www.pwc.com/mn Doing Business Guide 2010 - 2011 Doing Business Guide 2010 - 2011 CONTENTS KEY STATISTICS ..................................................................................................................... 5 1 MONGOLIA – A PROFILE .................................................................................................... 6 1.1 Introduction .................................................................................................................................. 6 1.2 Government Structure .............................................................................................................. 8 1.3 Legal System .............................................................................................................................. 10 1.4 People ........................................................................................................................................... 10 1.5 Economy ...................................................................................................................................... 13 1.6 Foreign Trade ............................................................................................................................ 14 1.7 Mining in Mongolia .................................................................................................................. 14 2 BUSINESS ENVIRONMENT ............................................................................................... 16 2.1 Business Climate ...................................................................................................................... 16 2.2. Free Trade Zones .................................................................................................................... 16 2.3 International Agreements .................................................................................................... 16 2.4 Legal Environment .................................................................................................................. 17 2.5 Regulations for Business ....................................................................................................... 17 2.6 Property Market ....................................................................................................................... 19 3 FOREIGN INVESTMENT.................................................................................................... 20 3.1 Foreign Investment ................................................................................................................. 20 4 BANKING, FINANCE AND INSURANCE ........................................................................... 21 4.1 Banking System ........................................................................................................................ 21 4.2 Foreign Currency Market and Foreign Currency Rules ............................................ 21 4.3 Investment Institutions ......................................................................................................... 21 4.4 Capital Markets ......................................................................................................................... 21 5 IMPORTING AND EXPORTING ......................................................................................... 23 5.1 Trends in Customs Policy ..................................................................................................... 23 5.2 Import Restrictions ................................................................................................................. 23 5.3 Customs Duties ......................................................................................................................... 23 5.4 Temporary Import Relief ...................................................................................................... 24 5.5 Customs Duties Incentives ................................................................................................... 24 5.6 Documentation and Procedures ........................................................................................ 25 5.7 Warehousing and Storage .................................................................................................... 25 6 BUSINESS ENTITIES.......................................................................................................... 26 6.1 Legal Framework ..................................................................................................................... 26 6.2 Joint Stock Company (“JSC”) ................................................................................................ 26 6.3 Limited Liability Companies (“LLC”) ............................................................................... 28 6.4 Partnerships............................................................................................................................... 29 6.5 Branches and Representative Offices............................................................................... 29 6.6 Registration Process ............................................................................................................... 30 7 LABOUR RELATIONS AND SOCIAL SECURITY............................................................... 31 7.1 Labour Market........................................................................................................................... 31 7.2 Labour Relations ...................................................................................................................... 31 7.3 Working Conditions ................................................................................................................ 31 7.4 Social Security System ........................................................................................................... 31 7.5 Foreign Personnel.................................................................................................................... 31 PwC 2 Doing Business Guide 2010 - 2011 8 ACCOUNTING AND AUDIT REQUIREMENTS ................................................................. 33 8.1 Accounting .................................................................................................................................. 33 8.2 Chart of Accounts ..................................................................................................................... 33 8.3 Audit Requirements ................................................................................................................ 33 9 TAX SYSTEM AND ADMINISTRATION…………………………………………………………… ..... 34 9.1 Tax System .................................................................................................................................. 34 9.2 Direct and Indirect Tax Burden .......................................................................................... 34 9.3 Principal Taxes.......................................................................................................................... 34 9.4 Legislative Framework .......................................................................................................... 34 9.5 Income Tax ................................................................................................................................. 35 9.6 Tax Treaties................................................................................................................................ 35 9.7 Tax Returns and Payments .................................................................................................. 35 9.8 Assessments ............................................................................................................................... 35 9.9 Appeals......................................................................................................................................... 36 9.10 Withholding Taxes ................................................................................................................ 36 9.11 Tax Audits ................................................................................................................................ 36 9.12 Penalties.................................................................................................................................... 36 9.13 Advance Tax Clarification .................................................................................................. 36 10 TAXATION OF CORPORATIONS .................................................................................... 37 10.1 Corporate Tax System ......................................................................................................... 37 10.2 Incentives ................................................................................................................................. 37 10.3 Taxable Income ...................................................................................................................... 37 10.4 Deductibility of Expenses ................................................................................................... 38 10.5 Related Party Transactions ............................................................................................... 38 10.6 Foreign Exchange .................................................................................................................. 39 10.7 Losses ........................................................................................................................................