www.pwc.com/mn Doing Business Guide 2010 - 2011 Doing Business Guide in Mongolia 2012 - 2013 Doing Business Guide 2012 - 2013 CONTENTS KEY STATISTICS 1. MONGOLIA – APROFILE 1.1 Introduction ..............................................................................................................................................................................................................................65 1.2 Government structure.......................................................................................................................................................................................86 1.3 Legal System ................................................................................................9 1.4 People ..........................................................................................................9 1.5 Economy ....................................................................................................11 1.6 Foreign Trade ............................................................................................13 1.7 Mining in Mongolia....................................................................................13 2. BUSINESS ENVIRONMENT 2.1 Business Climate........................................................................................15 2.2. Free Trade Zones................................................................................................................................................................................. 1615 2.3 International Agreements..........................................................................16 2.4 Legal Environment....................................................................................16 2.6 Property Market ........................................................................................18 3. FOREIGN INVESTMENT 3.1 Foreign Investment....................................................................................19 4. BANKING AND FINANCE................................................................................................... 19 4.1 Banking System .........................................................................................20 4.2 Foreign Currency Market and................................ Foreign Currency................................ Rules ............................................................. 2120 4.3 Investment Institutions .............................................................................21 4.4 Capital Markets .........................................................................................21 4.5 Insurance...................................................................................................21 5. IMPORTING AND EXPORTING 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 5.7 Warehousing and Storage ..........................................................................25 6. BUSINESS ENTITIES 6.1 Legal Framework .......................................................................................25 6.2 Joint Stock Company ................................(JSC) ..................................................................................................................................................2625 6.3 Limited Liability Companies (LLC) ...........................................................27 6.4 Partnerships ..............................................................................................29 6.5 Representative Offices ...............................................................................29 6.6 Registration Process in General.................................................................29 7. LABOUR RELATIONS AND SOCIAL SECURITY 7.1 Labour Market ...........................................................................................30 7.2 Labour Relations ................................................................................................................................... 30 7.3 Working Conditions...................................................................................30 7.4 Social Security System ...............................................................................30 7.5 Foreign Personnel......................................................................................30 8. ACCOUNTING AND AUDIT REQUIREMENTS 8.1 Accounting.................................................................................................31 ................................................ 31 PwC 2 Doing Business Guide 2012 - 2013 8.2 Chart of Accounts ......................................................................................31 8.3 Audit Requirements ..................................................................................32 9.1 Tax System.................................................................................................32 9.2 Direct and Indirect Tax Burden .................................................................32 9.3 Principal Taxes ..........................................................................................32 9.4 Legislative Framework ..............................................................................32 9.5 Income Tax................................................................................................33 9.6 Tax Treaties...............................................................................................33 9.7 Tax Returns and Payments ........................................................................33 9.8 Assessments ..............................................................................................33 9.9 Appeals......................................................................................................33 9.10 Withholding Taxes...................................................................................34 9.11 Tax Audits ................................................................................................34 9.12 Penalties ..................................................................................................34 9.13 Advance Tax Clarification ........................................................................34 10 TAXATION OF CORPORATIONS 10.1 Corporate Tax System ..............................................................................34 10.2 Incentives ............................................................................................................................................................................... 3534 10.3 Taxable Income .......................................................................................35 10.4 Deductibility of Expenses ........................................................................35 10.5 Related Party Transactions ......................................................................36 10.6 Foreign Exchange ....................................................................................36 10.8 Tax Computations ...................................................................................36 10.9 Other Taxes .............................................................................................37 10.10 Branch Versus Subsidiary ......................................................................38 10.11 Group Taxation.......................................................................................38 10.12 Special Taxation Regimes.......................................................................38 11. TAXATION OF INDIVIDUALS 11.1 Territoriality and Residence......................................................................39 11.2 Gross Income ............................................................................................................................................................................... 39 11.3 Deductions ...............................................................................................39 11.4 Tax Credits ...............................................................................................40 11.5 Other Taxes ..............................................................................................40 11.6 Tax Administration ..................................................................................40 11.7 Tax Rates ..................................................................................................41 12. VALUE ADDED TAX (VAT) 12.1 Introduction .............................................................................................41 12.2 Scope of VAT....................................................................................................................................................................................... 4241 12.3 Zero-Rating..............................................................................................42 12.4 Exempt Supplies ......................................................................................43 12.5 Taxable Amount.......................................................................................44