001//
Article 17. Liquidating a foreign invested entity and a branch of a foreign legal
entity
1. If a business entity with foreign investment or a branch of a foreign legal entity resolve to
suspend or terminate its operations it shall submit that resolution to the State Central
Administrative body in charge of foreign investment and to the General Department of
National Taxation within 14 days of its adoption. /This paragraph was rephrased by the
Law of November 30, 2001 and was amended by the Law of January 3, 2002/
2. An investment agreement shall be removed from the registration and a certificate of
approval shall be revoked when duration of the investment agreement expires and/or the
investor annuals the agreement or violates laws of Mongolia. /This paragraph was added
by the Law of January 3, 2002/
3. /This paragraph was annulled by the Law of November 30, 2001/
4. Upon receiving the notice referred to in paragraph 1 of this article, the General Department
of National Taxation shall remove the business entity with foreign investment or a branch
of a foreign legal entity from the State register and publish that fact. /This paragraph was
amended by the Laws of November 30, 2001 and January 3, 2002/
5. If the operations of the business entity with foreign investment or a branch of a foreign
legal entity cease in preparation for dissolution, then the foreign investor concerned shall
be entitled to transfer the returns referred to in paragraph 4 of article 10 of this law upon
completion of the final accounts of the business entity concerned. /This paragraph was
amended by the Law of January 3, 2002/
Article 18. Taxation
1. Business entities with foreign investment and a branch of a foreign legal entity shall be
liable for tax under the tax laws of Mongolia.
2. Tax incentives and/or exemptions to a business entity with foreign investment, branch of
a
foreign legal entity and an implementing entity of an investment agreement will be subject
to
Income tax law of Business entities and organizations1, Customs tariff law2, Value added
tax
law3, Excise tax law4 and Land law5 of Mongolia. /This paragraph was added by the Law
of
January 3, 2002/
Article 19. Stability Agreement
1. In the event of a request by the investor intending to undertake an investment project
of not less than US$ 2 million or equivalent amount in Mongolian national tugrigs in
Mongolia, the Cabinet Member responsible for taxation policy issues as permitted by the
Government of Mongolia may sign an agreement with that investor on a stability as a
legal guarantee for a stable environment to conduct business activities.
2. A sample of a stability agreement will be approved by the Government of Mongolia.
This agreement sample shall contain provisions to ensure stable tax conditions during
certain period and state objectives and amount of the investment, its implementation
period and rationale to revoke the agreement.
3. If a start-up investment amount of the project to be implemented by a foreign investor
is US$ 2.0-10.0 million or equivalent amount of Mongolian national tugrigs a stability
agreement can be signed for I0 years and if the amount is over US$ 10.0 million or its
equivalent in Mongolian national tugrigs for 15 years.
4. In the event of a termination of activities by sole initiative of an investor before the
period stated in the stability agreement when a business entity with foreign investment
and/or a branch of a foreign legal entity was not bankrupted in accordance with the laws
of Mongolia or their activities were not stopped by the respective authorities or the parties
did not terminate the contract upon their mutual agreement the amount of tax discounts
and/or exemptions awarded to that investor shall be compensated by the investor. /This
article was added by the Law of January 3, 2002/
Article 20. Conclusion of a Stability Agreement
1. An investor willing to conclude a Stability Agreement shall submit its application and
draft Stability Agreement to the State central administrative body in charge of taxation
policy issues.
2. The Government member in charge of taxation policy issues shall examine the
application and the draft agreement within 14 business days following the receipt and
shall conclude the Stability Agreement with the applicant, if no clarifications are required.
If additional clarifications are required, the applicant shall be notified of it within 7 business
days.
3. Relevant organizations shall be notified of such Stability Agreement. /This article was
added by the Law of January 3, 2002/
Article 21. Land utilization by a foreign invested entity and a branch of a foreign
legal entity
1. Business entities with foreign investment and branch of a foreign legal entity may acquire
the right to use land by way of lease and subject to the conditions and procedures set out
in the legislation on land of Mongolia. /This paragraph was amended by the Law of January
3, 2002/
2. Any lease shall include the terms and duration of use, measures required to ensure the
protection and restoration of the environment to its natural state, the amount of annual
ground rent, and the liabilities of the lesser and lessee.
3. A lease for the business entities with foreign investment and branch of a foreign legal
entity shall be granted in accordance with the procedures below: /This paragraph was
amended by the Law of January 3, 2002/
1) a lease for the use of State-owned land by a wholly foreign-owned business entity
shall be entered into by the Mongolian landowner and the foreign investor and shall
be authorized by the relevant local Hural of Representatives and its Presidium;
2) a lease for the use of State-owned land by a business entity with foreign investment
in which a Mongolian investor is a participant shall be entered into by the Mongolian
landowner and the head of the business entity concerned and shall be authorized by
the relevant local Hural of Representatives and its Presidium;
3) a lease for the use of private freehold land by a business entity with foreign investment
in which a Mongolian investor is a participant shall be entered into by the Mongolian
landowner and the head of the business entity with foreign investment and shall be
authorized by the competent State authorities.
4. The obligations arising from the leases referred to in sub-paragraphs 2 and 3 of paragraph
3 of this article which are entered into by the head of a business entity with foreign
investment shall be borne by the Mongolian and the foreign investor in proportion to their
contributions in equity of the business entity. /This paragraph was amended by the Law
of January 3, 2002/
5. The duration of any lease shall be determined by the duration of the operations of the
business entity with foreign investment and branch of a foreign legal entity. The initial
term of a lease shall not exceed 60 years. The lease may be extended once for a period
of up to 40 years on the same conditions as the original lease. /This paragraph was
amended by the Law of January 3, 2002/
6. If a business entity with foreign investment and branch of a foreign legal entity are dissolved
before the expiry of the lease, then the lease shall terminate at the same time. /This
paragraph was amended by the Law of January 3, 2002/
7. Leasehold land may be substituted or taken back for a specific State purpose. Decisions
on that matter may be made only by the Government of Mongolia. Compensation for
losses suffered by foreign investors as a result of such action shall be paid without delay.
The amount of compensation shall be determined on the basis of value at the time of
such substitution or transfer.
8. If leasehold land is used to the detriment of the public health, natural environment or the
interests of national security, then the lease shall be cancelled.
Article 22. Finances, loans, accounts and inspections
1. Business entities with foreign investment and branch of a foreign legal entity shall conduct
their activities in respect of finances, loans, accounts, and foreign currency operations in
accordance with the laws of Mongolia.
2. Business entities with foreign investment and a branch of a foreign legal entity shall keep
account books and balance sheets in accordance with the laws of Mongolia.
3. The accounts and financial and business transactions of business entities with foreign
investment and a branch of a foreign legal entity shall be investigated by State financial
inspectors or by chartered auditors in accordance with the laws of Mongolia. Foreign
auditing organisations may be invited if required. /This paragraph was amended by the
Law of January 3, 2002/
Article 23. Insurance
Business entities with foreign investment and branch of a foreign legal entity may be insured
by Mongolian insurance agencies in accordance with the laws of Mongolia. /This article was
amended by the Law of January 3, 2002/
Article 24. Labour and social security relations
1. Business entities with foreign investment and a branch of a foreign legal entity shall
primarily employ citizens of Mongolia. Foreign citizens may be hired for jobs requiring
special or high qualifications. Issues on importing labour forces and experts shall be
regulated by the relevant legislation of Mongolia. /This paragraph was amended by the
Law of January 3, 2002/
2. Matters of labour and social security relating to citizens of Mongolia who are employed
by business entities with foreign investment and a branch of a foreign legal entity shall be
governed by the laws of Mongolia on labour and social security. /This paragraph was
amended by the Law of January 3, 2002/
3. Foreign citizens who are employed by business entities with foreign investment and a
branch of a foreign legal entity shall be liable for income tax in accordance with the laws
of Mongolia and may transfer their income abroad after paying tax. /This paragraph was
amended by the Law of January 3, 2002/
Chapter Four
Miscellaneous
Article 25. Settlement of disputes
Disputes between foreign investors and Mongolian investors as well as between foreign
investors and Mongolian legal or natural persons on the matters relating to foreign investment
and the operations of the business entities with foreign investment and a branch of a foreign
legal entity, shall be resolved in the Courts of Mongolia unless provided otherwise by
international treaties to which Mongolia is a party or by any contract between the parties to
the dispute. /This paragraph was amended by the Law of January 3, 2002/
Article 26. Coming into force of the law
This law shall come into force on 1 July 1993.
Speaker of the State Ih Hural of Mongolia
N.Bagabandi
Secretary General of the Secretariat of the State Ih Hural
N.Rinchindorj
(Footnotes)
1
Bulletin “State Information”
¹ 1
, 1993
2
Bulletin “State Information”
¹ 9
, 1996
3
Bulletin “State Information”
¹ 2
, 1998
4
Bulletin “State Information”
¹ 2
, 1993
5
Bulletin “State Information”
¹ 2
, 1995

Attachment of the Government
Resolution number 247 of 1991

1. The foreign companies, banks and other commercial organizations (hereinafter referred to as
“foreign organizations”) may establish their representative office in accordance with this
regulation in Mongolia.
2. The objectives of the establishment of foreign representative office are:
2.1. Cooperation between the business entities of Mongolia and foreign organization in the field
of trade and economy, currencies and finance, science and technique, transport and tourism,
and other; information exchange and introduction of advanced technique and technology;
2.2. Rendering assistance in encouragement and promotion of foreign investment;
2.3. To organize efficiently the conclusion and fulfillment of contracts and other transactions.
3. The Foreign Investment and Foreign Trade Agency shall grant the establishment of foreign
representative office unless otherwise stipulated by the law of Mongolia.
Permission for the establishment of foreign representative office shall be granted for 3 years and
its duration may be extended for 2 years when a foreign organization considers that its
obligations are not fulfilled completely.
4. The foreign organization wishing to establish its representative office shall submit the
following documents to the Foreign Investment and Foreign Trade Agency:
4.1. Application letter (shall mention – the purpose of the representative office establishment, its
business contracts and scope of cooperation with the Mongolian organization, the intention of
further development and other things shall be stated);
4.2. Introduction of the foreign organization and its Statutes;
4.3. Bank confirmation – from investor’s national bank;
4.4. Copy of the National State Registration Certificate;
4.5. Copy of permission of the representative office establishment abroad – If that kind of
permission from relevant authorities is required according to their national laws. /shall be
guaranteed by notary/;
4.6. Statutes of the representative office (shall mention – its organization and structure, main
activities, stuff number and their rights and responsibilities);
5. The Certificate of foreign representative office shall be granted within 10 working days upon
the receiving foreign organization application letter.
6. The Certificate of foreign representative office must indicate the address, purpose, conditions
and the term of activities. The Certificate date of issuance is considered its establishment date.
If the representative office doesn’t function within 6 months from the date of Certificate issuance,
the Certificate will be considered invalid.
7. Several foreign organizations may have joint office.
8. Representative office must act on behalf of its own organization within the framework of the
Mongolian legislation. Representative office is prohibited to carry out any commercial activities
for the profit earning purpose within the territory of Mongolia.
9. The Authority, which granted the Certificate of foreign representative office, shall render
assistance in creation of conditions required for the normal operations of representative office.
10. The representative office shall possess an office and a flat in the territory of Mongolia on the
basis of contracts concluded with the relevant organizations and individuals and be supplied
with the domestic services.
11. The representative office may employ Mongolian citizens according to the Mongolian
legislation on the basis of lobar contract.
12. The head of the representative office shall act within the powers given by the foreign
organization.
The head of the representative office shall inform the Authority that granted the Certificate of its
activities, staff numbers and changes.
13. Representative office is obliged to provide with information concerning its activities to the
Mongolian competent authorities upon their request.
14. The representative office shall be dissolved in the following cases:
14.1. Certificate duration is expired
14.2. Termination of the foreign organization which established its representative office in
Mongolia.
14.3. Invalidation of agreement and contract which served a basis for the establishment of
representative office.
14.4. Violation of the requirements for the establishment of representative office and its
operations contradicting the legislation of Mongolia.
14.5. A decision by the foreign organization on dissolution of its representative office.
15. The registration fee of 700$ or other equivalent hard currency is to be paid for the granting
the Certificate of Foreign Representative Office. The fee of 300$ or other equivalent hard
currency is to be paid for the extension of permission.

/ Unofficial translation /