Introduction
Mongolia is a republic state. The government of national unity
is controlled by the Mongolian People's Revolutionary Party (MPRP),
with the additional presence of several smaller partners in the
coalition.
Mongolia had its first elections in 1992, hence the country's
democracy is still young and more time is needed to exam its
stability.
Mongolia's legal regime adopted a combination of Soviet, German,
and US legal systems that combine civil code and case-precedent;
constitution ambiguous on judicial review of legislative
acts.
In general, foreigners may acquire immovable properties in
Mongolia. However, foreign property buyers need to be aware that
although they can own the dwellings outright, they cannot own but
lease the land.
Private property rights are protected, according to Mongolia
Constitution, "The State recognizes all forms of both public and
private property and shall protect the rights of the owner by law".
The constitution also states that compensation shall be granted in
the case of expropriation for public usage.1 In addition, the Foreign Investment Law of
Mongolia encourages foreign investment and protects foreign
investors' rights and property. However, investors need to be
aware that the enforcement of laws in Mongolia remains weak due to
the judges' lack of understanding of commercial
principles.2
Mongolia's fiscal, financial , business, investment and trade
freedom has been apprised. The top income and corporate tax rates
are moderate.3
Legal Guide
Law
Mongolia's legal regime adopted a combination of Soviet, German,
and US legal systems that combine civil code and case-precedent;
constitution ambiguous on judicial review of legislative
acts. The legislative branch is the State Great Hural and the
judicial branches are comprised of the constitutional courts
(a.k.a. Tsets) and the Ordinary Courts, which include:
- Supreme Court – serves as appeals court for people's and
provincial courts but rarely overturns verdicts of lower
courts
- Aimag Courts (Provincial Courts)
- Soum, intersoum and district courts4
In respect of the real estate sector, following are some of the
relevant laws
- Constitution
- Law on Registration of Immovable Property
- Company Law, 1999 (Link is currently unavailable)
- Law on Licensing, 2001
- Law on State Stamp Duties, 1993
- Law on Allocation of Land to Mongolian Citizens for
Ownership
- Immovable Property Tax Law
- Law on Land
- Law on Land Fees
Ownership & Rights
The Mongolian legal concept of ownership follows Roman law
categories of property rights and specifies a right to own (umchleh
erh); a right to dispose (zahiran zarzuulah erh); usus fructus
(ezemshih erh); and usus (ashiglah erh). As a result, the
land-related provisions of the Constitution, Civil Code and Law of
Land are based on these concepts. However, the Law of Land of
Mongolia only corresponds with the rights of usus fructus and usus,
determines the relevant land contracts - "land possession contract"
(contractor may sub-lease his land to others) and "land use
contract".5
The Foreign Investment Law of Mongolia states that foreign
investors may acquire immovable properties. The Law also states
that foreign investors shall enjoy the rights "to possess, use, and
dispose of their property including the repatriation of investments
which were contributed to the registered capital of the business
entity with foreign investment".6
Whilst the dwellings can be owned outright for foreign
investors, land can only be leased. According to the Law of
Mongolia on Land, 7 June 2002, "The state-owned land may be given
possession with a license to Mongolian citizens, companies, and
organizations as well as entities with foreign investment for
duration of 15 to 60 years. The land possession license may be
extended for not longer than 40 years at a time."7
The new Law on Land and Law on Allocation of Land to Mongolian
Citizens for Ownership is to regulate ownership, possession, use
and other rights to land by citizens, economic entities and
organizations.
Buying Procedure
The buying procedure for an off-plan property is in general as
follows:
1. Reserve the property
Once you have chosen your ideal property, a reservation agreement
is to be signed with the seller and a reservation deposit needs to
be paid (will form part of the purchase price).
2. Exchange Contract
Before signing preliminary purchase contract, buyers are suggested
to consult a local law firm or conveyancing lawyer on analyse the
risk, any unfavourable terms of the contract. Upon signing of the
contract, first instalment/payment is often required.
3. Title Transfer
Historically there wasn't much need of a land registration system
for the nomadic people of Mongolia. In recent years the
social changes have resulted more than 50 percent of the population
urbanized. Consequently, there is growing need for land information
as a basis for planning, development and control of land resources.
The land registration system in Mongolia remains premature.
Mongolian government has been granted a loan from the Asian
Development Bank to establish a National Land Information Systems
(NLIS).
For the registration of immovable property, the Law on
Registration of Immovable Property 1997 has a clear guideline on
the procedure. Upon the transfer of the immovable property, each
dwelling buyer shall submit an application for the registration the
ownership of the particular property together with the following
support documents:
- a document certifying the applicant's right to ownership of the
immovable property; and
- a document by a competent authority setting out the dimensions
ad valuation of the property.
These support documents must be certified by a Notary.
The dwelling buyer may withdraw from the application before the
property is registered at the Registration Office.
If the property buyer is a non-permanent resident of Mongolia,
he/she shall make the application for registration or withdraw an
application through an authorized representative who is a permanent
resident of Mongolia, and certified to be so by a
Notary.8
Taxation (for non-residents individuals*)
Taxation When Purchasing
| Category |
|
tax/fee rate |
| Stamp Duty |
|
0.01% of the property value9 |
| Property Transfer Tax |
|
2% |
Obtain a non-encumbrance certificate
from the Immovable Property
Registration Office |
when buying
when registering |
MNT30,000 - 125,000 (depend on property value
& servicespeed required)
MNT7,500 |
| Notary fee |
when buying
when registering |
MNT30,000 - 85,000 (depend on property value)
MNT10,000 |
Taxation When Holding/Owning
| CATEgory |
tax/fee rate |
| Income Tax |
20% on gross income from leasing of property10 |
| Immovable Property tax |
0.6%, giving exemptions to following types of
properties:
- immovable property of persons, who are financed by central and
local budget
- dwelling houses
- building and construction for public use11
|
Taxation When Disposing
| category |
tax/fee rate |
| Capital Gains Tax (CGT) |
NIL |
| Income Tax |
20% from sales of immovable property12 |
| Property Sale Tax |
2% |
* A non-resident or a temporarily resident taxpayer, under the
Personal Income Tax Law of Mongolia means a foreign citizen or a
stateless person, who is staying in Mongolia for less than 183 days
a year.
Mongolia has entered double taxation agreements (DTA) with
various countries, including the UK, Germany, China, France, India,
Russia, and so on. Mongolia has not yet entered into DTA with the
USA or Japan.
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