Tag Archives: Land Law

Time Running Out for Mongolians to Claim Free Land Entitlement



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According to Mongolian law, each Mongolian citizen is legally entitled to own a plot of land. Plot size allotted will be depending on the location, which a smaller plot available in Ulaanbaatar, and a larger plot (up to .05 hectares) available in more rural areas This ownership entitlement is a one-time opportunity granted by “The Law on Allocation of Land to Mongolian Citizens for Ownership”. But the opportunity is not forever and the period to apply for a free grant of land in accordance with the law expires on May 1st this year.

As the deadline is fast approaching, our Mongolian lawyers would like to offer some tips on the application process to Mongolian citizens who have not yet taken advantage of the land grant.

Firstly, citizens applying for the land grant must submit applications materials to the local governor or land development office. The Application requirements as set out by law require applicants to submit the following documentation and materials.

Citizens need to submit their application to the relevant local Governor or land department to acquire land for ownership for the purpose of family needs.

  • notarized copies of birth certificates of family members who have not reached 16 years of age
  • letter of confirmation by a Governor of khoroo or bag on the status of the family and number of its members;
  • if land is possessed according to Law on Land, then copies of the land certificate to possess land or notarized copy of the land possession contract;
  • an outlining map showing location and size of the land requested (if the land is to be owned on a shared basis among a group then an outlining map of every parcel belonging to each owner showing its size, location and boundary).

The local governor will review the application documentation and resolve the application within a period of 3 months from receiving the application. Usually the land is granted unless there are irregularities in the documentation. The land grant issued by the governor will indicate the plot’s location, boundaries, purpose, full name of the new owner, the owner’s identification number and birth certificate number for those who have not yet reached 16 years of age.

Based on the decision of Governor, the local Immovable Property Registration Office will register the land ownership status and will issue a registration certificate for immovable property reflecting ownership.

Can Foreign Companies Acquire Land in Mongolia?



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In this article we shall discuss what land rights are there for foreign citizens, foreign companies /foreign invested companies/ in Mongolia and is it prudent to invest.

Pursuant to laws there are three types of land rights in Mongolia: land ownership, land possession and land use right. All land, other than land granted for ownership to citizens of Mongolia, is owned and managed by the state. Thus, obviously aside from the state only citizens of Mongolia are entitled to land ownership. Therefore, restrictions on private foreign land ownership in Mongolia are absolute, meaning foreign citizens and companies are prohibited from outright land ownership. Domestic companies and Mongolian citizens may “possess” and “use” the land, where foreign companies and citizens may only “use” the land and only for purposes established by legislation.

Foreign citizens, who permanently reside (for more than 183 days) in Mongolia, may acquire land use right through open auctions for residential needs only. Foreign citizens may be given land for use up to 0.05 hectares for a residential lot, and up to 0.1 hectares – for gardening activities (such as cultivating vegetables, fruits and berries). Land may be given for use for up to 5 years through a contract and be extended by up to 5 years at a time.

For foreign companies or Mongolian companies with foreign shareholding the acquiring of land use rights is much more complicated process. Foreign companies may acquire land use rights through an open auction process similar to foreign individuals. However only the Parliament of Mongolia is entitled to make a decision on giving land for use to foreign companies (including or Mongolian companies with foreign shareholding); whereas, a decision on giving land for use to foreign citizens is made by governors of corresponding level. Land may be given for use to foreign companies under lease or concession contracts for up to 60 years and extended once for up to 40 years upon its initial term. The Government determines land borderlines and land use regulations.

Aside from restrictions on acquiring land use rights, there are a couple additional restrictions for foreign citizen and companies’ land rights. Foreign citizens and companies are prohibited to freely transfer, or pledge acquired land use rights. Such transfers and pledges may be undertaken only between Mongolian citizens, companies and organizations. Mongolian citizens and companies, who gave the land for utilization to foreign citizens and companies without proper prior approval from authorized state body, are liable to compensation of damages and termination of their land use rights. In other words, in order to acquire land use right from Mongolian citizens and companies, once again one must obtain approval from abovementioned authorized state bodies. Thus, it makes acquisition of land use right from domestic companies and citizens also complicated.

In conclusion, while the process for a foreign invested company is difficult, it is doable. For those foreign companies for which acquiring such land use rights is important, it will be important to obtain the advice and assistance of an independent Mongolian lawyer.

Foreign Investors in Mongolia: Know the Immovable Property Tax



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The Immovable Property Tax Law was adopted in 2000 by the Mongolian Parliament and has been effective since 2001, over 16 years. Under the law, tax is imposed on all kinds of immovable properties which cannot be used for their original purpose when they are separated from the land. All persons or legal entities, who own immovable property in the territory of Mongolia, are considered taxpayers.

Local governments at the provincial level, and in Ulaanbaatar, are responsible for imposing a tax on immovable property within their respective locality. The tax level may be .6 – 1.0 of the value of the property as calculated considering the location, intended use, size, and overall demand of the property in question.

For tax purposes, the value of immovable property excluding the underlying land is determined, firstly, by the valuation as registered with immovable property state registry. If there is no such registration, the value is determined by the valuation of insurance on the property. And if there is no registration or insurance valuation, the value will be established as the value that is written down in financial records of the property owner in accordance with the law.

According to the law, the following immovable property types are exempt from immovable property tax:

  • immovable property of legal persons financed by state and local budget (state owned or funded enterprises);
  • residential houses;
  • buildings and developments for public use;
  • management of industrial and technological parks, unit production, structures within technological parks and other immovable properties; and
  • buildings and facilities constructed and registered in a designated tax free zone.

A Mongolian company or other legal entity which owns taxable immovable property will pay equal amounts of tax on the immovable property before the 15th of last month of each quarter for their annual tax liability. An individual citizen of Mongolia, or a foreign citizen who owns immovable property, must pay a once annual tax on immovable property before the 15th of February.

We have encountered many clients which confuse the immovable property tax with the tax on income from the sale of immovable property, but these are not the same. The tax on income from sale of immovable property is a onetime tax assessed upon transfer of real estate, and will be equal to 2% of the transaction cost. In contrast the Immovable property tax is owed each year for the duration of ownership of the property.

Mongolia Set to Allow Trading of Real Estate Interests Via Stock Exchange



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Mongolian Parliament approved the Law on Allocation of Land to Mongolian Citizens for Ownership (LALMCO) in 2002 under the authority of Article 6.3 of the Constitution, “the state may give for private ownership plots of land, except pastures and areas under public and special use, only to the citizens of Mongolia”.

Implementation of LALMCO began May 1, 2003, granting every Mongolian Citizen a right to own a plot of land. This was the first time in the history that Mongolian citizens were entitled by law to own land. However, implementation of this law was not satisfactory. The right to acquire land for ownership is opened to all Mongolian citizens according to LALMCO, but implementation mechanism were not set out in this law, as result, many citizens face obstacles to their legal acquisition of land for their ownership. Those individuals who live in an apartment in the city, in particular have encountered difficulty in gaining access to land ownership despite the  guarantee in the LALMCO. Since LALMCO’s implementation only 7.6% of the 1.2 million city dwellers in Mongolia have been granted the land rights as guaranteed.

Reasons for the unsatisfactory implementation of LALMCO are not for lack of available land, or   limitations on use of land. The law is missing specific regulations and procedures with regard to establishing and confirming land ownership rights obtained under LALMCO. As a result of the lack of clear regulations and procedures, some national and local authorities have used the law to distribute land to friends and family through corruption and without transparency or public oversight.

As set forth in the new draft law, a Certificate of the Right to Own Land will be issued to each citizen, and upon establishing Land Ownership, a Certificate of Land Ownership will be issued. A Certificate of the Right to Own Land will represent each respective citizen’s right to own land. The Certificate of Land Ownership will clearly set out the individual’s ownership rights to a specific plot of land.  Details regarding issuance of these certificates and relevant regulations are also set out in the draft law.

The draft law also provides an interesting mechanism regarding the Land Ownership Certificate. Land Ownership Certificates will be able to be securitized and traded via the Mongolian Stock Exchange. This will provide an avenue for profits for those citizens, such as city dwellers, who are not planning on living on or using the granted land rights themselves.

While real estate can be very valuable, undeveloped land, may not always offer any profit or other benefit to the owner. Development of the land often takes substantial resources and time commitment, which owners may not be able to provide. The ability to trade ownership interests in these plots of land could be a major reform for the Mongolian economy enabling many citizens to profit off land ownership in new ways.

Currently, it remains unclear whether foreign individuals or companies will be able to invest in and trade the Land Ownership Certificates once they are listed on the exchange. This could also be a substantial opportunity for foreign investments in Mongolia. We will keep our eye on developments and update here when we know more.

Don’t Get Your Mongolia Mining License Revoked



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The Mongolian mining industry is a big part of the firm’s client base. Of course, mining in Mongolia is a very carefully regulated sector. Mongolian mining companies require a special mining license to legally manage a mine or conduct geological exploration activities. In some cases, a valid mining license may be revoked by the government. It is important to be mindful of these circumstances so that steps may be taken to avoid such a risk.

The State administrative agency will revoke a mining and exploration license on the following grounds:

One of the general requirements to hold exploration and mining license are that the legal entity holding the mining license, should be incorporated under the laws of Mongolia and must be Mongolian taxpayer for the entire duration of a valid license. Without meeting this requirement will be one of the grounds to be revoked the licenses. If a company is not paying correct taxes, it is at risk.

Another important requirement is to pay license fees on time as specified in the law. The amount of the license fee will be calculated on the basis of the measurements of the real estate covered by the license. Timely payment of the required license fees will be determined by the date of the transaction as recorded at the bank. The license holder must pay the license fees each year in advance, on or before the anniversary date of the issuance of the license. If the fee is not paid in advance, the company will be levied fines of 0.3 percent of the annual payment amount for each day overdue. If payment is overdue for 30 days or more the license is at risk of being revoked.

Where a designated area for exploration or mining has been reclassified as a “special purpose territory” by a decision of the Government, or it has been prohibited by the law to explore or mine in such area, the government may compensate the mining and exploration license holder, and duly revoke the license ;

If a company holding an exploration license is not conducting expected exploration activities, as indicated by annual exploration expenditures being lower than the expected minimum cost of exploration, the license for such exploration may be revoked.

A license may be revoked if environmental authorities determine the license holder has not adequately carried out its environmental conservation duties.

Where a designated area for exploration or mining has been identified as a cultural heritage area, the license will be revoked.

If it is determined that the license holder has breached obligations under Mongolian Law as it relates to fresh water conservation, the license will be revoked.

Basics of Mongolia Land Law



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Land in Mongolia is categorized in accordance with the unified land territory of Mongolia and, unless otherwise granted for ownership to Mongolian citizens in limited cases, is owned by the State and leased in the form of either possession or use rights.  In almost all cases, other than those for limited household use or small farming plots, the acquisition of land rights is subject to a tender process.

The unified land territory of Mongolia is classified based on the general purpose of its use and the need for its use as follows:

  • Agricultural land;
  • Land of cities, villages, and other urban settlements;
  • Land under roads and networks;
  • Land with forest resources;
  • Land with water resources; and
  • Land for special needs.

Under Mongolian law, there are three (3) types of rights related to land, such as Land Ownership, Land Possession and Land Use. 

Both the Constitution and the Civil Code define “landowner” as the State unless otherwise dictated by legislation allowing private ownership. The Constitution states that only Mongolian citizens may Own land. The Land Law specifically states that “land, excluding pastureland, land for common tenure and land for the state special needs, may be given for Ownership to citizens of Mongolia only.” Furthermore, the most specific legislation regarding Mongolian ownership of land, the Land Ownership Law, prohibits the transfer of the Owned land to foreign citizens through sale, trade, gift or pledge.  However, the Land Ownership Law provides that landowners may transfer to others for Use or Possession their land with the relevant Soum or District Governor’s consent.

Mongolian citizens of 18 years and over, companies and organizations may Possess or Use land in compliance with the Land Law and “Land Possession Certificate(s)” shall be given only to Mongolian citizens, companies and organizations.  There are three steps toward acquiring land Possession by a Mongolian: 1) the Governor must pass a resolution accepting the Mongolian’s request to possess land; 2) after successfully passing of the resolution, a Land Possession Agreement is created between the Government authority and the Mongolian requesting land possession; and 3) when the agreement is successfully executed, a Land Possession Certificate is issued.

 With the permission from the corresponding Governor, the land Possessor has the right to grant whole or partial Use Rights of the land to others. This granting of Use of the land to others may be on the basis of land lease agreements or other similar agreements. The Land Law allows foreign legal entities, international organizations, foreign citizens, stateless persons and business entity with foreign investment only to Use land for a certain period of time.