Your guide to doing business in Mongolia
Mongolia lies in East Asia, and is landlocked to the north by Russia, and to the south by China. One of the largest nations in the world by landmass, Mongolia has a population of over 3 million, with over 45% of its inhabitants located around its capital, Ulaanbaatar. An independent state since the early 1920s, Mongolia eventually transitioned to a democratic governmental system, and became a market economy in the 1990s. Livestock and agriculture have always been important to the Mongolian economy, but the industrial sector has been driven in recent years with the development of the retail services, real estate and transportation sectors. Discovery of rich mineral deposits, including copper, coal, tin, and gold, stimulated growth in Mongolia in 2007, but the country was affected by the global economic crisis and is still working to recover. Despite adversity, Mongolia is working to develop its business profile with initiatives to stimulate foreign investment - including the establishment of free trade zones across the country. The trend towards business-friendly policies has had positive effects: Mongolia’s economy is one of the fastest growing in the region, and, in 2018 it was ranked 62 on the World Bank’s Ease of Doing Business Survey (up from rank 88 in 2011).
Why Invest in Mongolia?
Mongolia offers interested financiers a number of reasons to invest. These include:
The Government of Mongolia welcomes foreign investment, incentivising investors in key strategic industries for the development of the national economy. The Government has implemented strict fiscal policies to provide a stable macroeconomic environment for businesses to succeed. Local and foreign national investors are treated equally.
The company is not required to have a legal entity established in order to process a payroll.
It is not mandatory to make payments to both employees and the authorities from an in-country bank account.
The working week in Mongolia is Monday to Friday. The working day for commercial offices is usually eight hours, typically from 0900 to 1800 hours. Lunch breaks are usually one hour.
Mongolia lies at the heart of East Asia and is the world’s second-largest landlocked country. With strong cultural links to neighbouring Russia, China and Kazakhstan, Mongolian civilisation has been historically nomadic, and represented by a mix of ethnicities, cultures, and religions. Once a vast empire ruled by the infamous Genghis Khan, Mongolia was absorbed by China in the 16th century, before becoming part of the Soviet Union in the early 20th century. Mongolia went through a peaceful democratic revolution in 1990, emerging on the world stage as a multi-party republic in 1992. Mongolia’s natural environments are varied: the majority of the country is characterised by grassy plains, bordered by northern mountain regions, and the southern Gobi desert. Mongolian summers are hot and sunny, but winters can be extremely cold, thanks to weather fronts descending from Siberia. Horses are prevalent in Mongolia’s culture, thanks to a nomadic tribal tradition, which endures to this day.
Full Name: Mongolia
Population: 3 Million (UN, 2018)
Capital: Ulan Bator
Primary Language: Mongolian
Main Religion: Buddhism
Monetary Unit: 1 Togrog (tugrik) = 100 Mongos
Main Exports: Copper Concentrates, de-haired cashmere, textiles, hides.
GNI per Capital: US $1,850 (World Bank, 2010)
Internet Domain: .mn
International Dialing Code: +976
Hello: Сайн байна уу?Sain bainauu?
Good morning: Өглөөний мэнд - Ogloonii mend
Good evening: Үдшийн мэнд -Udshiin mend
Do you speak English? Та англиар ярьдаг уу? – Ta angliar yridaguu?
Good bye: Баяртай - Bayartai
Thank you: Баярлалаа- Bayarlalaa
See you later: Дараа уулзья – Daraa uulzaya
The tax year runs from 1st January to 31st December.
All companies are required to register with Mongolian Central Registration Office, Tax and Social Insurance Authorities. The incorporation process takes around three weeks to be completed.
There is no requirement for a third party to make any tax and /or social security filings on the behalf of a client.
Monthly income tax contributions are paid on the 10th of the following month. The penalty for late payment is penalized at 0.1 % by each day of delay and the total amount of penalty shall not exceed 50 % of the due tax and undue loss at 0.047 % by each day of delay.
Monthly Social Security Contributions are paid before the end of every month.
The following reports must be filed on a monthly basis:
Employers shall deduct insurance from an Employee’s monthly earnings and remit it to social insurance authority on an Employee’s behalf. The Employer shall prepare a monthly report (ND-7, 8) and submit it to the social insurance authority by the 5th of following month.
Employers shall prepare and file withholding Tax Return ((TT-11, 11(1)) to the Tax Authority on a Quarterly and Annual basis. The 20th of April, July and October are dates for the submission of the Quarterly Report; 10th of February of next year for Annual Report.
All reports and returns can be submitted by both parties either Client or Payroll provider.
It should be signed by the Employer or can be signed by a representative of the payroll provider based on previous authorization provided by client.
All employers and employees must contribute to Mongolia’s social security system (SHI). Employers contribute at rates of 12%-14%, while employees contribute at a rate of 11% (capped at MNT 264,000 per month). Employers must withhold employee contributions and pay them to the SHI on a monthly basis.
When a contract of employment in established, employers receive Social and Health Insurance Record Books from the SHI authorities for each employee. Employers must maintain records of monthly Social and Health Insurance Contributions in accordance with applicable regulations. SHI books must be filled out on a monthly basis by employers and be verified by a social insurance officer.
Accordingly, employers will have a Blue Book issued by the Tax Authority for each employee in order to maintain records of Personal Income Tax reports. Those records must be reconciled with the tax authority at the end of the tax year.
When setting up a new start, the following information is required:
When setting up an expat new start, the following information is required:
The deadline for expat new starts to be registered with local authorities is the same as the registration for local Employees.
Employers in Mongolia should be aware of certain statutory requirements and procedures concerning new employees. Registering a new employee involves processing a range of documents and information, including:
New contracts must include details such as basic salary work conditions, along with duties to be performed. The maximum length of a new employee’s probation in Mongolia is 6 months.
Payment for Leavers must be made on the last day of work. Notification of the Leaver to authorities is not necessary.
Mongolian payroll is processed in a Pay As You Earn system, with personal taxes and social security withheld and deducted by employers - and paid to the relevant authorities each pay cycle. Mongolian income tax is charged at a flat rate of 10% for all salaries - with a personal tax allowance of MNT 84,000.
Residency status should be factored into the payroll process, especially when managing a global employee population: ‘resident’ taxpayers are charged on income earned from within Mongolia and worldwide, while ‘non-resident’ taxpayers pay tax only on income earned within Mongolia.
Social security contributions cover Mongolia’s statutory pension scheme, medical insurance, benefit insurance, and unemployment insurance. Contributions to social security are made by both employers and employees.
Employers in Mongolia must provide payslips to employees each pay cycle, although it is acceptable to provide these online. Payroll reports must be kept for a minimum of 5 years for payroll purposes, and a minimum of 10 years for accounting purposes. Mongolia’s payroll laws can represent a compliance challenge for foreign businesses. This being the case, it is often advisable to engage a global payroll provider to take advantage of compliance expertise and ensure employees in Mongolia are paid accurately, and on time.