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2015 Spring Session
• ended on 10 July 2015
• 20 new laws
• 18 laws repealing existing laws or provisions of laws
• 64 laws amended
• 16 international agreements and treaties ratified
• several state policies for various sectors adopted
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2015 Spring Session
1. Support for domestic production
2. Taxation
3. Financial reporting and accountability
4. Other
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1. Supporting domestic production
• Following the approval of the State Policy on Industrialisation in June 2015, Parliament approved the Law on Supporting [Domestic] Production.
• Under this law, the Government of Mongolia ("GoM") will support production in the following manner: − subsidising the difference between commercial interest rates
on loans for technological updates and capital investment, to producers that export more than 30 per cent of their output;
− providing one-time payments equal to 75 per cent of the research and development costs incurred by producers of exports that created or brought to Mongolia highly efficient or cutting edge technology; and
− supporting export-oriented production by various export financing arrangements.
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The Law on Supporting Production
• Support provided to businesses that "add value"
• Preferential treatment for businesses that:
− are open joint stock companies
− acquire more than 60 per cent of their main or secondary
raw materials or other required goods, work or services
from domestic suppliers
− have registered on the technology register database
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The Law on Supporting Production
• Not applicable to foreign-invested business entities
and those investors that have entered into an
investment agreement with the government
• Parliament increased customs duty to up to 20%
(formerly 5 – 15%) for nearly 370 imported goods
that can be produced domestically
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Revised Law on Value Added Tax
• Introduced and revised key terminology
• Increased the type of activities that are subject to VAT (such as advocacy, legal and mediation services, and factoring and forfaiting)
• Increased the mandatory registration threshold from MNT 10 million to MNT 50 million, and for voluntary registration from MNT 8 million to MNT 10 million
• Changed the types of goods, work and services that are exempt from VAT or that are zero rated (refined mineral products)
• Effective from 1 January 2016
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The Capital City Tax law
• Completely new law
• Imposed on the sale of alcohol and cigarettes, hotel and
hospitality services
• The tax rate of up to 1 per cent will be determined by
Capital City parliament
• Will vary across the city depending on location and
population size of a particular area
• Effective from 1 October 2015
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3. Financial reporting and accountability
• Revised Law on Accountancy
− Large business entities and public institutions, and certain medium and small-sized business entities will be required to apply the IFRS relevant to them
− Now expressly requires accounting records to be produced in Mongolian and shown in MNT
− Electronic reports: twice per annum for joint stock companies, "regulated" sector companies and state-owned entities; other entities are required to submit once per annum
− Financial reports will be available to other government departments
− Effective from 1 October 2015 9
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Revised Law on Auditing
• Definition of services auditing entity may offer to clients
• Mandatory audits for entities required to apply IFRS
• Prohibition on acting for more than 5 years
• Changes to the criteria and procedure for issuing and revoking auditing licences
• Prohibition on certified tax consultants from keeping accounting books and records and producing financial reports for clients
• Auditors may now provide tax consultancy services upon obtaining the relevant licence
• Auditors may also engage in property valuation, financial and accounting consultancy services
• Auditors may NOT audit the financial reports of an entity for which it has provided tax and accounting consultancy services or property appraisal services
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4. Other
• Policy for the Privatisation or Restructuring of State
Property for 2015-2016
• Policy on Energy
• Amendment to the Law on Occupational Health and
Safety
• Amendments to the Immovable Property Pledge
Law
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Policy for the Privatisation or Restructuring of
State Property for 2015-2016
• Government is to approve the list of state-owned legal
entities to be privatised or restructured
• Intention to use domestic or international stock exchanges
• Proceeds to be used for undertaking technical development
of the business
• Assets proposed to privatised/restructured:
− Thermal Power Plants #2, #3 and #4;
− Erdenet and Darkhan thermal power plants;
− the Ulaanbaatar Electricity Distribution Network;
− Shivee-Ovoo and Baganuur;
− Mongol Post;
− Mongolia Telecom; and
− Khutul Cement Factory.
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State Policy on Energy
• Purpose of this policy is to ensure uninterrupted and reliable supply of energy and to transform Mongolia into an energy exporting country
• Policy will be implemented in two phases:
− Phase 1 (between 2015 - 2023)
completion of Power Plant #5; thermal power plants at Tavan Tolgoi, Baganuur, and in the eastern and western regions; hydro-power plants at Egiin Gol and Khovd Gol; construction of various power transmission lines connecting towns and cities etc.
− Phase 2 (between 2024 - 2030)
establishing transnational grid; hydro-power plant Selenge Murun; establishing power plants and relevant lines for exporting energy
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Changes to the Law on OHS
• Notable changes in the Amendment are:
− Introduction of new terminology such as "industrial accident",
"industrial work environment", "high-risk workplace"
− subject to risk-levels, business entities must spend no less
than 1.5 per cent of their production and services costs on
occupational safety and sanitation related activities
− high-risk workplaces must provide workers with life and health
insurance in an amount equal to at least 36 times their
monthly salary
− employers must appoint a person or committee to be
responsible for occupational health and safety issues
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Changes to the Immovable Property Pledge Law
• Provides that parties to a land pledge agreement
may agree determination procedures involving non-
judicial bodies, such as arbitration tribunals and
notaries
• The provision which prohibits the sale of pledged
land by non-judicial procedures remains in effect
• Courts will be required to issue an order for an
forced sale
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Irregular Session held 3 - 14 August 2015
• Parliament approved following laws during its
irregular session convened at the request of
Enkhbold Z, the speaker of Parliament:
− the Amnesty Law
− the Law on Promoting Economic Transparency
− the revised version of Law on Firearms
• These laws have not yet been published in the state
gazette
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The Amnesty Law
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• General criminal pardon
• Applies to crimes committed before 3 July 2015
• Excludes grave crimes, such as murder, rape and terrorism
• Amnesty not available for some other crimes, but may receive a
2 year reduced sentence
• Crimes by government officials and fraud are (currently) subject
to the amnesty
• Damage suffered due to criminal acts shall remain
compensable notwithstanding the amnesty
• Suspects or persons accused who admit their wrongdoing and
agreed to compensate damage suffered can also benefit from
the amnesty
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The Amnesty Law
• The President issued a decree on 17 August 2015
giving a partial veto in relation to persons who have
committed or are suspected or accused of the following
crimes:
− received bribes
− abused power or office by a state official
− acted in excess of authority by a state official
− unjustly enriched
− misused state funds
− committed serious fraud or embezzlement
• President's veto may be repealed by a vote of two-thirds
of Parliament
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The Law on Promoting Economic Transparency
• Aims to uncover undeclared income and assets;
• Applicable to legal and natural entities
• Encouraging proper reporting and registration
without any legal or financial consequences
• Applicable to breaches committed before 1 April
2015, if reported before 31 December 2015
• Not only tax matters
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The Law on Promoting Economic Transparency
• A one time relief in relation to sanctions, penalties,
late fees, tax and social insurance premiums under
following laws:
− Law of Mongolia on Value Added Tax
− General Tax Law
− Law of Mongolia on Social Insurance
− Law of Mongolia on State Registration of Legal Entities
− Law of Mongolia on Accountancy
− Law of Mongolia on Customs
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Conclusion
• Aim to support domestic production, to improve financial accountability and to uncover/legalise the shadow economy
• It is anticipated that Parliament will pass other laws, such as the Law on Trade, the revised Labour Law and Criminal Code, and may reconsider the Amnesty Law
• Possibility of summoning irregular session again
• Legislation generally favourably received by investors
• Tinkering around the edges?
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