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Hiring in Mongolia

Mongolia, also known as the State of Mongolia, is a country in East Asia. Ulaanbaatar is the capital and the largest city of Mongolia. Mongolia is rich in copper, coal, tin, tungsten and gold. The economy is largely based on mining and agriculture. Other dominant industries include wholesale and retail trade, transportation and real estate. Mongolia’s main trading partners are the United States, China, Germany, Russia and Japan. Global PEO or Employer of Record (EOR) play a pivotal role in providing companies with services related to hiring employees, and ensuring compliance with Mongolia’s legal and tax regulations. Employment regulations are covered by the Labor Code. Labor Code stipulates that employees are entitled to 15 days of annual leave. Residents are taxed on their worldwide income; non-residents are taxed on Mongolian-source income only. Global PEO’s or Employer of Record (EOR) facilitate companies by ensuring compliance with Mongolia’s Labor Code and tax laws.

statutory labor requirements

Probation Period

  • Probationary periods of up to six months are allowed.

Annual Leave

  • Employees are generally entitled to 15 days of annual paid leave. 
  • Additional leave is granted as follows:
    • 6-10 years of service: 3 days
    • 11-15 years: 5 days
    • 16-20 years: 7 days
    • 21-25 years: 9 days
    • 26-31 years: 11 days
    • 32+ years: 14 days

Public Holidays

  1. New Year's Day (1st January)
  2. Tsagaan Sar (24th to 27th February)
  3. International Women's Day (9th March)
  4. Children's Day (1st June)
  5. Naadam
  6. Genghis Khan's Birthday
  7. Republic Day (26th November)
  8. Independence Day (29th December)

Maternity Leave

  • Female employees are generally entitled to 120 days of maternity leave at 70% of pay. 
  • Women with children under the age of three are also eligible for baby care leave.

Paternity Leave

  • There is no paternity leave

Sick Leave

  • Employees are generally eligible for sick leave for as long as needed.

Work Hours

  • In general, the work week is 40 hours, with five, eight-hour days.

Overtime

  • If an employee who has worked overtime or on the weekly rest days has not been compensated with other rest days, he shall be paid one and half times or more of his average remuneration.

Notice Period

  • Employees are generally entitled to between 30 days and two months’ notice, dependent on the reason for dismissal.

Severance

  • In general employees are entitled to at least one month’s wages on dismissal.

13th / 14th Month Pay

  • No
  • There is no statutory requirement to pay the 13th or the 14th month salary.
  • Employees may agree on bonuses with their employers or through collective bargaining.

income tax

  • A permanent resident taxpayer of Mongolia is subject to tax on worldwide income.
  • A non-resident taxpayer of Mongolia is subject to tax on the income earned in the territory of Mongolia during the tax year.
  • The current PIT rates are as follows:

Sources of income

Applicable tax rate (%)

Residents

Non-residents

Salary income

10

20

Income from property (i.e. dividends, royalties, interest, capital gain from sale of securities/stocks)

10

2

Sale of immovable property (gross)

2

20

Income from scientific, literary, and artistic works, inventions, product designs, and useful designs (gross); income from sports competitions, art performances, and similar income (gross)

5

20

Income from betting games, gambling, and lotteries (gross)

40

20

deductible expenses

  • There are no business deductions allowed for employees, except for a social insurance contribution made by an employee per Social Insurance Law of Mongolia.
  • There are no deductions for non-business expenses in Mongolia. However, starting from May 2014, donations made for the purpose of rehabilitation of national cultural heritage can be deducted from taxable income.
  • A general deduction of tax is available ranging from MNT 60,000 to MNT 160,000 annually based on the annual income. 
  • Where income is above MNT 36 million annually, no PIT credit is available.

Deductible Expenses

Employment Expenses

  • There are no business deductions allowed for employees, except for a social insurance contribution made by an employee per Social Insurance Law of Mongolia.

Personal Deductions

  • There are no deductions for non-business expenses in Mongolia.
  • However, starting from May 2014, donations made for the purpose of rehabilitation of national cultural heritage can be deducted from taxable income.

Standard Deductions

  • A general deduction of tax is available ranging from MNT 60,000 to MNT 160,000 annually based on the annual income. 
  • Where income is above MNT 36 million annually, no PIT credit is available.

immigration

  • For traveling to Mongolia for the purpose of business, the following three types of visas are available: 
    • B visa (business visa) 
    • HG visa (work visa) 
    • T visa (investor visa) 
  • All of the above visas should be obtained from a Mongolian embassy or consul before traveling to Mongolia. 
  • A B visa is a single-entry business visa that is valid for a visit up to 30 days. 
  • After arrival, it is possible to have a B visa extended once for the same period while the existing B visa is valid. 
  • A B visa holder cannot legally work while in Mongolia. 
  • This visa is mainly for visitors attending meetings, conferences and exhibitions and engaging in other similar activities. 
  • This visa is only available with an invitation letter issued by the Ministry of Foreign Affairs, which is based on a request letter from company operating in Mongolia. 
  • A T visa can be obtained by foreign-invested companies and representation offices for usually one or two persons (typically, for the senior management of the company). 
  • T visas are issued to individual foreign investors in Mongolian companies or to foreign executive directors of Mongolian companies. 
  • T visas are issued as either a six-month or one-year multiple-entry visa, which can be renewed annually. 
  • Long-term residency permits are also issued to T visa holders. 
  • After the visitor arrives in Mongolia, he or she must apply for a long-term residency permit. 
  • HG visas allow foreign visitors to work in Mongolia. 
  • In addition to an HG visa, a work permit from the Ministry of Labor and a long-term residency permit must be obtained to work in Mongolia. 
  • Like the B visa, a single-entry HG visa and a temporary work permit must be obtained before traveling to Mongolia. 
  • On arrival, the HG visa is extended for up to a year and a long-term work permit and residency permit are issued. 
  • A fully registered Mongolian company must apply for this visa for all of its foreign workers. 
  • A limited number of HG visas and work permits are issued per company because the Mongolian government publishes annual quotas on the number of foreign workers allowed. 
  • This quota is issued annually by the government of Mongolia. In general, 10% to 60% of a company’s work force can be foreign, depending on the industry and the total number of employees. 
  • In summary, only T visa and HG visa holders can work in Mongolia. 
  • They can work after an eligible Mongolian company receives the required approval from respective state authorities.

 

Type of Visa/Permit

Documentation

Validity

Eligibility

B Visa

  • Application form
  • Passport
  • Passport size photo
  • Confirmation of visa fee transaction
  • Letter of invitation

30 days (can be extended)

  • This visa is mainly for visitors attending meetings, conferences and exhibitions and engaging in other similar activities. 
  • This visa is only available with an invitation letter issued by the Ministry of Foreign Affairs, which is based on a request letter from company operating in Mongolia. 

T Visa

  • Completed application form;
  • Passport in original (must be valid for a minimum of six months before your intended travel to Mongolia);
  • 3.5×4.5cm photo (the size of the photo is mandatory);
  • Approval by the Ministry of Foreign Affairs (Applies only to visitors travelling for business or non-governmental organization purposes);
  • Approval by the Immigration Agency (Applies to all other types of visa, including employment, student);
  • Proof of visa fee payment.

6 months or 1 year (can be renewed annually) 

  • A T visa can be obtained by foreign-invested companies and representation offices for usually one or two persons (typically, for the senior management of the company). 
  • T visas are issued to individual foreign investors in Mongolian companies or to foreign executive directors of Mongolian companies. 

HG Visa

  • Cover letter.
  • Application form.
  • Copy of certificate of state registration, certificate of foreign incorporated company and special permission.
  • Copy of passport pages clearly containing passport number, date of issue and expiry, name and date of birth.

Up to 1 year

  • Foreign individual seeking employment in Mongolia can apply for a HG visa (work visa)

value added tax

  • A VAT at the rate of 10% is imposed on the supply of taxable goods and services in the territory of Mongolia and on imports into Mongolia. 
  • International postal parcel that was sent under the name of an individual, the value of which does not exceed ten times the minimum monthly wages (for notebook not exceeding 30 times the minimum monthly wages), and that comprises of not more than two similar goods is exempted from VAT and customs duty.

VAT

Standard Rate

10%

Exempt

0%

withholding tax

Dividends

  • Dividends paid to a resident are subject to a 10% withholding tax (0n the gross amount)
  • Dividends paid to a nonresident are subject to 1 20% withholding tax, unless the rate is reduced under a tax treaty

Interest

  • Interest paid to a resident is subject to withholding tax at 5% or 10%
  • Interest paid to a nonresident on debt issued on a capital market or interest paid on loans obtained by Mongolian commercial banks is subject to a 5% withholding tax; otherwise the rate is 20%, unless reduced under a tax treaty

Royalties

  • Royalties paid to a resident are subject to a 10% withholding tax
  • Royalties paid to a nonresident are subject to a 20% withholding tax, unless the rate is reduced under a tax treaty

Fees for Technical Services

  • Fees billed for services provided in Mongolia are subject to a 20% withholding tax

Type of Payment

Residents

Nonresidents

 

Company

Individual

Company 

Individual

Dividends

10%

10%

20%

20%

Interest

5%/10%

10%

5%/20%

20%

Royalties

10%

10%

20%

20%

Technical Service Fee

0%

0%

20%

20%

termination

  • A labor contract can be terminated upon initiation by either the employee or the employer.
  • Unless otherwise stated in the contract, employees are able to leave their position after 30 days of giving notice.
  • Grounds for terminating employment include:
    • Mutual agreement by the parties to do so
    • If the employer or employee has died
    • If the labor contract has expired and both parties have decided not to extend the contract
    • If a legal authority has so demanded
    • If an unjustifiably dismissed employee has been reinstated o their previous position
    • If an employee has been enlisted for army service
    • If a court decision prevents an employee from performing their work duties as a result of a criminal offence

statutory benefits

  • These are mandatory benefits as postulated by law
  • These include probationary period, annual leave, public holidays, sick leave, maternity leave, overtime pay, notice period, and severance pay
  • Statutory benefits also include social security benefits

Statutory Benefits

Probationary Period

Annual Leave

Public Holidays

Maternity Leave

Sick Leave

Overtime Pay

Notice Period

Severance Pay

Social Security Benefits

payments and invoicing

  • In general, if an employee (local or expatriate) receives employment income from a Mongolian employer, the responsibility for reporting, withholding, and payment lies with that employer. 
  • If an employee receives other income (e.g. income from the sale of shares) or if there is no Mongolian employer, the responsibility for reporting, withholding, and payment lies with the employee.
  • The tax agent (i.e. employer) should transfer the tax withheld from a taxpayer’s income to the budget by the tenth day of the following month.
  • Furthermore, a tax agent should submit a quarter-to-date report of tax withheld by the 20th day of the first month of the following quarter and year-to-date tax report by 15 February of the following year to the corresponding tax authority.
  • Income should be reported on an individual tax form and submitted to the tax authority by 15 February of the following year.

ease of doing business

  • The ease of doing business index is an index created by Simeon Djankov, an economist at the Central and Eastern Europe sector of the World Bank Group.
  • Higher rankings (a low numerical value) indicate better, usually simpler, regulations for businesses and stronger protections of property rights.
  • According to the World Bank Mongolia ranked 81st in the World in 2019 in terms of ease of doing business.

 employee accruals

   
Christmas Bonus%

0%

Christmas Bonus Over Vacations %

0%

Severance per Year %

Employees are entitled to severance pay equal to one month's pay after completion of one year of employment (8.33% of annual salary)

Vacations % Employees are entitled to 15 days of paid annual leave (4.28% of annual salary)
Notice %

Employees are entitled to 30 days of notice period for one year of service or more (8.24%)

Christmas Bonus Over Notifications% 0%
Vacations Plus% 0%
Total percentage of Salary (yearly) The total employment accruals as a percentage of salary per anum are equal to 20.94%

 

 employer accruals

Additional information (Country Accruals)

   
Social security ceiling 14.50%
Maternity 101 days
Vacations 4.11%
Description The Mongolian Social Security System provides benefits such as pension, health, disability and unemployment, amongst others. Participation in Social Security is mandatory for all Mongolian nationals, foreigners and stateless persons who are employed within the territory of Mongolia.
Both employers and employees are required to pay social security contributions, at rates which are established by the Social Insurance Law of Mongolia. Employer contribution rates currently vary from 12.5 to 14.5 percent, depending on the industry. Employee contribution rates are currently 11.5 percent (from salary and similar income). However, employee monthly contributions are currently capped at MNT483,000 per month.

 

Employer Accruals Additional information

    Employment Accruals
Annual Leave Employees are generally entitled to 15 days of annual paid leave. This equals 4.1% (15/365 days) of annual income
Maternity Leave Female employees are generally entitled to 120 days of maternity leave at 70% of pay. This equals 70% of 32.8% (120/365 days) of annual income
Overtime If an employee who has worked overtime or on the weekly rest days has not been compensated with other rest days, he shall be paid one and half times or more of his average remuneration. Depends on the number of overtime hours worked
Severance In general employees are entitled to at least one month’s wages on dismissal. This equals 8.33% (1/12 months) of annual income
Social Security Employers must make the following social security contributions: - Pension insurance 7%; Benefit insurance 0.8%; Health insurance 2%; Industrial accident and occupational disease insurance 1% to 3%; Unemployment insurance 0.2%.. This equals 13% of annual income

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