Tag Archives: Development

Digital Origin Certificates for Exports from Mongolia to Japan



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The Economic Partnership Agreement (EPA) between Mongolia and Japan came into effect in 2016, with implementation starting on June 7, 2016. This agreement aims to boost trade, investment, and industrial sector exports, while also increasing foreign currency earnings between the two nations. The EPA focuses on reducing tariff and non-tariff barriers, facilitating trade, and simplifying customs procedures for smoother transactions.

Under the agreement, both countries negotiated a reduction in import customs tariffs for a wide range of goods. Mongolia will benefit from a reduction on 59% of the imported goods, which includes around 3,429 types of products across 97 categories. On the other hand, Japan has agreed to lower tariffs on 86% of the goods imported from Mongolia, covering approximately 8,000 types of goods. These tariff reductions came into effect as soon as the agreement was implemented.

To further streamline the export process, Mongolia will now digitize the origin certificates for goods being exported to Japan. According to the Mongolian National Chamber of Commerce and Industry (MNCCI), starting from May 7, 2025, exporters will receive their origin certificates electronically in PDF format. This move is part of an ongoing effort to improve the efficiency and convenience of trade between the two nations.

With this transition to digital certificates, Mongolia and Japan continue to strengthen their economic relationship, creating new opportunities for businesses in both countries.

#MongoliaJapanTrade #EconomicPartnershipAgreement #DigitalCertificates #TradeEfficiency #ExportBusiness #MongolianExports #JapanTrade #TradeSimplification #CustomsProcedures #BusinessOpportunities #MNCCI

Tax Incentives for Businesses Operating in Free Zones in Mongolia: What You Need to Know



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Are you considering investing in a free zone? The benefits can go beyond logistical advantages—there are tax incentives you might be eligible for, depending on the nature of your business and your investment scale. Let’s explore the opportunities outlined in the Corporate Income Tax Law and how they can work for you.

What Are Free Zones?

Free zones are designated areas where businesses can operate under special regulations designed to encourage investment, innovation, and trade. To support economic development, many governments offer tax reliefs to incentivize investments in infrastructure and key facilities within these zones.

Tax Relief: How It Works

Under Article 22.5 of the Corporate Income Tax Law, businesses operating in free zones can enjoy significant tax breaks if they meet one of the following conditions:

1. Investing in Free Zone Infrastructure

If your business has invested $500,000 USD or more in critical infrastructure, such as:

  • Energy and heating systems
  • Pipelines and clean water supply
  • Sewage systems
  • Roads, railways, or airports
  • Communication networkss

Then, 50% of the income you earn from the free zone—equal to the amount of your investment—will be exempt from corporate income tax.

2. Investing in Specific Free Zone Facilities

If your investment focuses on constructing or developing:

  • Warehouses
  • Loading and unloading terminals
  • Hotels or tourism complexes
  • Factories producing export-oriented or import-substituting products

And your investment totals $300,000 USD or more, you’re also eligible for a tax break. Similar to infrastructure investments, 50% of your income from the free zone—up to the value of your investment—is exempt from corporate income tax.

Beyond the tax incentives, free zones offer:

  • Easier access to global markets
  • Streamlined customs procedures
  • Modern infrastructure tailored for business operations
  • Networking opportunities with like-minded entrepreneurs

These advantages make free zones a hotspot for businesses aiming to expand regionally or globally while optimizing costs.

Amendments to the Corporate Income Tax (CIT) Law: Social Responsibility Tax Relief Explained



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As part of its ongoing efforts to encourage corporate social responsibility (CSR), the Mongolian government has introduced significant amendments to the Corporate Income Tax (CIT) Law. Effective from August 30, 2024, these provisions allow businesses to claim tax relief for specific activities that benefit society, the environment, and public welfare. Here’s a breakdown of the new tax relief opportunities available under section 22.9 of the law.

Key Highlights of the Tax Relief Provisions

Under these amendments, businesses can deduct certain expenses from their taxable income as part of their social responsibility initiatives. These expenses must align with the law’s stipulations and are subject to the following conditions:

  • The expenses must be unrelated to the taxpayer’s income-generating operations.
  • Deductions include investments in depreciable fixed assets, financial support for unrelated entities, and charitable contributions.
  • The total deduction is capped at 1% of the taxable income for the relevant tax year.

Activities Eligible for Tax Relief

To qualify for this tax benefit, businesses must invest in one or more of the following activities:

  1. Environmental Conservation
    • Initiatives aimed at reducing pollution, restoring ecosystems, and protecting natural resources.
  2. Care for Vulnerable Groups
    • Supporting senior citizens, individuals with disabilities, and children through care facilities and programs.
  3. Cultural Heritage and the Arts
    • Projects that protect and restore cultural sites, or provide support to museums, libraries, and artistic endeavors.
  4. Public Infrastructure Development
    • Funding and maintaining essential infrastructure such as parks, roads, and public transportation systems.
  5. Sports Development
    • Building and maintaining sports facilities or supporting athletes participating in Olympic-level competitions.
  6. Education and Scholarships
    • Providing scholarships for students and funding educational institutions to enhance learning opportunities.
  7. Research and Development
    • Supporting innovation through grants to universities and scientific organizations.

To ensure transparency and alignment with the law, businesses must adhere to reporting standards set by relevant government ministries. These ministries will also establish guidelines to verify compliance with the eligibility criteria for tax relief.

The amendments are applicable from August 30, 2024, and will remain in effect until January 1, 2035. Businesses planning to take advantage of this tax relief must carefully document and report eligible expenses to qualify.

Conclusion

The revised CIT law provides a dual benefit—encouraging businesses to engage in socially responsible activities while easing their tax burden. By aligning corporate operations with these initiatives, companies can contribute to the broader development of society, culture, and the environment.

If you’re a business owner or finance professional, now is the time to explore how your organization can benefit from these provisions while making a positive impact.

Unlock the Benefits of Trade: How to Obtain a Certificate of Origin in Mongolia



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A Certificate of Origin is essential for businesses exporting products, as it certifies that the goods are partially or fully produced in Mongolia. Issued by the Mongolian National Chamber of Commerce and Industry (MNCCI), this document plays a key role in international trade by verifying the origin of goods for tariff benefits, trade agreements, and legal requirements.

What is a Certificate of Origin?

According to Article 6.2 of the Mongolian Law on Chamber of Commerce and Industry, the MNCCI issues certificates of origin under the “Regulation on determining the origin of export products derived from Mongolia and on issuing the certificate of origin.” This legal document is proof that goods exported from Mongolia are either entirely or partially manufactured within the country.

Types of Certificates of Origin:

The MNCCI issues several types of Certificates of Origin based on specific trade agreements, including:

  • Certificate of Origin Form A
  • Certificate of Origin Form E
  • Certificate of Origin Form APTA
  • Certificate of Origin Form B
  • Certificate of Origin Form-D

These forms are crucial in enabling products to qualify for tariff reductions or exemptions under various trade agreements, ensuring smooth international transactions.

Required Documents for Obtaining a Certificate of Origin

Entrepreneurs looking to obtain a Certificate of Origin must submit the following documents:

  1. Copy of foreign trade contract (buying/selling)
  2. Application form
  3. Invoice (English sample with Mongolian explanation)
  4. Packing list (Invoice & Packing list in Russian/English)
  5. Copy of Incorporation Certificate (individuals provide a copy of their identity card)
  6. Document detailing product composition (if raw materials were imported, include the customs declaration)
  7. Copy of product license
  8. Quality conformity and hygiene certificates
  9. Additional documents may be required for certain certificates, including an additional examination.

Easy Online Submission

For added convenience, businesses can now submit their requests for certificates of origin online by uploading the necessary documents to the MNCCI’s platform. This streamlines the process, making it easier for businesses to meet their export requirements efficiently.

By obtaining a Certificate of Origin, businesses not only comply with international trade laws but also unlock tariff benefits and access to global markets.

Why It Matters

Securing a Certificate of Origin from Mongolia ensures your products are recognized internationally, facilitating smoother transactions, securing tariff advantages, and opening doors to global opportunities.

#CertificateOfOrigin #MongoliaExports #ChamberOfCommerce #MNCCI #TradeLaw #ExportDocuments #BusinessCompliance #TradeAgreements #MongolianProducts #GlobalTrade #ProductLicensing #QualityControl #Exporting #InternationalBusiness #ForeignTrade #BusinessGrowth #TariffBenefits #ExportersGuide #CustomsCompliance #LegalDocumentation #TradeRegulations #OnlineCertification #CommerceIndustry #ExportSuccess #DocumentPreparation

Obtaining a Mining LIcense is no Obstacle for Foreign Enterprises Operating in Mongolia



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It is well-known that the economy of Mongolia is largely dependent on mining sector by generating 24 percent of GDP and 94 percent of export income and comprising 64 percent of FDI.

The country is abundant with natural resources, and it is the Government of Mongolia that determines those areas for which a mineral exploration license or a mining license may be granted based upon the recommendation of the Ministry of Mining. The law provides that the size of an exploration area for one license shall not be less than twenty-five (25) hectares and shall not exceed one hundred fifty thousand (150 000) hectares.

The Mineral Resources and Petroleum Authority of Mongolia under the jurisdiction of Ministry of Mining and Heavy Industry is in charge for organizing the selection for granting the special licenses for the exploration area and any entities interested in obtaining the exploration license may submit their proposals online as well. Upon the selection of the company in tender process and granting the special license, the entity shall duly complete the exploration project and determine the natural reserve deposits. Importantly, only the exploration license holder shall be entitled to apply for a mining license in the exploration licensed area.

The “One license for one legal entity” rule applies pertaining to prospecting, exploration or a mining right. Mineral exploration and mining licenses shall be granted to a legal entity duly formed and operating under the laws of Mongolia, and such legal persons shall be duly registered as taxpayers. Foreign companies may establish a foreign invested legal entity in Mongolia directly or they may establish a joint venture in cooperation with Mongolian businesses. Where more than 25 percent of the total share capital of a Mongolian enterprise is held by a foreign investor the investment amount by each foreign investor equals must be at least USD $100,000.

As it is prohibited to transfer the special licenses to any other third parties as a whole and there are strict requirements of obtaining the exploration and mining licenses, some foreign business entities choose to simply buy an existing Mongolian company, which already has obtained the necessary licenses. In other words, in such case the foreign entities may buy a Mongolian company along with all its rights and duties, as well as its licenses, and may operate its mining operations under this company.

The Government of Mongolia is doing its best effort to establish a pleasant environment for all businesses and grant the equal rights for both domestic and foreign companies willing to benefit from natural resources of Mongolia, provided they do operate in good faith by respecting and adhering to applicable laws.

Mongolia to Take Action to Address Corruption



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During its regular session on March 14, 2024, the Cabinet of Mongolia made a significant step forward in the fight against corruption by supporting the submission of a draft Resolution to the State Great Khural of Mongolia for approval.

The draft Resolution outlines the implementation of an Action Plan for the Implementation of the National Anti-Corruption Program. the Resolution aims to establish an effective legal framework to combat corruption and encourage public trust in government. The newly proposed resolution for implementing the national anti-corruption program is a much-needed initiative to address the misuse of power and authority.

The draft Resolution outlines 290 measures to be implemented between 2023 and 2030, aimed at achieving the 11 goals and 48 objectives of the National Anti-Corruption Program, as set out in 2023 Resolution No. 59 of the State Great Khural. The success of this program hinges on the active participation and cooperation of all stakeholders, including the public and private sectors, civil society organizations, international organizations, the media, and citizens. The anticipated outcomes of this program are promising. A yearly decline in corruption levels is expected under the plan, leading to an expanded state budget, increased public trust in public organizations, rising citizen income, and a strengthened culture of zero tolerance for corruption. Furthermore, a more robust whistle-blowing system will be established, providing a crucial avenue for reporting and addressing corrupt activities.

Official corruption is a pervasive problem in many Asian countries, undermining the rule of law, hindering economic development, and eroding public trust in institutions. Corruption takes various forms, including bribery, embezzlement, nepotism, and cronyism. It affects all levels of government, from local administrations to national agencies, and can influence decision-making in areas such as business regulations, public procurement, and law enforcement.

The consequences of official corruption are far-reaching. It distorts markets, creating an uneven playing field for businesses and discouraging foreign investment. It also undermines the delivery of essential public services, such as education, healthcare, and infrastructure. Corruption can lead to inefficiencies, waste, and misallocation of resources, further exacerbating poverty and inequality. Moreover, it can fuel social unrest and political instability, as citizens become disillusioned with their governments and demand accountability.

The root causes of official corruption in Asian countries are complex and multifaceted. Some of the key factors include weak institutions, lack of transparency and accountability, and cultural norms that tolerate or even encourage corrupt behavior. In many cases, low salaries and inadequate resources for public officials create incentives for them to engage in corrupt activities. Additionally, complex regulatory systems and opaque decision-making processes can create opportunities for corruption to thrive.

Protection of Newly Created Plant Varieties in Mongolia



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Following a process of technical consultations with the Food and Agriculture Organization of the United Nations and the International Union for the Protection of New Varieties of Plants, Mongolian Parliament enacted the Law on Seeds and Varieties of Plants on October 15, 2021 to regulate issues related to supporting the development of the sector of crop seeds, stimulating research and innovation in the seed sector, establishing fair trade of seeds, protection and sustainable use of plant genetic resources, creation of new plant varieties, protection of breeder’s rights and ensuring food safety.

In specifically, this law regulates the registration of a new plant varieties and the protection of the breeder’s rights. Any person who produces, sell, export and import a registered and protected plant varieties is required to obtain permission from a breeder. The protection of breeder’s right is valid for 20 years for plants and 25 years for trees and climber plants.

Ministry of Food, Agriculture and Light Industry is entitled to register a new variety plant in Mongolia and to protect breeder’s right. In determining whether or not the breeder is entitled to apply a new variety plant registration, the Minister of Food, Agriculture and Light Industry should identify that the plant is new, various, identical and stable by doing necessary field experiments and laboratory tests. These four requirements are described as below.

New – the seed and plants variety are considered new if it is not sold or distributed throughout a certain time prior to the request date:

  • 1 year ago, in the territory of Mongolia;
  • four years ago, in the territory of other countries and six years ago for trees and shrubs.

Various – if the newly created variety differs clearly from other popular varieties at the time of the request, it is considered to be different.

Identical – if the basic characteristics of the variety are sufficiently maintained during changes that may depend on the characteristics of the reproductive structure, then the seed is considered an identical variety.

Stable – After repeated reproductive cycles, if the basic characteristics of the seed do not change at the end of a specific cycle, the seed is considered a stable variety.

Therefore, it is significant to first clarify whether a plant variety can be considered as a new variety plant in Mongolia, whether breeder’s plant variety sold or distributed before in Mongolia and oversees during period mentioned above.

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.

A Mongolian perspective on Public-Private Partnerships Development



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Since the Law of Mongolia on Concessions was adopted in 2010, it has established a legal framework for public-private partnership by granting concessions to private investors to use existing infrastructure facilities owned by the state, and to construct new infrastructure facilities for the purpose of providing services.

However, the current Concessions law is inadequate to meet the needs of fundamental principles of public-private partnership such as planning, granting and effective risk and debt management.

The implementation of the Concessions law raised the following issues:

  • Illegal selection of participants for granting a concession
  • Concluding an invalid direct agreement
  • Ineffective concession which creates significant burden of the state budget
  • Absence of specific regulations and policies of concession procedure guidelines.
  • Lack of related administrative authorities’ involvement on selecting, contracting, implementing, or overseeing concession
  • Risk management and risk allocation methodologies

Therefore, the government submitted the first draft of Law on Public-Private Partnership on April 6, 2022, and requested to repeal the Law of Mongolia on Concession. The purpose of the law is to support private sector’s participation and investment in the implementation of public-private partnership in the field of public infrastructure and public services projects, and to create favorable legal environment for long-term efficient cooperation.

Constitutional Change Improves Environmental Impact Transparency



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The Parliament of Mongolia amended the Constitution of Mongolia on November 14, 2019, according to the second part of Article 6.2 of the Constitution of Mongolia “… By using subsoil resources within the right of citizens to live in a healthy and safe environment have the right to know about the impact on the environment”.

In order to exercise this constitutional right, the Law on Environmental Protection and the Law on Environmental Impact Assessment provide for measures to be taken by citizens to monitor the status of subsoil use, environmental impact, rehabilitation and monitoring by the authorities. The legal regulation of the right to know and the legal regulation of the exercise of constitutional rights are in the process of being approved.

This is very important regulation. There are frequent tripartite disputes between citizens and company using subsoils or project implementer and local authorities such as Governor and Citizens’ Representative Meeting.

Citizens complain that companies using subsoil in local area and project implementers are destroying the environment and failing to rehabilitate it, and demand that action be taken to stop the activity.

The reason for this is that citizens are not given the right to know and the information they want has not been provided. In other words, failure to provide information or access to information on the current status of subsoil use, its impact on the environment, and the process and results of rehabilitation, the lack of access to information has led to a number of negative consequences, such as misinformation and misunderstandings.

On the other hand, due to the failure of the local government to provide the above information to the citizens, the citizens have lost trust in the local governors and the Citizens ‘Representatives’ Meeting and therefore there have been many cases that citizens criticized local government that not protecting their rights and interests instead protecting and serving the interests of the company using subsoil and project implementers.

As a company using subsoil and project implementer, they have spent a certain amount of money and have conducted certain activities, such as employing local people, providing financial support for local development, and conducting regular rehabilitation work. Lack of information or access to information has led to many misunderstandings and conflict among citizens due to a lack of information about their work and investments.

Therefore, it is important to ensure that citizens have access to information and right to know, and that local governments and project implementers are required to report their work and the results of their activities in connection with proving information to citizens.

According to the two laws mentioned above, on the one hand, the law allows a citizen may request information from the aimag, capital city, soum and district governors, project implementer on the condition of natural resource use within the territory, its impact on the environment, rehabilitation process and control measures taken by the state authorities and project implementers.

On the other hand, aimag, capital city, soum and district Citizens ‘Representatives’ Khurals and Governors shall openly inform citizens about the conditions of land use, environmental impact, rehabilitation and control measures within the territory, and provide relevant information upon request, and therefore obliged to report it to the Citizens’ Representatives Meeting.

As a project implementer, they are obliged to provide or provide information on the status of subsoil use, environmental impact, rehabilitation process and results related to its activities at the request of the citizen.