Category Archives: Corporate Commercial

Establishing a Branch of Foreign Company in Mongolia



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A foreign company may establish a branch in Mongolia as a secondary establishment of the parent company. Legally, such a branch is considered a part of the parent company, and as such, it is able to perform the principal functions of the company, however it is dependent on the foreign parent company. This type of branch will not be deemed to be a unique legal entity and must conduct its activities on behalf of the foreign company that established it. The foreign parent company will be responsible for the activities of the branch.

A branch of a foreign legal entity in Mongolia shall be registered with the registration authority. An executive director, founder, a person to represent without the power of authority or other persons authorized by the company will apply an application to the state registry and will include the following documents:

  • Foreign company’s registration certificate and the Charter. (copy)
  • Shareholders resolution to establish a branch in Mongolia.
  • Shareholders resolution to appoint a director of a foreign company’s branch and to provide an address and contact details where a branch will be.
  • A branch’s rule which includes branch address, contact information and conducting activities.
  • If a director of a branch is a foreign resident, a copy of the citizen’s passport.
  • Evidence of the branch office address such as rental agreement or an immoveable property certificate.

All the documents made in foreign language should be translated. Also, documents issued in a foreign country should be apostilled.

Domestic Arbitration for Foreign Companies in Mongolia



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Our Mongolian lawyers frequently assist clients engaged in a range of international business. One of the questions asked by our clients is about domestic arbitration proceeding in Mongolia.

Domestic arbitration in Mongolia is arbitration proceedings other than international arbitration proceeding. If parties have agreed to solve their dispute by domestic arbitration or such agreement is provided in the contract, any disputes related to the contract will be settled by the Mongolian International Arbitration Centre in Mongolia.

The claimant shall submit a written claim which should state the facts supporting the point at issue and the relief or remedy sought and the respondent is required to state his/her defense in respect of these particulars within the period of time agreed by parties or determined by the arbitration tribunal, unless the parties have otherwise agreed. Within 30 days of receiving a notice of arbitration initiation notice, the parties are entitled to appoint an arbitrator from the list of international arbitrators in Mongolia. If the parties did not appoint within a specified time frame, the presiding arbitrator of the tribunal appoints an arbitrator. Following this, a preliminary hearing will be held to establish procedures for resolving arbitration cases, and the following issues will be discussed in the hearing. Among them:

  • Whether an arbitration proceeding has been negotiated between the parties,
  • Whether the dispute subjects to jurisdiction of an arbitration,
  • Place of arbitration proceedings and hearings,
  • Judicial norms for dispute resolution and proceedings,
  • Arbitration language,
  • Basic and additional costs of arbitration,
  • Resolving requests such as summoning a witness, appointing an expert, including an interpreter, a translator, and providing evidence;
  • Whether the arbitration proceedings will be open or closed,
  • The date of the arbitration hearing.

Arbitration will be conducted in accordance with the agreed procedures of the parties, the Arbitration Act, and the rules of arbitration proceeding.

Establishing a Representative Office of Foreign Company in Mongolia



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Our Mongolian lawyers have encountered number of inquiries regarding establishment of a representative office of foreign legal entity in Mongolia in the past few months. The scenario below takes a look at general regulations and requirements in Mongolia.

A representative office of a foreign company is not be deemed to be a legal entity and it will not operate an office independently in Mongolia. A representative office of a foreign company conducts activities of legal representation such as undertaking to protect the legal interests of the company and conclude transactions on behalf of the company in accordance with procedures adopted by the establishing company. A representative office will have its own Charter, but the establishing company will be responsible for the consequences of the activities. The board of directors will appoint the management of its representative offices and such director acts on the basis of a power of attorney from the company.

According to Mongolian law, a representative office is required to be registered with the registration authority. The registration period is two years, and if an establishing foreign company believes that the purpose of the representative office has not been fully met and that it is necessary to continue operating, it can be extended for the same period as the original grant.

In accordance with registration law, an establishing company prepares following documents to establish a representative office:

  • Application form
  • Establishing company’s certificate and charter copy
  • A decision of board of directors to establish a representative office
  • A charter of a representative office
  • Foreign citizen’s passport who is appointed for a representative office’ director.
  • Proof of address
  • Tax office letter

Mongolian lawyers of our law firm are open to assist if you would like to have more information and advice on this matter.

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”.