Mongolia Market Entry

Mongolia Market Entry

Subchapters:

  • Market entry
  • Forms and conditions of operation on the market
  • Marketing and Communications
  • Issues of intellectual property protection
  • Public procurement market
  • Payment terms, payment ethics and resolution of commercial disputes
  • Visas, fees, specific conditions of travel to the territory
  • Employment of citizens from the Czech Republic
  • Fairs and events

Market entry

Mongolia has a relatively uncomplicated business registration process, which now only takes place at the State Registration Office. The certificate issued to new companies must be renewed annually. The company must be registered with the appropriate branch of the tax office (jurisdiction according to the company’s registered address). Imports into Mongolia are not subject to special permits. However, the importer must be registered with the tax office and the state registration office. Imports are not subject to any restrictions, except for a few items subject to import licenses (eg chemicals, human blood and organs, explosives and weapons). Licenses are issued by the relevant departmental ministry. Check smber for agriculture and fishing facts of Mongolia.

Generally speaking, Mongolia does not discriminate against foreign investors or investors from the Czech Republic, with two major exceptions. 1) A foreign investor must invest a minimum of USD 100,000 to establish a company in Mongolia. Mongolians are not subject to any investment minimum. 2) Foreigners and foreign companies are not allowed to own real estate in Mongolia. Investors can obtain land use rights for their business plans for five years with a one-time five-year renewal. The Mongolian government imposes no such restrictions on its citizens. With the exception of the real estate market, foreign and domestic investors have the same rights to establish, sell, transfer shares, usufructuary rights of companies and movable property. Furthermore, there are no legal or regulatory limits on foreign ownership and investment control in Mongolia. The only exception is the law

Flat tariffs of 5% are applied to most imported products. The zero duty rate applies to e.g. live animals intended for breeding, horses, sheep, pigs, cows and goats, information processing equipment including spare parts, medical equipment, etc. A seasonal 15% duty is imposed on flour and vegetables to protect domestic producers /growers in the period from 1 August to 1 April, outside this period the rate is 5%. Based on the resolution of the Parliament dated 1/5/2020, certain types of vegetables (potatoes, tomatoes, carrots, onions, cabbage, cucumbers, yellow beets) will be subject to a 30% import duty (effective from 1/8/2020). At the same time, all customs duties for the import of cereals, oilseeds, fodder crops and potato seeds are abolished.

An additional import duty is imposed on vehicles (based on vehicle age $500 0-3 years, $1000 4-19 years, $2000 over 10 years) and alcohol and tobacco. The duty on imported tobacco is 20-30% depending on the classification. The Mongolian Customs Law allows for temporary customs reliefs that may apply to engineering production and equipment that is imported for the purpose of exhibitions and fairs and will be re-exported within 1 year. The importer must obtain a duty-free temporary importation permit.

Further information on customs procedures is available on the website of the Mongolian Customs and Import Tariffs on the EU Access2Markets portal.

Free Trade Zones (FTZs)

Since 2004, three free trade zones have been opened in Mongolia. Two of them are located along the Trans-Mongolian Railway, to which the Trans-Siberian Railway connects in Ulan-Ude (Buryatia, RF). 1) located in the city of Altanbulag on Mongolia’s northern border with the Russian Federation and 2) in southern Mongolia at the Zamiin-Uud Mongolian-Chinese border crossing. The third free trade zone is in the west of the country in the border town of Tsagaannuur in the province of Bajan-Ölgii, adjacent to the RF. In recent years, there has also been much talk of introducing a new free trade zone at the new international airport in Ulaanbaatar. The existing FTZs are relatively inactive and require further development.

Forms and conditions of operation on the market

According to the Law on Business Companies and the Investment Law, it is possible to establish a company without foreign investment (BENFI) or a company with foreign investment (BEFI) in Mongolia. A BEFI is defined as a company with assets that are at least 25% owned by foreign investors and the investment of each of the foreign investors is worth min. $100,000.

Mongolian legislation allows the establishment of several forms of business entities:

  • Limited Liability Company (LLC) – can have up to 50 shareholders or just one owner (the most common form, 80-90%)
  • Joint Stock Company (JSC) – must have 10 million MNT capital listed on the Mongolian Stock Exchange and 1/3 of the board cannot be shareholders
  • A joint-stock company can be of open or closed type
  • Limited liability company – the initial deposit is provided by the partners and can take the form of cash or other assets (appropriately valued in monetary value). It can have one or more partners (natural or legal persons). The minimum basic company contribution for a company with foreign investment (BEFI) is USD 100,000. For companies without foreign investment (BENFI), there is no minimum amount of the basic contribution
  • Partnership – The Partnership Act defines three types of this legal form of business that can implement profit-generating activities:
    • Unlimited = partners are jointly liable for partnership obligations
    • Limited partnership with certain partners with unlimited liability
    • Limited partnership = two or more natural persons with a professional license can establish this form of partnership, the obligations of the partners are limited by the amount of their shares in the capital
  • Representative office – according to the Investment Act, foreign legal entities can establish a representative office in Mongolia, which does not have its own legal personality. The representative office performs only representative functions. The registration procedure is similar to other legal forms of business in Mongolia.

The list of documents required for registration of individual forms of legal entities can be found on the website of the State Registration Office.

Marketing and communication

For the average Mongolian consumer, the price of goods is key. In the wide assortment of consumer goods, goods from the PRC, and to a lesser extent from the Russian Federation, the Republic of Korea and Turkey, are gaining ground. Consumer behavior, especially in cities, is increasingly influenced by advertising. New types of goods practically cannot do without advertising. Advertising campaigns in television and print have the greatest effect.

To give you an idea, the price of a full-page color advertisement in a prestigious social magazine ranges from 500-1000 EUR. SMS advertising is used very intensively. Large-scale billboards are widely used in the capital. Companies, domestic and foreign, present themselves at exhibitions and conferences, of which there are a large number in Ulaanbaatar during the year, and are also promoted in the media.

The Mongolian National Chamber of Commerce and Industry (MNCCI) inherently promotes economic and trade relations. MNCCI offers services to its members and foreign companies. It also organizes various exhibitions and fairs, as well as helps with the organization of Czech business missions to Mongolia.

Issues of intellectual property protection

Mongolia is a member of the World Intellectual Property Organization (WIPO). It has signed and ratified most agreements and conventions, including WTO TRIPS. Therefore, in the field of intellectual property rights protection (registration of patents and trademarks), international standards apply, the possible violation of which may result in legal penalties.

Mongolia also has the Intellectual Property Office, the Mongolian Customs, the National Police and the Copyright Inspection Office, which protect intellectual property rights. However, the activities of the Office for the Control of Copyrights do not meet the standards we know from the Czech Republic. Counterfeits exist in book publications, music and film media. Mongolia does not have the capacity to monitor the “copying” of industrial or similar goods.

Public procurement market

Public procurement is essentially decentralized. As a rule, they are published in printed newspapers or at www.tender.gov.mn and www.ub-procurement.mn. In March 2019, the Public Procurement Act was amended. Government ministries are now outside the tendering process. The Ministry should only be responsible for its internal public procurement.

All other public contracts must be handled by an independent agency. Domestic manufacturers are supported in tenders if they meet international standards and quality. Foreign suppliers cannot participate in tenders for the supply of goods that can be secured by a domestic manufacturer (if this restriction is established). A black list of entities that have violated the rules of tender procedures is established. Entities on the blacklist cannot participate in further tenders. Pre-selection activities for projects of international organizations are introduced. The announcer of the competition is responsible for the selection process.

Tenders for project implementers are also announced by many international donors – EBRD (European Bank for Reconstruction and Development), MCC-Acount (Millenium Challenge Corporation – Account), ADB (Asian Development Bank), WB (World Bank), JICA (Japan Development Agency ), etc. The Embassy of the Czech Republic handles inquiries from Czech companies regarding the possibility of selling goods or offers to supply equipment from the Czech Republic and mediates mutual contacts within its capabilities. Mongolian requests are submitted to the BusinessInfo.cz portal.

Payment terms, payment ethics and resolution of commercial disputes

The generally accepted principle is to try to resolve commercial disputes by agreement. If this is not possible, disputes are settled in court. If there is an arbitration clause in the contract, then disputes are resolved using arbitration courts; if the claimant is a Mongolian party, jurisdiction lies with the Arbitration Court of the Mongolian National Chamber of Commerce and Industry, if the claimant is a foreign participant, it applies to the arbitration court of the given country (unless otherwise agreed in the contract).

The Investment Protection Council of Mongolia, which was established by the government, deals with resolving disputes by agreement and protecting the rights and interests of investors in Mongolia. The Council strives to establish close cooperation with investors and maintain a strong relationship. The Mongolian banking system is seeing some improvement every year and expanding its products (most of the big banks are managed by foreign workers). Due to the riskiness of the market (7th group according to the OECD), it is more difficult and expensive to obtain guarantees for crediting imports/exports. For larger deliveries, it is necessary to compete with the conditions offered by companies from Japan, the Republic of Korea, Germany, the USA, etc., which allow deferred installments and other preferential forms of sales.

Payment ethics are different, some companies even pay 90% of the order in advance, which can be recommended as essentially the only suitable method if payment is not otherwise secured.

Visas, fees, specific conditions for traveling to the territory

The required document when a citizen of the Czech Republic travels to Mongolia is a passport, the validity of which must exceed the expected last day of stay in Mongolia by at least 6 months.

Citizens of the Czech Republic, with the exception of holders of diplomatic passports, must apply for a visa in advance at the relevant Mongolian embassy when traveling to Mongolia. A tourist visa can now be applied for online on the website of the Immigration Agency of Mongolia. After the visa has been granted, the applicant will receive an electronic visa (so-called eVisa) to his previously specified e-mail address, with which he can travel to Mongolia. The new eVisa system speeds up the visa process for applicants and eliminates the need for a physical visit to the Mongolian embassy.

Apart from Chingis Khaan International Airport in Ulaanbaatar, only two railway border crossings can be used for trips to Mongolia, namely Sukhbaatar/Naushki (with RF) and Zamiin Uud/Ereen (with PRC) and also three road crossings with RF – Altanbulag/Kyakhta, Tsagaannuur /Tashanta and Ereentsav/Solovyosk and 4 road crossings with PRC Zamiin Uud/Ereen, Bulgan-Yarant/Takashiken, Bichigt/Zuun-khatavch and Sumber/Rsahann (with PRC). Working hours at individual crossings vary. Before choosing/using a road crossing, we recommend checking the current opening hours of the border crossing via the Embassy of the Czech Republic in Ulaanbaatar or the Embassy of Mongolia in Prague. Entry into Mongolia by motor vehicle with a license plate other than one of the border states can only be done at international border crossings. For vehicle transit through Russia,

The Ministry of Foreign Affairs of the Czech Republic recommends that Czech citizens check with the embassy of the country they are visiting before traveling whether the conditions for travel have not changed.

Information on visa issues for Mongolian applicants heading to the Czech Republic is available on the embassy’s website here in the relevant subsections on short-term (Schengen/unified) visas, the registration system for submitting visa and residence applications, and the government’s Qualified Employee Program.

Employment of citizens from the Czech Republic

Labor relations are regulated by the Labor Code of 14 May 1999. The standard working week is 40 hours with exceptions for seasonal work. The minimum wage is determined by legislation, as of January 1, 2017 it is 240,000 MNT/month (approx. EUR 92). The levy for social security, including health, is 12.5% ​​for employees and 13.5% for employers. Labor costs: the average monthly gross wage in Mongolia was 1,314,900 MNT (approx. EUR 401) in 1Q 2021.

Personal income tax for non-residents is 20% for income from a Mongolian source. According to the Mongolian National Currency Settlement Act, all foreign workers, with exceptions (e.g. diplomatic missions), must be paid in Mongolian currency (MNT) by transfer to a MNT bank account in Mongolia. Salary can be transferred abroad without additional deductions.

A work permit is required for all foreign employees of companies and representative offices. Obtaining it can be time-consuming – up to 4 weeks before departure and 2 weeks in Mongolia. Before traveling, it is necessary to arrange a work visa at a Mongolian embassy (e.g. in Prague). After entering, the worker must register with the Immigration Office within 7 working days, otherwise he faces a fine of up to MNT 1 million (approx. EUR 305). The work permit itself is issued by the Ministry of Labor and Social Affairs, the necessary documents are submitted at the Service Center of the Labor Office and a fee of 384,000 is paid in advance. MNT for each month of work permit. One-time fees for services are also paid (application for a work permit – 1 person 15,000 MNT, work permit card – 2,000 MNT). Once a work permit is obtained, it is necessary to arrange a long-term work visa. It is also necessary to subsequently arrange a long-term residence permit at the Immigration Office.

The Mongolian government sets quotas for the employment of foreign workers. And that for companies without and with foreign investment. Depending on the sector, the amount of investment and the number of employees of the company, the quotas range from 5-80%. Companies engaged in foreign trade have a quota of 5% (a company must employ at least 20 employees in order to employ one foreigner). Companies owning exploration or mining licenses for mineral raw materials have a quota of 10%, and companies extracting oil or natural gas up to 80%.

Healthcare facilities in Mongolia are both public and private. Treatment must always be paid in cash, travel insurance for possible reimbursement in the Czech Republic is therefore desirable and is one of the conditions for granting a Mongolian visa. Evacuating severely injured or ill persons from Mongolia to countries with a higher level of medical care is a very complex and expensive matter.

There are several hospitals in Ulaanbaatar, private hospitals are recommended for foreigners, some of which are already equipped with high-level equipment (e.g. INTERMED), or the Songdo private hospital in the city center. It has a decent standard, but it is primarily a diagnostic center – the inpatient section is small and the doctors of the outpatient section usually do not have permanent patients, so it is more of a clinic in character that provides very accurate and quick diagnostics, which patients then take with them for assessment by their treating doctors.

Vaccinations are not mandatory for the trip to Mongolia, vaccination against TB, jaundice, typhoid and childhood diseases, possibly against rabies, can be recommended.

Fairs and events

Organizers of fairs and other events can, after the cancellation of most government measures restricting the movement and meeting of people, incl. travel restrictions for foreign visitors, once again organize events in face-to-face form. To give you an idea, here are some important international fairs that will be held in 2022.

AgroExpo 2022

  • Venue: Ulaanbaatar, Hui Doloon Hudag
  • Date: 26—28. 8.
  • Sector: Agriculture, food industry Organizer: AgroExpo

International New Energy Summit

Venue: UlaanbaatarDate: 29—30 9.

Sector: Energy, renewable resources

Organizer: Mongolian Renewables Industries Association, Global Green Growth Institute, The Business Council of Mongolia, Erdenes Mongol Corporation. Fair website here.

Mongolia Mining 2022, International Mining & Oil Expo

Venue: Ulaanbaatar, Buyant Ukhaa Sports Palace

Date: 21—23. 09. 2022

Sector: Mining and quarrying industry

Organizer: Minex Mongolia Co., Ltd. Fair website here.

Expo Mongolia 2022

Venue: Ulaanbaatar, Misheel Expo Convention Center

Date: 12-14 October 2022

Sector: multi-sectoral

Organizer: JV Consult Mongolia LLC, JV Consult Messemanagement and Planetfair Group- Fair website here.

Mongolia Market Entry