Adopted by the Parliament in October 2013 and effective on November 1, 2013, the Investment Law is particularly important as it repeals and replaces the former “ Foreign Investment Law” (enacted in May 1993) as well as the Law of Mongolia on the Regulation of Foreign Investment in Business Entities Operating in Sectors of Strategic Importance (enacted in May 2012).
The key changes you need to be aware of:
- The law is applicable to both foreign and domestic investments. It guarantees the rights of both domestic and international investors.
- Foreign invested companies are no longer required to go through a double registration process and they need only to be registered with the Legal Entity Registration Office (“LERO”).
- Foreign investors can establish their presence in Mongolia by either incorporating a limited liability company with foreign investment (“Foreign Invested Company”) or a representative office.
- A Foreign Invested Company is a limited liability company of which at least 25% is owned by a foreign investor and the amount of capital contribution by each foreign investor must be at least US$100,000.
- A representative office of a foreign business entity is an office that has no legal entity status and can only engage in legal representation acts on a proxy basis. A representative office cannot engage in any commercial activity.
- A foreign state owned entity who wishes to acquire 33% or more of the shareholding of a Mongolian entity operating in the mineral resources, banking and finance, or media and communications must obtain prior approval from the Ministry of Economic Development (“MED”). An approval from the Parliament is no longer required.
- The law promotes investment through tax and non-tax incentives for investors. The law stabilizes corporate income tax, customs tariff, value added tax and mineral royalty for various periods of time through a stabilization certificate. The term of the stabilization depends on the amount of investment and the industry sector.
- In the case of investments over MNT500 billion (approximately US$295.0 million), the investor may request to enter into an investment agreement with the Government.
Please see an unofficial translation of the Investment Law here The Investment Law provides many new stipulations in favor of both local and international investors which aim foster greater investment in Mongolia in the years to come. After a tumultuous past two years, the Investment Law is warmly welcomed by Mongolians and foreigners alike. However, the administration and implementation of the law remains unclear and. The regulatory environment in Mongolia is surely changing and GTs Advocates looks forward to updating our clients throughout the upcoming months of implementation of the new law.
For further information, please contact:
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Tel.: +976 332020