Category Archives: Corporate Commercial

Obtaining an Apostille in Mongolia



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Recently we have been asked by one of our clients about an apostille service and how to get documents to be apostilled in Mongolia.

An apostille is a specialized certificate used to verify original public document’s legitimacy and authentication so that they can be accepted in one of the other nations who are signatories to the 1961 Hague Convention Treaty also known as the Hague Apostille Convention.

Since December 31, 2008, Mongolia has been part of the 1961 Hague Apostille Convention. It allows that any official document destined for Mongolia requires an apostille from the Secretary of State. As a result, documents will be valid in 121 countries that are member of the Hague Apostille Convention without requiring any further confirmation.

Apostilles authenticate the seals, stamp, the signatures and the capacity of signer on public documents such as birth certificates, court decisions or any other documents issued by government agencies, the administrative body, court, prosecutor or educational organizations at all level. The documents will be issued by the consulate of Ministry of Foreign Affairs.

Things to consider for apostille application:

  1. All seals and signatures must be originals. Copies are not acceptable unless they are true certified copies from a notary.
  2. Notarize each document. The signature of document and signature of the notary who certified the original copy of the document should be clearly visible.
  3. All documents that handed over with application must be translated with certified translator, and notarized as a true translation.

Is Sports Betting Legal in Mongolia?



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Our Mongolian lawyers have recently received an inquiry from a prospective client on whether over sport betting activities is legal in Mongolia.

In Mongolia, the establishment and operation of a casino has been prohibited since 1999. Under the Criminal Act, operation of gambling activities is considered a crime while participating in the act of gambling is also a violation of the law.  The question then is whether the sports wagering is type of the gambling category.

 According to the legislations above, any business which involves gambling via dice, playing cards or other objects to make a profits, involving an unpredictable outcome and risk is a crime, including where such activities are conducted via information technology and social media. If someone participates in that activity, his/ her action is considered a breach of the Infringement Law.

According to this definition, sports betting is not considered gambling under the Mongolian legislation. Sports betting is an activity to predict the outcome by betting on real sports games like basketball soccer and tennis. It is possible for sport betters to estimate the probability of results based on their skills, knowledge and information. In other words, there is more control and predictability than the outcome of a game of chance, which differentiates sports betting from gambling.  

Companies in Mongolia are able to obtain a license to operate a lottery or betting games. This shows that Mongolia law sets an important distinction between pure gambling verses betting, reflected in the different regulations.

Helping Foreign Entrepreneurs Understand Today’s Mongolian Business Environment



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The past couple days we have been assisting clients who have interest in entering the Mongolian market. but lack of guidance and reliable resources to do so was challenging them. If you are looking to expand you business in Mongolia, this post is for you.

Mongolia is a landlocked country established an industrial economy based mainly on mining and agricultural product processing. The government will keep looking into methods to diversify the economy, concentrating on new infrastructure projects, the development of the agriculture industry, and using materials and equipment made locally for major projects. In sectors including energy, fuel import and export, telecom, solar energy, wind turbines, and hydropower projects, the government provides international investors with opportunities.

So far, Mongolia has signed double taxation agreements with 26 nations and “Foreign Investment Protection and Promotion Agreements with 43 other nations.

Mongolian Investment Law requires that foreign investors to operate through the following forms of business which should be registered with the Legal Entities Registration Office (LERO): a limited liability company, a representative office or a limited liability partnership. Sole proprietorships like permanent establishments are not required to register with the LERO but should be registered with the tax and social insurance authorities.

There are particular legal and business practice that requires consideration and planning for starting a business. The main legal documents to consider are a company charter and shareholder’s resolution. Particularly because the company charter makes an arrangement for shareholder ownership, they should be resolved based on the company’s charter if there is any dispute over the share.

Furthermore, it also needs to examine whether your business activities are required to obtain special permission under the Law of Permits. Before the Permitting Law is enacted on 16 June, 2022, state administrative officials were authorized to issue 1600 different licenses for business activities. Now, the Law reduces licenses to 365 different types of permits in order to implement more flexible business environment for entrepreneurs and companies. This reduction is a step by the government to make investment in Mongolia more attractive for local businesses and foreign companies alike.

Anti-Corruption Law in Mongolia



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Each year, Transparency International association develops an index of corruption perceptions which reveals corruption levels at a worldwide standstill. From 2020-2022, Mongolia scored 35 points and ranked 111 out of 180 countries on the corruption index, while this year it was ranked 116th with 33 points.

Corruption is a high risk for foreign investors and companies operating business in Mongolia, arising from political corruption and judicial corruption. Since 1996, Mongolia has been fighting against corruption through activities such as a national anti-corruption program and anti-corruption legislations include the Criminal Code and the Anti-Corruption Law, which prohibit active and passive bribery. However, the fact that Mongolian corruption index has not decreased over the last 3 years, and the most recent update has even seen an increase in the corruption index which has led to questions about the effectiveness of anti-corruption law.

Amendments to the Personal Income Tax Law



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Our Mongolian lawyers and accountants regularly assist foreign individuals and companies in Mongolia with advise regarding Mongolian income tax issues. There are important changes to the Personal Income Tax law in 2023 that foreign companies and individuals should be aware of.

On 11 November 2022, the parliament adopted the Law on amendments to the Personal Income Tax which came into effect on 1 January 2023. The legalized change imposes progressive rates on individual’s salaries and other similar income tax. In other word, it is a tax system that increases rates when the taxable income goes up. Previously, the flat rate of 10% of Personal Income Tax on salary, wage, bonus, incentive and similar income was set for resident taxpayer. Now, tax in salaries and other similar income will be imposed as follows:

  1. 10% for taxable income between 0-120,000,000 MNT;
  2. 12,000,000 MNT and the income exceeding 120,000,000 will be subject to an additional tax of 15% for taxable income between 120,000,001-180,000,000 MNT;
  3. 21,000,000 MNT and the income exceeding 180,000,000 MNT will be subject to an additional tax of 20% for taxable income above 180,000,000 MNT

For instance, an individual who earns 144 million tugrug annually would be taxed at the rate of 10% in 120 million tugrug of taxable income. The remaining 24 million tugrug will be taxed at the rate of 15%.

Cryptocurrency Exchange and Trading in Mongolia



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As we work with many foreign clients engaged in range of international businesses, one of the comment questions asked by our clients lately is whether cryptocurrency is legal in Mongolia and how it is regulated.

In Mongolia, cryptocurrency trading and exchanges are legal, and the country implemented the Law of Mongolia on Virtual Property Service Providers (VPSP law) which came into force on December 17, 2021.

Along with the rapidly evolving technological processing in the world, the market of crypto is expanding in Mongolia. At the same time, there was a need to create a legal framework for the sector of crypto trading and exchanging in order to prevent from public risks as well as to have required records, suspicious or terrorist-related transactions reports.

Considering these issues, Mongolia has taken an adoptive approach to cryptocurrency regulation by applying legislation mentioned above. The main objective of the VPSP law is to register cryptocurrency exchanging and trading providers, monitor their activities, and determine their legal rights and obligations.

The VPSP law brought cryptocurrency under the regulatory authority of the Financial Regulatory Commission from December 2021, and imposed a requirement from cryptocurrency service provider companies to register and obtain a special license. Moreover, cryptocurrency exchange and trading service provider’s income is taxable and exempt from value added tax.

Can You Obtain a Damages Award for Emotional Distress in Mongolia?



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In order to guarantee the fundamental rights of the citizens, regardless of the material damage, the rights to claim emotional distress damage should be open. In Mongolia, the right to claim emotional distress damages is limited by the Civil Code of Mongolia. In judicial practice, only emotional damages related to defamation of other people’s distinction, reputation and business reputation are awarded. Other than that, emotional damage that may occur is interpreted as not specifically regulated on compensation for emotional damage based on the Article 230.2 of the Civil Code of Mongolia.

Jurisprudence shows that certain conditions must be met in order to award emotional damage compensation. It includes:

  • Emotional damage should be related to the victim of the case
  • The damage cannot be repaired or restored
  • Intentional or reckless guilt
  • The act must have been manifested in an action that is discussing, repulsive and noticeable to anyone
  • Victims may have experienced emotional damage
  • The right to demand compensation for emotional damage must be specified in the civil law and other laws.

Studying the decisions of the courts of Mongolia, emotional damage award will be depending on the severity of the case. Although the court considered that emotional damage has not been proven, in cases of obviously serious, repulsive and despicable acts, there are cases where claims are satisfied including the amount and evaluation of emotional damage in the physical damage of the victim. However, the scope of the right to claim emotional damages is still limited by Article 230.2 and 511 of the Civil Code.

The Law on Criminal Procedure and the Law on Family provide for the possibility of demanding compensation for emotional damage, but the court refuses to issue compensation for emotional damage on the grounds that “it is not specifically provided for in the Civil Code”.

What Rights to Land Does a Foreign Invested Company Enjoy in Mongolia?



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Articles 27-44 of the Law of Mongolia on Land regulates granting land for possession or use. In this blog we will discuss difference between the right to possess and use land in Mongolia as well as the right of foreign investment company in this field.

The right to use and possess land are different by the subjects, purpose of its use, size and duration under the Law of Mongolia on Land. For instance, in regards with the subject, the land possession shall be given only to Mongolian citizens, companies and organizations.

Under Mongolian legislations, foreign investment company is considered as Mongolian legal entity. However, according to Article 44 of the Law of Mongolia on Land, there is only right to use the land not to possess for foreign investment company. Also, the article 6.5 of the Constitution of Mongolia specifically state that “the State may allow foreign nationals, legal persons, and stateless persons to use land for a specified period of time under conditions and procedures as provided by law”.

This is related to the concept “Land relations are the basis of national heritage and independence” of the Constitution of Mongolia. Therefore, granting land possessing rights to foreign invested company is contrary to the concept of the Constitution of Mongolia.

Foreign invested economic entities can use land for specific purposes, terms and conditions set forth in the Law of Mongolia on Land and the Government shall set the relevant term and duration to use land.

Renewal of a Mining License



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In the past weeks the firm’s Mongolian lawyers have been approached with an inquiry regarding how the recently revised Law on Permits may affect renewal of Mining Licenses.

Mining license are typically granted for a term of thirty (30) years, and are available for renewal in the two years before expiration.

The holder of a Mining License is required to submit an application for renewal of the license not less than two years prior to the expiration of the Mining License.  The applicant is required to submit the original Mining License along with a copy of the license as part of the application. The applicant is also required to submit documentation demonstrating regarding implementation of the mandatory Environmental Protection Plan for mining operations for the project.

Upon the receipt of an application for renewal of the Mining License along with supporting documents mentioned above, the relevant government agency shall reach a decision within 15 days. Where the administering agency finds no violations or other issues which result in ineligibility, the Mining License should be extended for a new term of 20 years.

Exercising the Right to Enforce Sale of Collateral without a Court Order



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Our Mongolian lawyers have recently assisted a client in connection with the planned sale of collateral by auction without obtaining a court decision.  

Mongolian law provides for this type of out of court enforcement procedure where stipulated in a mutual agreement. In order to start this process, the Pledgee is required to notify the Pledgor in writing as to the demand for performance of the contractual obligation. The notice period required in 30 days. If there is no reply within 30 days, the enforcement may be registered directly with the national pledge registry which will initiate a sale of the pledged collateral.

The law provides that the auction price shall be agreed upon by the parties to the contract, and if no agreement is reached, it shall be set at 70 percent of the market value determined as determined by an appraisal.

If there is no competition during the auction, or if the winner does not deposit the price offered by him/her in the designated account within the time specified in the contract, the auction will be deemed not to have taken place and a new auction will be held.

A Pledgee is entitled to negotiate an agreement with the Pledgor within 10 days after an announcement that no auction has taken place to have the collateral transferred to its ownership at the first price of the auction.

If the collateral is sold, or the Pledgee takes possession of the collateral as satisfaction of its demand, or the Pledgee does not finally to exercise its right to purchase the collateral the security interest on the collateral shall be terminated.