Company formation in brief
Foreign investors have several legal opportunities to carry out business activities in Mongolia:
• establishing a company with 100% foreign capital
• establishing a mixed capital company
• registering a foreign company branch in Mongolia
A Mongolian company is qualified as a foreign-invested company if at least 25% of the company's capital is owned by foreign shareholders.
All potential foreign investors are required to file an application for incorporation to be approved by the Foreign Investment and Foreign Trade Agency (FIFTA) of Mongolia and to support it with:
• owners’ and directors’ CVs,
• business plan,
• bank statements evidencing assets for payment of capital,
• copies of corporate participants’ audited financial statements for the most recent period,
• evidence of directors’ and shareholders’ addresses,
• Future office rental contract,
• other documents required by the Foreign Investment and Foreign Trade Agency of Mongolia.
All documents filed for registration should be certified by notary.
The company’s foreign participants have to transfer MNT 10’000’000 (approximately US$10’000) to a temporary account opened in one of the banks of Mongolia.
If the application for incorporation is approved, the foreign participant receives a relevant certificate - the Certificate of Foreign-Invested Company, then a seal, and the temporary bank account opened earlier becomes the company’s permanent account.
All foreign-invested companies are regularly audited by the Central Bank of Mongolia and submit quarterly financial statements in accordance with international standards.
All foreign-invested companies are required to maintain an equipped office in Mongolia. There are no special requirements as to the office’s size and equipment but it should have at least a telephone line, a safe and an alarm system.
Directors and secretaries of foreign-invested companies do not have to be residents of Mongolia, and foreigners may, if applicable, obtain a work permit in Mongolia, but the company’s accountant must be local or familiar with Mongolia’s accounting regulations and have no language barrier.
Directors of foreign-invested companies must have relevant qualifications and experience in their field confirmed by education diplomas or reference letters from employers, and provide a certificate from the law enforcement agencies that they have no criminal past.
Mongolia provides substantial benefits to foreign investors, for example:
• full exemption from taxes for 10 years, and subsequently, exemption from 50% of taxes for another 5 years to companies engaged in construction and maintenance of thermal power plants, electric and thermal energy transmission lines, in telecommunications, roads and railways construction and maintenance and in aviation;
• full exemption from taxes for 5 years and subsequently, exemption from 50% of taxes for another 5 years to companies engaged in mining (except precious metals), metallurgy, engineering and manufacture of electronics;
• full exemption from taxes for 3 years and subsequently, exemption from 50% of taxes for another 3 years to companies with export share from Mongolia of more than 50%.
Foreign-invested companies importing equipment are exempt from all customs duties.
Tax benefits may also be provided to companies engaged in other areas of business.
Foreign shareholders are fully released from foreign exchange control in Mongolia and may transfer abroad their companies’ dividends and profits.
Mongolia is not a tax heaven or offshore jurisdiction, and a concept of Mongolian tax exempt company (and/or Mongolian international business company (IBC), offshore company, trust, foundation etc. registration) does not exist in Mongolia as such. A company formation in Mongolia could be arranged with a professional registered agent providing incorporation, virtual office and other corporate services in Mongolia. To set up a company in Mongolia is possible by correspondence, but to open a bank account in Mongolia will, most probably, require a personal visit.
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