Legal development

1. Mongolian Legislative Changes for
Investors in 2013-2015:
Ashid Advocates LLP
Suite #301, Ochir House Business Center, Peace Avenue 15A/5, 1st
Khoroo, Sukhbaatar District, Ulaanbaatar City - 14210, Mongolia
13 August 2015

2. Legislative changes for Investment
2013-2015
• Investment Law /Approved October 03, 2013/
• Mineral law /Amendments 2013-2015/
• Petroleum Law /Amendments May 09, 2015/
• Law of Power Energy /Amendments June 19, 2015/
• Law on Free Zones /Revised February 12, 2015/
• Industries Promotion Law /Approved July 09, 2015/
• Construction Law /Legislation Bill submitted to Great State Khural July 09, 2015/
• General Tax Law /Amendments June 04, 2015/
• Law of VAT /Amendments February 12, 2015/
• Corporate Income Tax Law /Amendments February 12, 2015 /
• Promote Transparency of Economic Law /Approved August 07, 2015/
• Law on Registration of Legal Entities /Revised January 19, 2015/
• Administrative General Law /Approved June 19, 2015/

3. Investment Law
/Approved October 03, 2013/
• Investment Law was approved on October 03, 2013.
• The purpose of this law was to increase foreign investment in the Mongolian therefore
created very favorable conditions for foreign investors.
• Foreign investors became national investors equal access to the
same;
• Investment tax at the time were able to stabilize over time;
• Invested in relation to land ownership and use of extended
duration;
• bring foreign work force, professional to run on the investing project
is easy.

4. THE AMENDMENTS OF 2013, 2014 AND 2015
TO THE LAW OF MONGOLIA ON MINERALS (2006)
1. The major amendments approved since the year of 2013.
 Stabilization certificate. The Law of Mongolia on Investment (the “Investment Law”) was enacted
on 3 October 2013. Therefore, in compliance with the Investment Law, the relevant amendments
were made and approved under the Law of Mongolia on Amending the Minerals Law, which was
enacted on 3 October 2013.
 Tax incentives. The Parliament of Mongolia enacted the Law of Mongolia on Amending the Minerals
Law on 24 January 2014 under which in the event the license holder sells the extracted gold to the
Bank of Mongolia or its authorized banks, the royalty rate will be decreased to 2.5%.
 Strategic significant deposit. On 18 February 2015, the Parliament of Mongolia approved the Law of
Mongolia on Amending the Minerals Law that sets out in the event the relevant parties to the
contract agree to transfer the percentage of the state share in minerals deposit of strategic
importance upon the approval of applicable authority in charge, the license holder who receiving the
state share has to pay the royalty by percentage approved by Government of Mongolia.

5. THE AMENDMENTS OF 2014 TO
THE LAW OF MONGOLIA ON MINERALS
2. The main amendments, introduced under the Law of Mongolia on Amending the Minerals Law, which
was passed and came into effect on 1 July 2014. Under the initiation of the Government of Mongolia,
which formed as a result of 2012 election, to reform the certain laws in order to increase foreign
investment, therefore achieve the primary objective of stimulating the economy, the Parliament of
Mongolia approved the Law of Mongolia on Amending the Minerals Law on 1 July 2014, which came into
effect on the same day of approval (the “Amendment”). The Amendment includes some key changes,
which include, among others:
 As for the common minerals, and its exploration and mining activities are now stipulated under the
separate law, therefore, it is no longer regulated under the Minerals Law;
 The exploration and collection of non-ferrous metals and precious stones will now require a license
similar that of other common minerals;
• The term for exploration licenses has been extended to 12 years, which was 9 years prior to the
Amendment;
• The license holders have now obligation in giving priority to business entities registered in Mongolia
when procuring goods, works or services and hiring subcontractors;

6. THE AMENDMENTS OF 2014 TO
THE LAW OF MONGOLIA ON MINERALS
• Besides above obligation, the license holders shall give priority to Mongolian concentrator
plants when selling its extracted, concentrated or semi-processed products;
• A license holder whose licensed area has been confiscated as a result of the establishment
of a special purpose zone in accordance with the Law of Mongolia on Land must now be
compensated by the relevant authority who issued the confiscation decision within one year
of the approval of such decision. Therefore, the Minerals law specifically provides that in
the event compensation is not paid within the specified period, the license holder may
continue operating. The most significantly, the Amendment stipulates that in the event the
confiscated area is not treated anymore as the special purpose zone, such area will be
returned to the previous same license holder;
• The maximum area which may be licensed under a single exploration license has been
reduced from 400,000 hectares to 150,000 hectares;

7. Petroleum Law
/Amendments May 09, 2015/
• Oil Law Revision was approved on First of July, 2014
• The powers of government in the oil sector, regulating
improving relations related to monitoring with royalties
(royalties) rates, impose a tax credit, acquisition and
licensing, suspend, revoke oil prospecting, exploration
and exploitation activities.
• Petroleum Law amended on 9th of May, 2015, when
non-conventional oil exploration drilling can be done,
such as technical errors corrected.

8. Law of Power Energy
/Amendments June 19, 2015/
• Business operations in accordance with classification standards
adopted by the United Nations, "gas" and "gas supply network"
concept reflects the new energy concept "gas" attribute.
• On the law draft gas supply, gas added to regulate the use of
new concepts, "Gas supply" license holder being included
unregulated supplier, and more regulations included in law
draft.
• Energy construction license provides from the state
administrative organization in charge of energy.
• Power and heat transfer license holder’s lines and
substations included in the state.

9. Law on Free Zones
/Revised February 12, 2015/
Mongolian special economic zones to attract investment established by free zone. Free Zone Law revised and approved on February 12, 2015.
According to this law, investors to invest in a Mongolian free zone consisting of the following favorable situation.
Free Zone Customs Regime
Goods into the territory of the free zone, with the law on customs tariffs and customs duties to make more concessional terms, simplified customs
clearance.
Visa regimes in the Free Zone
Free citizens of the border region, a period of 30 days without a visa, citizens of third countries are transporting in Free Zone is following Mongolian
international agreements.
Registration management of legal entity in Free Zone
Free Zone registered a legal entity to engage in economic activity was able to enjoy preferential rights law
Special tax regimes in Free Zone
Tax discount, exemption applies to income from Activities and Investment in Free Zone.

10. Law on Free Zones
/Revised February 12, 2015/
Special tax regime in the Free Zone
Free zone tax discount, exemption applies to the following:
1. Goods of imported from abroad to Free Zone exemption customs, excise and value added tax;
2. Import customs, excise and value-added tax paid goods into the customs territory exemption tax;
3. Mongolian goods to the customs territory of the free zone into the value-added tax "0" to impose the rate;
4. Goods export from Free Zone to abroad exemption tax;
5. Legal entity or citizens of Free Zone, produced within the free zone area, the sale of goods, works and services
rendered to impose value-added tax.

11. Law on Free Zones
/Revised February 12, 2015/
Free zones in the corporate income tax exemption applies to the following:
1. Innovation and high-tech enterprise engaged in production of commencement of mining operations in the Free
Zones in next five year exemption from income tax;
2. Registered facilities, under construction real estate in Free Zone exemption from tax.

12. Industries Promotion Law
/Approved July 09, 2015/
According to the Law on Government to encourage the development of export industries will support the
following form.
Exporting more than 30 percent of national production and technological innovation for investment and working capital
loans to commercial banks to provide interest rate gap;
1. high efficiency with advanced technology and provide a high-technology reaserch costs up to 75 percent of the state
budget to support once an industry recovery;
2. Export production supported of a variety of export financing tools and including through the development of factoring
services.
This support is eligible entity shall meet the following requirements:
Domestic raw materials and imported raw materials to be created based on the value of the network.
1. Open Joint Stock Company;
2. Production of main and auxiliary materials, other relief goods, work, services at least 60 percent supplied from
domestic manufacture;
3. Technology to be registered with the registration database.

13. Construction Law
/Legislation Bill submitted to Great State Khural July 09, 2015/
• Construction facility sharing 5 categories and construction of first-class no need permission but
others must be permission.
• Construction work permits or construction of which is described in more detail the process of issuing
the license.
• In addition, the project been submitted before a law is now in force are not included in a regulation,
if construction works with a license to conduct business units transfers with more than 34 percent of
its shares, Special permission must be mandatory again
• Special permission of construction period of up to 3 years, 5 years, 10 years.
• Construction company specified in the permission to the holder of a permission consecutive 3
unemployed, governing the permission would not be valid.
• The relevant organization of the specification shall be issued within 10 days of receipt of the
request.

14. General Tax Law, Law of VAT
• General Tax Law /Amendments June 04, 2015/
• Tax inspections accept documents of electronic forms to
primary documents is reflected.
• Law of VAT /Amendments February 12, 2015/
• VAT with a sales volume of 50 million or more reached, the withholding
tax and budget are the following persons responsible for withholding
tax payers:
1. Sales of goods, works and services in the Mongolian territory;
2. Import goods and services;
3. Export goods and services.

15. Corporate Income Tax Law
/Basic, Amendments/
• Free Trade Zone enterprises to invest:
• 50 percent of the investment amount of income exempt from tax under
the following conditions:
• For infrastructure in 500.0 thousand US dollars or more
• For hotels and tourist complexes, establishment of import-substituting and export factory in
300.0 thousand US dollars or more
• Deficit target commencement of production operations are deducted
from the taxable income of the next five years.
• A taxpayer the newly acquired asset depreciation, amortization
shall commence on the first day of the next quarter.

16. Promote Transparency of Economic Law
/Approved August 07, 2015/
1. Not register with tax authority as taxpayers;
2. Concealed significant amount of taxable income;
3. Movable and immovable property not registered;
4. Not registered scope of work of the Legal Entity;
5. Reduced the payroll and similar income on
which premiums are imposed;
Exempt from taxes according to the law, the following taxes:
1.Corporate Income Tax;
2.Personal income tax;
3.Real Estate Tax;
4.VAT;
5.Excise Tax;
6.Customs Tax
Voluntarily:
 Declared,
 Reported,
 Registration
 Exempting from taxes
 Criminal and
Administrative liability
 Interest, loss undue and
penalties considered
April 01, 2015 December 31, 2015

17. Law on Registration of Legal Entities
/Revised January 19, 2015/
legal entities,
- Registration,
- Archive,
- to provide reference information
As expeditiously as and accessibility in order to provide the following
amendments.
For example:
• the State registration authority shall make a decision whether to register or
not to register within 2 days for registration of Domestic invested legal
entity upon receiving all required documentations in complete form as
detailed
• Previous legal documents necessary for the establishment of new legal
entities 12 was revised law was changed to 8.

18. Administrative General Law
/Approved June 19, 2015/
The Legislation prevents any uncertainty in decision making by the State
authorities. Furthermore, it abolishes limitless actions or inactions of the
State authorities who infringe the legitimate rights of investors, corporations
and individuals under the ambiguity terms of “protection of public interests,
national security and national interests”. Finally, the Legislation ensures no
bureaucracy exist in the State power, as well as decision making path is well
regulated.
 Protection of Legitimate
 Principle of Listening
 Administrative Decision Enforcement

19. Contact details
Tsolmon Shar
Direct line: +976 99102076
E-mail: tsolmon@ashidadvocates.mn
Ashid Advocates LLP
Suite #301, Ochir House Business Center,
Peace Avenue 15A/5, 1st Khoroo, Sukhbaatar District,
Ulaanbaatar City - 14210, Mongolia
Phone: +976 70147878
Fax: +976 70147878
Email: info@ashidadvocates.mn