Company Registration in Mongolia: Unlocking Opportunities in Asia

Before embarking on the journey of establishing a business in Mongolia, it is paramount to delve into the nuances of the local market, the competitive landscape, and the legal framework. This article will delve into these critical aspects and more, offering insights into the jurisdiction for launching an international investment project.

Business Landscape and the Setting up a Company in Mongolia

Mongolia's business environment presents a tableau of opportunities and challenges for entrepreneurs. The country actively courts foreign investments, offering enticing tax incentives to international enterprises. With abundant natural resources, Mongolia stands as a promising prospect for ventures in mining and mineral exploration.

Launching a company in Mongolia opens doors to several advantages for international businesses:

Furthermore, while the conditions for obtaining a residence permit in Mongolia are relatively straightforward, it is imperative to acquaint oneself with the intricacies specific to the country. It is advisable to consult subject-matter experts for comprehensive information regarding industry-specific requisites and opportunities in Mongolia's dynamic business landscape.

Legal Forms Available to Foreign Investors for Company Registration in Mongolia

Foreign investors seeking to register a business in Mongolia have several legal forms at their disposal:

It is advisable, when selecting a legal form, to engage with business consultants experienced in supporting the company registration process in Mongolia. Their expertise can guide you in choosing the most suitable legal entity that aligns with your specific needs and requirements.

Sector with the Greatest Economic Growth Potential in Mongolia

If you are contemplating company registration in Mongolia, you have the opportunity to launch your project in various business sectors. The following areas hold significant potential for economic growth:

• Renewable Energy: Mongolia's vast landscapes provide ample potential for renewable energy sources such as wind and solar power. The government is actively encouraging investments in this sector.
• Software Development and IT: Mongolia has potential in software development, mobile technology, and e-commerce.
• Agriculture and Livestock: The agricultural sector in Mongolia offers opportunities in livestock farming and meat production, particularly due to the country's large tracts of pastureland.
• Tourism: Mongolia's pristine landscapes, cultural heritage, and nomadic traditions make it an emerging destination for tourism. Opportunities in hospitality and tourism-related services abound.
• Infrastructure Development: Given Mongolia's commitment to enhancing infrastructure, there are prospects in construction, transportation, and logistics.

Promising Areas for Business Development in Mongolia

Mongolia presents several promising areas for business development, each offering unique opportunities and government support. Here, we delve into these sectors:

Information Technology (IT) Sector:

• Rapid Growth: Mongolia's IT sector has experienced notable growth recently, becoming increasingly vital for the nation's economy.
• Government Support: The government has established IT parks and incubators to nurture IT projects in Mongolia, offering events, master classes, and training to enhance professional skills.
• Skilled Workforce: Mongolian universities offer specialized IT programs, cultivating a pool of qualified talent for the sector.
• Infrastructure Development: The government actively invests in IT infrastructure, attracting foreign companies and investments through these initiatives.
• Legislative Support: Legislative initiatives, including tax incentives and customs duty exemptions for IT equipment, foster an environment conducive to Mongolian IT startup development.

Energy Sector:

• Renewable Energy: Mongolia possesses substantial potential in renewable energy, particularly solar and wind power.
• Investment: Recent years have witnessed increased investment in renewable energy projects, with solar and wind power plants springing up across the country.
• Diversification: The aim is to enhance environmental conditions and diversify Mongolia's energy sources.
• Government Backing: The government actively seeks foreign investment in the energy sector in Mongolia to bolster its significance.

Financial Technology (Fintech):

• Emerging Sector: Fintech is on the rise in Mongolia, playing a pivotal role in the country's aspirations to become a leading digital economy in the region.
• Innovation: Startups and companies are innovating financial services, with a focus on digital payments, mobile apps, and digital lending.
• Government Initiatives: Legislative changes facilitate fintech company establishment, and the government aims to develop innovative financial centers.
• Promising Future: Mongolia's fintech sector shows substantial promise for future growth.

Logistics:

• Strategic Location: Mongolia's strategic location makes it a prime location for logistics businesses, benefiting from significant trade flows.
• Key Components: The logistics sector in Mongolia encompasses road, rail, and air transport, warehousing systems, customs services, and delivery services.
• Government Investment: Government policies and investments aim to improve logistics infrastructure, making Mongolia attractive to professional logistics companies.

These sectors offer ground for investment and business growth in Mongolia. However, successful project development requires a well-crafted strategy and the support in setting up business in Mongolia. IQ Decision UK experts are poised to assist at starting the investment process, ensuring informed and effective decisions in these promising sectors.

Requirements for Founders and Directors When Registering a Mongolian Company

When registering a company in Mongolia, there are specific requirements for founders and directors:

1. Founders:
   • Legal Entities and Individuals: Founders of a Mongolian company can be either legal entities or individuals.
   • Minimum Number: The minimum number of founders required to register a company in Mongolia is one. However, in certain cases, a larger number of founders may be necessary depending on the type of company being established.
   • Documentation for Legal Entity Founders: If a legal entity is a founder, they must provide relevant constituent documents, such as a memorandum of association or a certificate of registration.
   • Documentation for Individual Founders: Individual founders are required to provide an identification document, such as a passport.
2. Directors:
   • Residency Requirement: A company in Mongolia must have at least one director who is a resident of Mongolia. This individual is responsible for the management of the company.
   • Age Requirement: Directors must be adults, meaning they must be 18 years of age or older.
   • No Criminal Record: Directors are typically required to provide a statement of no criminal record to demonstrate their suitability for the position.
   • Identification Document: Directors must present an identification document, usually a passport or another acceptable form of identification.
   • Financial Skills: Directors are expected to possess the necessary skills and understanding of financial management to prepare the company's financial statements effectively.

Company Registration Process in Mongolia:

The process of registering a company in Mongolia involves several stages, which may vary depending on the type of legal entity being established. Generally, the steps include:

1. Determining the type of company to be registered.
2. Reserving a unique name for the company.
3. Preparing the necessary documents, including the company charter, confirmation of minimum authorized capital (if required), and proof of a registered address.
4. Submitting the application and set of constituent documents to the Trade Register.
5. Applying for a Taxpayer Tax Identification Number.
6. Paying registration and other fees associated with the company registration.
7. Opening a bank account in the company's name, which typically requires a registration certificate, tax number, and the founder's passport.
8. If the chosen industry requires licensing, apply for the appropriate licenses.

Registration of Companies in Mongolian Free Zones:

Starting a business in Mongolia's free economic zones offers various benefits for foreign investors, including tax incentives, simplified business procedures, and flexible rules regarding land and property. Active free zones in Mongolia, such as Tsagaan Nuur, Altanbulag, and Zamyn-Uud, attract investors in various industries, including industry, manufacturing, trade, and logistics. Additionally, the creation of new economic free zones, like the one in the Hushing Valley, is designed to promote the tourism industry and international transport logistics, further enhancing Mongolia's investment attractiveness.

Opening a Bank Account in Mongolia

Mongolia's banking sector offers a variety of options for individuals and businesses seeking financial services. Here's an overview of the process and some key banks to consider:

1. Key Banks in Mongolia:
   • Mongol Bank (Central Bank of Mongolia): Mongol Bank is not only the Central Bank of Mongolia but also one of the largest and most stable banks in the country. It provides a wide range of financial services.
   • Khan Bank: Khan Bank is a significant commercial bank in Mongolia, serving both individuals and businesses. Its services include loans, savings accounts, credit cards, and more.

International Banks with Branches in Mongolia:

Several international banks have established branches in Mongolia to cater to the growing demand for financial services. Some notable ones include:

1. Asian-Pacific Bank: This bank offers financing, investment, and customer service services to its clients.
2. ING Bank: ING Bank provides corporate and investment banking services in Mongolia.
3. Standard Chartered Bank: One of the largest international banks in the region, it offers services to both corporate and retail banking clients.
4. Citibank and HSBC: These globally recognized banks also operate in Mongolia, providing access to a wide range of international banking services.

Steps to Open a Business Account in Mongolia:

To open a business account in Mongolia, you can follow these general steps:

1. Research and Choose a Bank: Familiarize yourself with the policies and offerings of various banks to select the one that best aligns with your business goals. Consider factors like terms, requirements, fees, and the bank's reputation.
2. Prepare Required Documents: Each bank may have specific document requirements, so compile a complete list of documents in accordance with the chosen bank's requirements. Commonly required documents may include business registration documents, identification documents, and proof of address.
3. Submit an Application: Fill out an application to open an account at the chosen bank in Mongolia. Be prepared to submit the application along with the set of required documents.

It's essential to keep in mind that the account opening process and specific requirements can vary from one bank to another, and may depend on the type of account you intend to open. To ensure a smooth process, it's advisable to seek guidance on opening business accounts in Mongolia from professionals who are knowledgeable about local banking regulations and services.

The stability of Mongolia's banking sector has been reinforced by reforms aimed at enhancing transparency, reducing risks, and improving regulatory quality. The Central Bank of Mongolia actively works to promote financial literacy and expand access to financial services, especially in rural areas. The banking sector's role in providing resources for investment and business growth is vital to Mongolia's economic development.

Taxation in Mongolia

Corporate Income Tax (CIT):

• CIT is levied at progressive rates ranging from 1% to 25%.
• The applicable rates are as follows:
• 1% for companies with annual revenues up to 300 million MNT (excluding certain industries like mining and oil).
• 10% for the first MNT 6 billion of annual taxable income.
• If annual taxable income exceeds MNT 6 billion, the tax rate is MNT 600 million plus 25% of income exceeding MNT 6 billion.

Taxation of Various Income Sources:

• Dividends: The tax rate on dividends is 10%.
• Royalty: Royalty income is subject to a tax rate of 10%.
• Sale of Real Estate: A tax rate of 2% applies to the sale of real estate.
• Sale of Rights: When selling rights (e.g., mining licenses, licenses for special activities), a tax rate of 10% is applied.

Value Added Tax (VAT):

• Businesses whose sales income exceeds MNT 50 million for 12 consecutive months are required to register for VAT.
• VAT is applied at a standard rate of 10%.

Customs Tariff:

• Customs tariffs on imported goods into Mongolia vary and range from 5% to 40%, depending on the types of goods. Some exceptions may apply.

Conclusion

Recently, Mongolia has emerged as an attractive destination for foreign investors, offering diverse business opportunities. Its abundant natural resources, particularly in primary industries and mining, create promising prospects. Furthermore, Mongolia boasts significant potential in the IT and logistics sectors.

Key factors contributing to Mongolia's appeal to investors include:

1. Macroeconomic Stability: Mongolia maintains a stable economic environment, which is a magnet for investors seeking security and predictability.
2. Reforms for Business Simplification: Recent reforms have streamlined the business registration process in Mongolia, making it more accessible for entrepreneurs.
3. Infrastructure Development: The government is actively investing in infrastructure projects, including roads, airports, and energy initiatives. This presents opportunities for investment in construction and infrastructure development.
4. Strategic Geopolitical Position: Mongolia's strategic location in the region positions it as a hub for trade and investment with neighboring countries.

However, it's crucial for prospective investors to thoroughly research the local regulatory environment and business culture to ensure the success of their projects while adhering to legal requirements.

If you are considering establishing a company in Mongolia, seeking professional assistance from experts like IQ Decision UK is highly recommended. They can provide valuable support throughout the investment process and offer a range of related services to facilitate your venture.