Investing In... 2026 Comparisons

Mongolia operates under a civil law legal system influenced by continental European legal traditions, particularly German law, while also featuring elements inherited from its historical socialist legal framework. The legal system is codified, meaning that the primary source of law is written legislation rather than judicial precedent. Key sources of law include the Constitution of Mongolia, primary statutes such as the Civil Code, Company Law, Investment Law, and Tax Laws, as well as subordinate regulations issued by governmental and administrative authorities. Judicial decisions do not constitute binding precedent. However, interpretations issued by the Supreme Court may carry persuasive authority and contribute to consistent application of the law.

The judicial structure is organised into three main tiers:

• first-instance courts, which hear civil, criminal and administrative disputes;
• appellate courts, which review lower court decisions; and
• the Supreme Court of Mongolia, which is the highest judicial authority responsible for ensuring uniform interpretation of laws.

In addition, Mongolia has a separate Constitutional Court, (the “Tsets”/“Цэц”), which reviews the constitutionality of laws and governmental acts. The regulatory framework for businesses is administered through a combination of ministries, government agencies and sector-specific regulators. Key institutions include the General Authority for State Registration, responsible for company incorporation and corporate filings, and the tax authority under the Ministry of Finance, which oversees tax compliance.

Sector regulators supervise industries such as mining, banking, telecommunications and energy, and may issue licences and enforce compliance. Administrative decisions may be challenged before administrative courts. In general, Mongolia provides a statute-driven, centrally regulated legal environment where compliance with legislation, licensing requirements and administrative procedures is essential for business operations. Arbitration is widely recognised for dispute resolution, including under the New York Convention.

In accordance with Mongolian law, FDI is generally permitted without prior government approval, reflecting the country’s open investment policy. The main legal framework is the Investment Law of Mongolia (2013), which ensures equal treatment of foreign and domestic investors and does not impose broad screening requirements for most investments. In most cases, the Invest Mongolia agency is responsible for facilitating and registering investments rather than approving them.

However, certain investments are subject to requirements to obtain approvals. If a foreign state-owned legal entity seeks to acquire 33% or more of a Mongolian company operating in strategic sectors, approval from the Government of Mongolia is required. These strategic sectors include mining, banking and finance, media and telecommunications, and infrastructure, as they are considered important for national security and economic stability. FDI is defined as an investment with at least 25% ownership, allowing participation in management. Ownership of 20–50% is considered an affiliate company, while 50–100% constitutes a subsidiary. The Investment Law also provides for various forms of investment, including the establishment of companies, securities investment, M&A, franchising, and financial leasing. Mongolia therefore maintains a liberal investment regime, while applying enhanced scrutiny in strategic sectors and to state-owned foreign investors.

Mongolia’s current economic, political and business climate is shaped by its status as a resource-dependent, frontier market economy with moderate growth prospects but notable structural and governance risks relevant to inbound FDI. Economically, growth remains primarily driven by the mining sector (coal, copper and gold), supported by major projects such as Oyu Tolgoi and strong export demand, particularly from China. Recent growth has been in the range of approximately 5–7% (according to a recent World Bank update), but the economy remains highly sensitive to global commodity price fluctuations and external demand shocks.

Inflationary pressures persist due to import dependence, wage growth and supply-side constraints. Infrastructure bottlenecks, especially in transport, logistics and energy, continue to affect operational efficiency and investment scalability. Politically, Mongolia maintains a democratic system but experiences frequent government turnover and policy shifts, which can affect regulatory predictability. While the state remains broadly pro-foreign investment, investors often view governance stability and administrative consistency as key risk factors. Efforts continue to strengthen fiscal discipline, transparency in the mining sector, and public sector governance, though implementation can be uneven.

From a business perspective, Mongolia maintains an open FDI regime with no general screening requirements, but sector-specific sensitivity persists in mining, banking and strategic assets. The near-term outlook is cautiously positive; steady mining-led growth is expected, alongside gradual reforms in investment regulation and economic diversification efforts. However, political cycle risk and commodity dependence remain central considerations for foreign investors.

Recent Major FDI Enforcement Cases or Expected Legal Changes

In enforcement practice, recent prosecutorial focus has increasingly targeted fraud, embezzlement and asset misappropriation involving foreign investors, particularly in the mining and real estate sectors, with authorities reviewing and re-opening certain cases involving alleged large-scale financial losses and cross-border transactions. At the same time, the Prosecutor General’s Office has intensified centralised monitoring of foreign investment-related criminal cases to improve consistency, recover damages and ensure procedural compliance in investigations.

Recent Changes to Mongolia’s FDI Regulations

Mongolia is currently undertaking several important reforms to its foreign investment framework, with a particular focus on amendments to the Investment Law and Taxation laws. These ongoing draft amendments are intended to strengthen investor protection by providing clearer legal guarantees and more predictable regulatory treatment for foreign investors. A key objective is to simplify administrative procedures, reducing bureaucratic delays and improving the efficiency of investment approvals and post-establishment operations. The reforms also aim to refine the structure and use of investment agreements, including clearer rules on eligibility, stability clauses and dispute resolution mechanisms.

In addition, there is an emphasis on improving tax stabilisation mechanisms to provide greater long-term certainty for large-scale and strategic investments. Institutionally, Mongolia is also strengthening its investment facilitation framework through better coordination among relevant government agencies, enhanced one-stop services and improved regulatory alignment. These measures collectively aim to create a more predictable yet more closely supervised investment environment.

In Mongolia, transaction structures are generally flexible and commercially driven, but are influenced by regulatory requirements, sector-specific licensing regimes, tax considerations and the relatively limited public M&A market. As a result, private company transactions predominate. The most common structure is a share acquisition, where a foreign investor acquires shares directly from existing shareholders, resulting in a transfer of ownership and control at the corporate level. This structure is widely used due to its simplicity and ability to transfer operating licences and contractual relationships together with the entity.

Asset acquisitions are also used, particularly where investors seek to acquire specific assets or business lines while avoiding historical liabilities associated with the target entity. For growth investments and partnerships, capital increases and subscription for newly issued shares are frequently used, especially in minority investments and joint ventures. These structures allow investors to inject capital into the business while acquiring a negotiated ownership stake and governance rights. Joint venture structures are common in strategic sectors such as mining, infrastructure and energy, where foreign investors typically partner with local entities.

Acquisitions of public companies are relatively rare in Mongolia due to the small size of the capital markets. Where they occur, transactions are generally executed through on-market purchases or negotiated block trades, subject to securities law disclosure requirements and oversight by the Financial Regulatory Commission. For foreign investors, key structuring considerations include regulatory approvals in strategic sectors, foreign ownership restrictions, tax efficiency, potential liability exposure in share deals, and enforceability of shareholder rights. Governance protections, exit mechanisms and dispute resolution arrangements are particularly important in minority investments.

Foreign investors undertaking domestic M&A in Mongolia should be aware of several additional regulatory review and approval regimes that may apply, depending on the structure and target sector of the transaction.

• A key area is competition (antitrust) control. Transactions that meet statutory thresholds or may result in a concentration of market power must be notified to and cleared by the Anti-Monopoly Agency, which assesses whether the deal could substantially restrict competition.
• In public M&A, additional requirements arise under securities regulation, including disclosure obligations, tender offer rules, and ongoing oversight by the Financial Regulatory Commission. Any acquisition resulting in a change of control of a listed company may trigger mandatory reporting and procedural requirements.
• Certain sector-specific regulatory approvals may also be required, particularly in regulated industries such as banking, non-bank financial institutions, insurance, telecommunications and mining. These may include prior consent from sector regulators, licensing updates, or approval of changes in ownership or management.
• From a corporate and registration perspective, share transfers and structural changes must be recorded with the State Registration Authority, and may require shareholder resolutions or board approvals under the Company Law.
• Tax and foreign exchange compliance considerations may apply, particularly in cross-border payment structures, profit repatriation and indirect asset transfers.
• In the mining sector, M&A leads to taxation consequences and requires notification to the government agency in charge of mining and petroleum.

While Mongolia does not impose a single unified M&A approval regime, foreign investors must navigate a combination of competition, securities, sectoral, corporate and tax-related approvals depending on the nature of the transaction.

Corporate governance in Mongolia is primarily governed by:

• the Company Law and Corporate Governance Code for listed companies;
• the Securities Market Law;
• the Financial Regulatory Commission; and
• the Mongolian Stock Exchange.

Public joint-stock companies are subject to stricter requirements, including a board of directors, executive management separation, mandatory independent directors, board committees such as audit committees, and enhanced financial and operational disclosure obligations under the Corporate Governance Code. Private companies, mainly limited liability companies, have more flexible governance structures defined by their charter and shareholder agreements. They are subject to the basic statutory fiduciary duties of directors and voluntarily comply with the Corporate Governance Code.

The main legal forms are LLCs, JSCs, and branches or representative offices of the foreign companies. LLCs are most common for foreign investors due to their flexibility and limited liability. JSCs are used for larger or listed entities. They face higher compliance burdens, but allow capital raising and free transferability of shares. Foreign investors may own 100% of companies, subject to sector-specific restrictions in strategic sectors.

Minority investments in Mongolian public companies are governed by the Company Law, Securities Market Law, and regulations of the Financial Regulatory Commission and Mongolian Stock Exchange. Key protections include equal treatment of shareholders, mandatory disclosure of financial and material information, and proportional voting rights at shareholder meetings. Major corporate decisions, such as capital changes, mergers or liquidation, require supermajority approval, safeguarding minority interests. Mandatory tender offer rules may apply in change-of-control situations, providing exit opportunities. Minority shareholders may also challenge unlawful resolutions or seek damages. In general, protections rely mainly on statutory rights, transparency and market mechanisms, rather than negotiated contractual arrangements.

In accordance with the Investment Law, a foreign-invested business entity (FIBE) is generally formed where a foreign investor holds at least 25% of equity and contributes a minimum of USD100,000 (§3.1.5). The primary disclosure obligations arise at the company level through registration with the Legal Entities Registration Office, including disclosure of foreign shareholders, ownership percentages and capital contributions. Any changes in shareholding must be updated in the state registry, and companies must comply with ongoing tax and financial reporting requirements. Foreign investors themselves do not have a separate FDI reporting regime, but their information is disclosed indirectly through company registration and banking/KYC processes.

Overall, Mongolia operates a registration-based system with limited sector-specific approvals, rather than a comprehensive FDI screening regime. Additional disclosure or approval obligations arise only in limited circumstances. Where a foreign state-owned entity acquires 33% or more of a company, prior government approval is required in regulated sectors such as mining, banking and telecommunications before completion of the investment for licensing purposes.

The capital markets in Mongolia are relatively small, bank-dominated, and still developing, with limited liquidity and a small number of listed issuers. The Mongolian Stock Exchange serves as the main platform for trading equities and government securities, while oversight is provided by the Financial Regulatory Commission of Mongolia and the Bank of Mongolia. In practice, commercial bank lending remains the primary source of financing for businesses, particularly for working capital, trade and large projects. State-backed funding, including from the Development Bank of Mongolia, plays an important role in infrastructure and strategic sectors. Although equity and bond markets exist, they are used to a limited extent compared to bank financing. As a result, companies also rely significantly on FDI and internal funding.

The Securities Laws and Regulation Over Capital Markets

Mongolia’s securities market is primarily regulated by the Law on Securities Market (2013) and supervised by the Financial Regulatory Commission, which oversees licensing, disclosure and enforcement. The regulatory framework governs the issuance and trading of securities, with public offerings requiring approval and compliance with prospectus and transparency requirements. Overall, the system is disclosure-based and focused on investor protection, market integrity, and ongoing reporting obligations for listed companies and intermediaries.

Listing on the stock exchange requires compliance with financial eligibility criteria, corporate governance standards, and full disclosure through an approved prospectus. Listed companies and market participants are also subject to ongoing reporting, licensing requirements, and investor protection and market conduct rules. The market is dominated by the Mongolian Stock Exchange, with 180+ listed companies and a focus on mining, banking and financial sectors.

In Mongolia, a foreign investor is not generally subject to securities laws solely as a result of making a private FDI in a non-listed company. However, securities law requirements may apply if the investment involves shares in a publicly listed company, triggering disclosure, reporting, or takeover-related obligations. Additional requirements may also arise where the transaction involves public offerings, issuance of securities, or regulated market intermediaries. In most cases, a typical private FDI transaction in a non-listed company does not give rise to direct obligations under securities laws.

For Foreign Investors Structured as Investment Funds

The Law on Investment Funds requires that foreign investment funds (§43) operating in Mongolia register with the Financial Regulatory Commission before conducting investment activities, but this is a registration requirement rather than a substantive approval process. It also prohibits foreign funds from publicly offering their shares in Mongolia, while only allowing private placements with prior approval from the regulator. Overall, the regulatory review focuses mainly on disclosure, investor protection and compliance with reporting requirements, rather than restricting the investment itself.

Exemptions

There are no formal blanket exemptions for foreign investment funds under this law. Rather, the regime works through:

• prohibition (public offering);
• mandatory registration; and
• limited conditional permissions for private placements.

Review Criteria

The review is primarily regulatory and investor protection-focused, not economic or discretionary FDI screening. It concentrates on whether the foreign fund is properly regulated abroad, transparent in structure, and compliant with Mongolia’s restrictions on public fundraising.

Mongolia has a merger control regime under the Law on Competition, administered by the Anti-Monopoly Agency. There are no exemptions based on foreign investor status. However, exemptions may apply to:

• intra-group reorganisations (non-change of ultimate control);
• transactions below statutory thresholds; and
• certain financial restructuring cases, depending on structure and control impact.

There are no special foreign investor thresholds or additional FDI-specific merger filing triggers. A notification is generally required where statutory turnover/asset thresholds are met, or where the transaction creates a controlling interest in a relevant market. Mongolia operates a suspensory pre-merger notification system.

• Filing must be made prior to completion of the transaction.
• The Agency conducts an initial review (typically 30–60 days).

Substantive review by the Agency assesses whether the transaction would substantially restrict competition, create or strengthen a dominant position, or otherwise harm market structure. Remedies (including divestitures or behavioural commitments) may be imposed.

In Mongolia, where a merger control regime applies, the Anti-Monopoly Agency conducts a substantive competition assessment to determine whether a transaction would substantially lessen competition or create or strengthen a dominant position. The analysis typically begins with market definition, identifying the relevant market based on demand-side substitutability in both product and geographic terms. This is followed by an assessment of market structure, including market shares, levels of concentration and the presence of close competitors.

A central component of the review is the assessment of competitive effects. In horizontal transactions, the authority examines whether the merger removes important competitive constraints, leading to unilateral effects (such as price increases) or an increased risk of coordinated effects (ie, facilitating collusion). In vertical and conglomerate transactions, the focus is on potential foreclosure risks, such as restricting access to inputs or customers, or leveraging market power into related markets. The authority also considers barriers to entry and expansion, with higher barriers increasing the likelihood of anti-competitive effects. In addition, buyer power, market dynamics, and competitive constraints from imports or alternative suppliers are considered.

Finally, the parties may submit efficiency arguments, provided these are verifiable, merger-specific, and likely to result in benefits to consumers. In some cases, broader public interest considerations (such as employment or economic impact) may also be considered. Ultimately, the authority may clear the transaction unconditionally, approve it subject to remedies, or prohibit it in exceptional cases.

Merger control is governed by the Law on Competition (2010) and enforced by the Anti-Monopoly Agency. If a merger or acquisition is considered to have a negative impact on competition, the authority may approve it subject to conditions, or in exceptional cases, prohibit it. Possible remedies include structural measures, such as divestiture of assets or business units, separation of subsidiaries, or reduction of ownership stakes. They may also include behavioural commitments, such as:

• obligations to provide non-discriminatory access to services;
• restrictions on pricing or exclusive agreements;
• information firewalls; and
• ongoing reporting requirements.

In some cases, the authority may also require the appointment of an independent monitoring trustee to oversee compliance with the imposed conditions.

The Invest in Mongolia Agency plays a promotional and support role, while actual regulatory approval and enforcement powers remain distributed across sector-specific regulators and other competent state bodies. This means that there is no single foreign investment screening authority with a broad mandate to block all FDI on national security grounds. However, foreign investment may still be restricted, challenged or effectively blocked through sector-specific regulation, competition review, and post-transaction enforcement mechanisms. In regulated sectors such as banking, finance, insurance, telecommunications and mining, relevant sector regulators (including the Financial Regulatory Commission, Bank of Mongolia or other licensing authorities) may have approval rights over changes in ownership or control.

These authorities may approve, condition or refuse transactions, and where approval is required, failure to obtain it may prevent completion. In addition, under the Competition Law, the Anti-Monopoly Agency may review M&A meeting notification thresholds, and may approve, impose remedies or prohibit transactions that are likely to substantially restrict competition. Where an investment has already been completed, authorities may still intervene if:

• required approvals were not obtained;
• notifications were not made; or
• other regulatory obligations were breached.

Consequences may include:

• administrative sanctions;
• fines;
• suspension of shareholder or voting rights;
• restrictions on the exercise of control; and
• orders for corrective measures.

In certain regulated sectors, authorities may also require retroactive compliance, obtaining approval after closing, or in practice, unwinding or restructuring the transaction. Additional issues may arise if ownership changes are not properly registered with the State Registration Authority, potentially affecting the legal recognition and enforceability of ownership rights. If a decision by a regulator or the competition authority is unfavourable, investors generally have the right to seek administrative review within the relevant authority and subsequently pursue judicial review before Mongolian courts under the Administrative Law framework. Courts may review the legality, procedural compliance, and reasonableness of decisions. Mongolia does not operate a unified FDI screening regime, but instead relies on sectoral approvals, competition law enforcement and post-transaction supervision.

Mongolia has a targeted foreign investment review regime, rather than a comprehensive system that applies to all foreign investors. The regime is specifically designed to regulate investments made by foreign state-owned enterprises (SOEs) in certain sensitive sectors.

The authority responsible for administering this regime is the Ministry of Economy and Development, which receives applications, conducts the review and issues final decisions.

A mandatory prior approval requirement is triggered when a foreign state-owned legal entity, as an entity where a foreign government directly or indirectly holds 50% or more of shares, seeks to acquire 33% or more of the shares of a Mongolian legal entity operating in any of the following sectors:

• mining;
• banking and finance; or
• media, information and communications.

Exemptions

The review regime applies only to foreign SOEs. Private foreign investors are not subject to this specific approval mechanism, regardless of the sector or size of investment. There are no express exemptions listed within the SOE review regime itself. Additionally, Article 4 carves out the following from the Investment Law entirely:

• public procurement investments using state/local budget funds; and
• grants and non-commercial donations by international or NGO entities.

The Process and Timeline in Accordance With §22.1 and §22.3 of the Investment Law

The foreign SOE submits a written application to the Ministry of Economy and Development, either directly or through its representative office or authorised representative in Mongolia.

The application must include:

• notarised copies of the entity’s registration certificate;
• a two-year registry record of the applicant, its affiliated entities and executive management;
• details of the preliminary transaction (type, terms, parties, number of shares, ownership percentage, transaction price and any proposed governance changes);
• financial statements of both the foreign SOE and the Mongolian counterpart; and
• an investment plan and business proposal. All documents must be in the Mongolian language.

The authority reviews the application and may request opinions from relevant government bodies, which have 30 days to respond.

The final decision is made within ten business days.

Importantly, clearance must be obtained prior to the investment. A foreign SOE may proceed with the investment only after receiving approval, making such clearance a precondition rather than a post-investment formality.

The foreign investment review regime in Mongolia is based on a set of core substantive criteria that the competent authority applies when assessing proposed investments by foreign SOEs. In conducting its review, the authority evaluates the following according to §22.4 of the Investment Law of Mongolia.

• National security considerations – the authority assesses whether the proposed investment would conflict with Mongolia’s national security framework, including whether the nature of the investor’s activities or the transaction is inconsistent with the National Security Concept.
• Legal compliance capacity – it evaluates whether the investor has the ability to comply with Mongolian law and established business practices, including sufficient legal, financial and operational capability.
• Competition impact – the authority examines whether the investment could restrict market competition or lead to the creation of a dominant position in the relevant sector.
• Fiscal and policy impact – it considers whether the investment may have a materially negative effect on state revenues or undermine broader government policies and activities.

These criteria are applied in a generally uniform manner, and the law does not establish separate analytical frameworks depending on the form of the investment. For example, partnerships and joint ventures are not subject to distinct review standards. However, they may still fall within the scope of the regime if the applicable ownership threshold is met. Specifically, where a foreign SOE holds 33% or more of a Mongolian entity through a joint venture structure, the investment will trigger the mandatory review requirement.

At the same time, the regime is explicitly designed to capture investments involving foreign governments or government-affiliated entities. The definition of a foreign SOE is broad and extends to situations where a foreign state holds, directly or indirectly, 50% or more of the shares, thereby encompassing complex ownership chains and layered corporate structures. By contrast, non-controlling minority investments are treated differently in practice due to the operation of the threshold requirement. Investments by foreign SOEs that fall below the 33% ownership threshold are not subject to mandatory review, even if they are made in sensitive sectors. Moreover, the law does not provide for any discretionary mechanism that would allow the authority to review such sub-threshold investments, meaning that they remain outside the scope of the regime altogether.

The Investment Law does not explicitly set out a defined list of remedies or behavioural commitments that may be imposed as conditions for approving a foreign investment. Instead, the framework suggests a more implicit and flexible approach, where any conditions would be derived from the substantive assessment carried out by the reviewing authority. In particular, before approving, the authority evaluates whether the proposed investment raises concerns related to national security, the investor’s ability to comply with Mongolian law, potential anti-competitive effects, or negative impacts on state revenues and public policy.

Where such risks are identified, this assessment effectively provides the basis for requiring the investor to address those concerns, meaning that any commitments would logically be tailored to mitigate the specific issues identified during the review. In practice, the review process allows for a degree of ongoing engagement between the authority and the investor. The authority may request additional documentation beyond the initially submitted materials, indicating that the process is not strictly one-off but can involve iterative clarification and supplementation.

Furthermore, the authority may seek input from other relevant government bodies, including sector-specific regulators such as those in banking or mining, which may indirectly influence the types of conditions attached to an approval. Although the law does not expressly frame them as formal remedies, approval appears to be closely tied to the investor’s submitted investment plan and business proposal. This implies that the investor is expected to carry out the project in accordance with those commitments, creating a form of ongoing compliance obligation.

The Ministry of Economy and Development does have the power to block or otherwise prevent FDI in certain circumstances. In particular, the Ministry of Economy and Development may refuse to grant approval for investments by foreign SOEs in the designated sensitive sectors. Such a refusal is based on the same substantive criteria applied during the review process, including concerns relating to national security, legal compliance, competition, and potential negative impacts on state revenues or public policy.

The Ministry acts as the ultimate decision-maker, and the law does not provide for escalation to the Cabinet or Parliament as part of the formal approval process. However, the authority may consult other government agencies during its review, particularly where sector-specific expertise is required. Despite this consultative element, the final determination remains with the Ministry itself. Regarding the appeal rights, the Investment Law does not establish a dedicated mechanism for challenging approval decisions. Nevertheless, under general principles of Mongolian administrative law, decisions issued by state administrative bodies may be challenged before the Administrative Court.

If a foreign SOE proceeds with an investment without obtaining the required prior approval, it may face significant legal consequences. Violations may result in liability under applicable laws, including the Criminal Code or the Law on Violations, depending on the nature and severity of the breach. Moreover, any tax stabilisation certificate granted in connection with the investment may be invalidated if it is later determined that the required approval was not obtained. While the law does not explicitly mandate forced divestment, these consequences indicate that non-compliant investments may be exposed to serious regulatory risks, including the potential loss of legal protections and the possibility of corrective measures.

Tax Stabilisation Regime

In addition to the foreign investment review framework, Mongolia provides a tax stabilisation regime designed to enhance predictability for investors. Foreign investors whose projects meet certain investment thresholds may apply to the Ministry of Economy and Development for a stabilisation certificate. This certificate fixes key tax rates, such as corporate income tax, customs duties, VAT and mineral resource royalties for a defined period. The duration of stabilisation depends on both the size and location of the investment, typically ranging from five to eighteen years for mining, heavy industry and infrastructure projects, and from five to fifteen years for other sectors. In certain cases, particularly for large-scale projects exceeding MNT500 billion that produce export-oriented or import-substituting goods, the stabilisation period may be extended by up to 1.5 times.

Licensing and Permit Regime

Foreign investors must also comply with Mongolia’s licensing and permitting framework, which is governed by the Law on Permits alongside sector-specific legislation. Permits are divided into ordinary and special categories, with special permits applying to higher-risk sectors such as mining, banking and finance, media, telecommunications and nuclear-related activities. These permits are typically granted for periods ranging from five to 20 years and are subject to ongoing regulatory supervision. Importantly, permits may only be issued to entities registered in Mongolia, meaning that foreign investors are generally required to establish a local legal entity before commencing regulated activities.

Land Use Restrictions

Land ownership and use constitute a significant legal and practical constraint for foreign investors in Mongolia. Under Mongolian law, foreign investors, whether individuals or foreign-invested legal entities, are not permitted to own or possess land and may only obtain limited land use rights. This restriction is grounded in the Constitution of Mongolia and further implemented through the Land Law, which strictly reserves land ownership for Mongolian citizens. In practice, foreign investors may access land only through contractual use arrangements. The Investment Law allows land to be used for a base term of up to 60 years, with the possibility of a one-time extension of up to 40 additional years under the original contractual conditions.

However, in sectors involving subsoil use, such as mining, more specific limitations apply. For example, under the relevant legislation governing subsoil use, land and resource exploitation rights are generally granted for up to 30 years, with a possible single extension of up to 20 years, calculated from the date of registration of the mining license. In the nuclear energy sector, land use and related investment rights are governed by a separate regime. Investment agreements in this field may be concluded for a period of up to 20 years, with a possible extension of up to ten years, reflecting the distinct regulatory framework applicable to nuclear-related activities.

Free Zone Regime

Mongolia has established four free zones, including Tsagaannuur, Altanbulag, Zamyn-Üüd and Khushig Valley, which operate under a distinct regulatory and tax framework. These zones are treated as being outside the customs territory for certain purposes and offer various incentives to investors. For example, goods imported into free zones are exempt from customs duties and certain taxes, and transactions within the zones may not be subject to VAT. Investors may also benefit from exemptions on employment-related fees for foreign workers and temporary land fee exemptions. In addition, both domestic and foreign currencies can be used within these zones. Foreign entities wishing to operate in a free zone must complete a registration process with the relevant local authority, which is generally completed within a short timeframe.

Foreign Employee Regime

Foreign investors employing non-Mongolian nationals must navigate a detailed regulatory framework under labour and migration laws. Employers are required to prioritise local hiring and may only recruit foreign workers if no suitable Mongolian candidates are identified within a specified period, typically 14 business days. The employment of foreign workers involves multiple steps, including obtaining permits, visas and residence authorisations, as well as paying applicable employment fees. These fees may vary depending on the sector and workforce composition, and can be significantly higher in industries such as mining where foreign workers exceed certain thresholds. Although recent reforms have relaxed numerical limits on foreign employees in most sectors, compliance with procedural requirements and workforce ratio policies remains essential.

Corporate Structure Requirements

Foreign investment in Mongolia is typically carried out through a locally incorporated entity, most commonly a limited liability company (LLC). Under Mongolian law, a foreign-invested company must have a minimum total equity of USD100,000 (or its equivalent in local currency), with at least 25% owned by one or more foreign investors. Where multiple foreign investors are involved, each is generally required to meet the minimum capital contribution threshold. This requirement ensures a baseline level of financial commitment and local incorporation for foreign investment activities.

Mongolia’s taxation of companies is governed primarily by the General Tax Law, which sets out the overarching principles of the tax system. This framework is supplemented by a range of specific tax laws covering:

• corporate income tax (CIT);
• personal income tax;
• value-added tax (VAT);
• excise tax;
• customs duties;
• immovable property tax;
• city tax;
• mineral royalties; and
• water resource usage fees.

Together, these form a comprehensive regime applicable to businesses operating within the jurisdiction.

Corporate Income Tax

Corporate income tax is the principal tax imposed on companies and is applied on a progressive basis depending on the level of taxable income. For most sectors, a reduced rate of 1% applies to annual taxable income up to MNT300 million, excluding certain industries such as extractive sectors, tobacco, petroleum and fuel. Beyond this threshold, a rate of 10% applies to the first MNT6 billion of taxable income, while income exceeding MNT6 billion is taxed at 25%, in addition to a fixed amount. The Mongolian tax system does not formally distinguish between corporations and partnerships for the purpose of applying CIT. Similarly, there is no general distinction in headline tax rates between domestic and foreign companies.

However, a key difference arises in the treatment of non-resident entities. Income earned in Mongolia by non-resident taxpayers is generally subject to withholding tax at a flat rate of 20%, rather than the progressive CIT regime that applies to resident companies. This includes income earned through representative offices, as well as income earned without formal registration in Mongolia.

Tax Incentives and Exemptions

The tax framework provides a number of exemptions and preferential treatments aimed at encouraging investment in certain sectors and activities. For example, income earned by healthcare and educational institutions, as well as non-profit entities engaged in activities consistent with their charter, may be exempt from corporate income tax. Additional exemptions apply to operating income of investment funds and dividends distributed by state-owned enterprises to the government. More broadly, the Investment Law offers mechanisms such as tax stabilisation certificates, which allow qualifying investors to lock in key tax rates for a defined period. This provides greater certainty and protection against adverse changes in tax policy, making Mongolia’s investment environment more predictable for long-term projects.

Under Mongolian tax law, payments of passive income to foreign investors are generally subject to withholding tax. Dividends paid to non-resident investors are taxed at a rate of 10% under domestic law. Similarly, interest income is typically subject to a 10% withholding tax, although a reduced rate of 5% applies in specific cases, such as interest on loans or debt financing sourced from commercial banks, including domestic commercial banks.

Royalties paid to foreign investors are also subject to withholding at a rate of 10%. In addition, where a Mongolian representative office remits profits to its foreign head office, such remittances are taxed at a higher rate of 20%. Mongolia has entered into 26 double taxation agreements (DTAs) with other countries, which may reduce, or in some cases, eliminate these withholding tax rates. The precise rates applicable under a treaty depend on the specific agreement in question. In many cases, treaties provide for reduced withholding tax rates on dividends, interest and royalties, often subject to certain conditions.

These conditions may include minimum shareholding thresholds (for example, where a foreign investor must hold a specified percentage of shares in a Mongolian company to benefit from a lower dividend withholding rate) or minimum holding periods. However, such requirements vary from treaty to treaty and must be analysed individually. As a general principle of the Law of Mongolia, where an international treaty provides more favourable tax treatment than domestic legislation, the provisions of the treaty will prevail. Accordingly, Mongolia’s DTAs play a central role in determining the taxation of cross-border income.

Mongolia’s tax framework, governed principally by the General Tax Law and the Law on Corporate Income Tax, offers several legitimate planning opportunities for foreign investors. Corporate income tax is levied on a progressive scale of 1%, 10% and 25%, and the regime includes meaningful incentives in the areas of depreciation, loss utilisation, intellectual property and special investment regimes.

Acquisition Structures and Asset Basis Step-Up

Investors acquiring a Mongolian business may structure the transaction either as a share acquisition or as an asset acquisition. An asset purchase allows the acquirer to record acquired assets at fair market value, enabling depreciation deductions on a stepped-up basis over the statutory periods of:

• ten years for buildings and constructions;
• five years for equipment; and
• immediate deduction for other fixed assets.

By contrast, a share acquisition does not give rise to a step-up in the underlying asset base, though it may offer other commercial advantages. Start-up companies engaged in innovation activities benefit from immediate accelerated depreciation, which can significantly enhance early-stage cash flow. Non-residents disposing of shares in Mongolian companies are subject to a 20% withholding tax effective from July 2024, which is a relevant consideration when planning exit structures.

Earnings Stripping with Intercompany Debt

Financing a Mongolian operating entity with intercompany debt rather than equity allows interest payments to be deducted from the CIT base of the borrower, thereby reducing taxable income. Outbound interest payments to non-residents are subject to a 10% withholding tax, and intercompany arrangements must be conducted on arm’s length terms consistent with Mongolia’s general tax principles. Where Mongolia has concluded a double tax treaty with the lender’s jurisdiction, reduced withholding tax rates may apply. Interest on loans drawn from Mongolian commercial banks benefits from a reduced 5% rate. Investors should carefully balance the debt-to-equity ratio of the Mongolian entity to optimise deductibility while managing withholding tax costs.

Cross-Licensing and Intellectual Property Arrangements

Mongolia’s tax law contains several favourable provisions for IP-driven structures. Royalty payments to non-residents are subject to a 10% withholding tax, while income derived from the sale of IP rights is taxed at a reduced 5% rate. Notably, income from the intermediary of IP rights and interest income from loans secured by IP rights are fully exempt from corporate income tax. Software licence fees and server rental fees paid to non-resident entities in connection with the primary operations of a Mongolian software development company are also subject to a reduced 5% withholding rate rather than the standard 20% applicable to other non-resident income. Multinational groups holding IP centrally and licensing it to Mongolian operating entities can therefore achieve meaningful tax efficiency, particularly where the licensor is resident in a treaty jurisdiction. The state also finances patenting costs for qualifying innovation companies, further reducing the effective cost of IP development.

Utilisation of Net Operating Losses

Mongolian tax law permits the carry-forward of tax losses to shelter future taxable income, subject to limitations that vary by sector. In general sectors, losses may be carried forward for up to four years, with utilisation capped at 50% of taxable profit in any given year. In the infrastructure and mining sectors, the carry-forward period extends to between four and eight years, better reflecting the long-term capital recovery profile of such projects. Investors should sequence investment expenditure carefully to ensure that losses arising in capital-intensive early years are generated within an entity that will have sufficient future taxable income within the applicable carry-forward window. Companies holding a stabilisation certificate benefit from the additional certainty of knowing the tax rate at which carried-forward losses will ultimately be utilised.

Group Structuring and Consolidation

Mongolia does not provide for a formal tax consolidation regime, meaning each legal entity is taxed separately, and intra-group loss offsets are not available. In the absence of consolidation, the structure of a multi-entity group requires careful consideration.

The progressive CIT rate scale – 1% on income up to MNT300 million in qualifying sectors, 10% on the first MNT6 billion, and 25% on income exceeding that threshold – creates rate arbitrage opportunities that investors may consider when deciding whether to consolidate multiple business lines within a single entity or operate through separate entities. Intra-group dividends are subject to a 10% withholding tax, while profits repatriated from a representative office to its foreign head entity attract a higher 20% withholding tax, making the subsidiary structure generally more efficient than a branch for profit repatriation purposes.

Stabilisation Certificate

The stabilisation certificate is among the most effective tax planning tools available to qualifying investors. Upon issuance, it locks in the applicable rates of corporate income tax; customs duty; VAT; and mineral resource royalties, for the full duration of the certificate, ranging from five to 18 years depending on the sector and investment amount. The stabilisation period may be extended 1.5 times for investors producing export-oriented or import-substituting products of long-term socioeconomic significance where the total investment exceeds MNT 500 billion. The certificate provides a fixed-tax environment within which loss carry-forwards, depreciation strategies and intercompany arrangements can be implemented with a high degree of certainty.

Free Zone Structures

For investors whose operations can be conducted within one of Mongolia’s three active free zones, Tsagaannuur, Altanbulag and Zamyn-Üüd, substantial indirect tax savings are available. Goods imported from overseas are exempt from customs duties, import tax, VAT and excise tax. No VAT is imposed on goods manufactured or services rendered within the free zone by registered entities, and registered facilities are fully exempt from immovable property tax. Land fee exemptions apply for the first five to ten years of operation, depending on the activity. These benefits may be combined with the stabilisation certificate regime and loss carry-forward provisions to create a highly efficient overall tax structure for qualifying investors.

Mongolia does not maintain a separate capital gains tax regime. Gains derived from the disposal of assets are treated as ordinary income and taxed under the corporate income tax framework, and there is no general capital gains exemption available to foreign investors. Mongolia does not offer a general capital gains exemption or a dedicated blocker corporation regime, and the primary planning tool available to foreign investors is the interposition of a holding company in a jurisdiction that has concluded a favourable double tax treaty with Mongolia, which may reduce or eliminate withholding taxes on disposal gains, dividends, interest and royalties flowing from the Mongolian operating entity.

Mongolia’s General Tax Law establishes a multilayered anti-avoidance framework governing FDI through several interconnected regimes. At the broadest level, the General Anti-Avoidance Rule empowers tax authorities to disregard any tax scheme implemented alone or jointly with others where the primary purpose is obtaining a tax benefit, allowing authorities to recalculate the taxpayer’s position as if the scheme had never existed, subject to a four-year look-back period authorised by a dedicated risk management committee.

The transfer pricing regime requires all controlled transactions between related parties to conform to the arm’s length standard, with mandatory adjustments where deviations reduce the tax base. Related parties are broadly defined to capture entities with 20% or more direct or indirect ownership, group members, and those with coordinated voting arrangements. There are five recognised pricing methods:

• the comparable uncontrolled price (CUP) method;
• the resale price method (RPM);
• the cost plus method (CPM);
• the transactional net margin method (TNMM); and
• the transactional profit split method (TPSM).

The TPSM may be applied individually or in combination, and larger taxpayers, group members and foreign-invested entities must file comprehensive documentation, including local files, master files and country-by-country reports alongside their annual tax returns. Critically, transfer pricing differences trigger secondary adjustments, treating the price differential as deemed dividends, creating a two-layer tax consequence that significantly raises the cost of non-compliance.

If a taxpayer conducts controlled transactions with a legal entity from a non-cooperative jurisdiction or fails to fulfil transfer pricing obligations, the tax authority is entitled to make additional tax assessments based on publicly available information from comparable taxpayers or data from the unified tax registry. It may use third-party information on a confidential basis, solely for comparison purposes. The list of non-cooperative jurisdictions, covering countries that do not exchange tax information with Mongolia or have high-risk tax systems, must be published annually by the competent tax authority.

The ultimate beneficial ownership rules further constrain offshore structuring by requiring holders of mining, petroleum, radioactive mineral licences and land use rights to register and continuously update beneficial owners holding 30% or more, effectively piercing corporate veils in the natural resources sector. Mongolia’s extensive automatic and on-request information exchange framework with treaty partners, combined with mandatory financial institution reporting obligations, significantly undermines the effectiveness of offshore vehicles designed to obscure taxable transactions.

While explicit anti-hybrid rules comparable to OECD BEPS Action 2 standards and controlled foreign corporation regimes are notably absent from this law, the combined operation of the general anti-avoidance rule, transfer pricing secondary adjustments, broad related party definitions, and information exchange provisions creates a framework capable of challenging most cross-border tax arbitrage structures where tax avoidance is the primary driver.

Mongolia’s employment and labour regime is governed by the Labour Law (2021), which sets the core rules on employment contracts, working conditions, and labour disputes. It also requires employers to implement practical rules on wage setting and payment (including payslip disclosures and payment form) and annual leave/leave pay through compliant contracts and internal labour regulations. The framework is supplemented by the Law on Labour Safety and Hygiene (2008) for workplace OSH duties and the General Law on Social Insurance (2023) for employer/employee social insurance obligations and coverage.

In Mongolia, collective bargaining and union-based representation are legally recognised and commonly used. The Labour Law defines an “employee representative” primarily as a trade union (or its representative) and, where no trade union exists, an employee elected by a meeting of all employees, which means collective engagement can arise even in non-union workplaces through duly mandated representatives.

“Works council” type arrangements may exist as internal organisational forms, but they are not the default legal model; the Labour Law’s operative concept for collective representation is the trade union or elected employee representative acting under a valid mandate. Foreign investors planning FDI should pay close attention to employment of foreign nationals, which is governed through labour force migration and foreign legal status rules (work authorisation, visas/residence and registration).

Quotas on foreign employees can apply by each sector, but Mongolia has adopted a policy position of not setting numerical or percentage limits on foreign workers in most economic sectors, excluding:

• public administration, defence or mandatory social security; and
• international organisations or permanent missions, where limits are specified.

Employee compensation and related payments (including allowances and extra pay) are paid in monetary form and in the national currency, subject to limited statutory exceptions. A statutory minimum wage applies as the floor (MNT792,000 per month effective 1 April 2025). Pensions/retirement benefits are primarily delivered through the mandatory social insurance system, which provides pension and related benefit coverage under the General Law on Social Insurance. Other key statutory benefits commonly include paid leave entitlements (annual leave and public holidays, plus family-related leaves such as paternity/parental arrangements, depending on the employee’s circumstances) set by labour legislation and related rules.

Mongolia also provides statutory benefits in certain employer-initiated termination scenarios, and the amount can increase with length of service. Under Mongolian law, a change in ownership or control of a business (including a change in the entity’s subordination/affiliation, form of ownership, legal form or management) does not, by itself, constitute a lawful ground to terminate employees’ employment relationships.

As a result, in a typical change of control transaction, employees’ existing compensation arrangements (salary, allowances and bonuses) generally continue on their current terms, because the employment relationship is not automatically severed merely due to the transaction. In addition, any provision in a collective agreement, collective bargaining instrument, employment contract, or internal labour regulation that reduces or undermines employee rights below the statutory minimum is void and unenforceable. This limits a new owner’s ability to unilaterally reduce pay or benefits post-closing through internal policy changes or revised contracts.

Where the employer terminates employment in connection with a transaction, the Labour Law requires advance written or electronic notice (at least 30 days) and, where continued performance is not required or possible during the notice period, permits the employer to keep the employee off work while paying compensation calculated on average salary until termination. If employment is terminated on specified employer‑initiated grounds, the employee is entitled to a one‑time statutory severance (irrespective of unemployment benefit eligibility), which can range from at least one to four months’ base salary, depending on length of service, and may be increased by collective instruments.

The Labour Law does not provide a specific “mandatory transfer” mechanism requiring employees to move to a new employer as part of an acquired business. Any move to a different employing entity is handled through employee consent and appropriate contractual arrangements. Completion of an acquisition and investment transaction in Mongolia does not require mandatory collective bargaining or a working council requirement as a legal condition precedent. However, where a trade union exists, the employer may need to provide information and engage in consultations, especially if the deal is expected to result in restructuring, workforce reductions or changes to employment terms.

Mongolia does not have a dedicated FDI screening mechanism specifically focused on intellectual property, and IP is not used as a standalone criterion in approving or rejecting foreign investments. Instead, IP is addressed indirectly within the broader investment and regulatory framework. The Investment Law of Mongolia provides a general guarantee that both foreign and domestic investors’ IP rights will be protected, which functions more as a safeguard than as a screening tool.

Although not part of an FDI screening process, Mongolia’s IP and copyright laws impose important compliance obligations on foreign investors. Industrial property rights must be registered locally to be enforceable, and foreign applicants are required to act through a licensed Mongolian representative, creating a procedural requirement for market entry. In addition, the Copyright Law places active responsibilities on digital and media-related businesses to prevent and respond to infringement, with regulators empowered to order the suspension of infringing activities.

Mongolia’s IP framework is governed by the Law on Intellectual Property (2020), which serves as an umbrella statute supplemented by the Law on Patents, Law on Copyright, and Law on Trademarks and Geographical Indications.

Protected rights fall into two categories:

• copyright and related rights; and
• industrial property rights covering inventions, utility models, product designs, trade marks and geographical indications.

Copyright arises automatically upon creation without registration. Industrial property rights require formal registration with the Intellectual Property Office of Mongolia, which conducts substantive examinations and maintains a publicly accessible unified IP database. The state may support IP commercialisation through tax incentives, an IP commercialisation fund, and assistance with domestic and international registration. IP rights may be exploited through licensing, assignment, franchise, or as investment capital or collateral.

Regarding limitations, the Law contains no express provisions on AI-generated works, leaving eligibility uncertain for works lacking identifiable human creative authorship. Foreign rights holders cannot file industrial property applications directly and must engage a licensed IP representative who must be a Mongolian citizen permanently resident in Mongolia.

Mongolia’s Law on Personal Data Protection (the Law on Data Protection), in force since 1 May 2022, governs the collection, processing, use and security of personal data. It establishes consent requirements, data subject rights, security obligations, breach notification duties, and restrictions on cross-border transfers. The Law on Data Protection contains no explicit extraterritoriality provision comparable to the GDPR. A foreign investor operating solely from their own jurisdiction with no Mongolian presence faces limited direct exposure.

Practical risk arises where the investor operates through a local subsidiary or partner, or collects data directly from Mongolian residents. Separately, the Law on Data Protection restricts cross-border data transfers out of Mongolia, squarely obligating the local counterparty regardless of the foreign investor’s position. Enforcement of the law is divided between the National Human Rights Commission, which handles complaints, investigations and recommendations, and the Ministry of Digital Development, Innovation and Communications, which oversees technical standards and cyber incident reporting.

The violations are addressed under broader legislation such as the Criminal Code and the Law on Violations. Critically, there is no statutory multiplier and no turnover-based penalty formula. Administrative fines under Mongolia’s general framework are modest by international standards. However, regulators retain broad discretionary powers, and operational consequences, mandatory data deletion and processing suspension can generate indirect losses exceeding direct fines. Foreign investors without a local presence have limited direct exposure, but any structure involving local entities or inbound data flows warrants careful compliance attention, particularly regarding cross-border transfer restrictions.