58881 Mongolia © 2010 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington, DC 20433 Telephone 202-473-1000 Internet www.worldbank.org All rights reserved. 1 2 3 4 08 07 06 05 A copublication of The World Bank and the International Finance Corporation. This volume is a product of the staff of the World Bank Group. The findings, interpretations and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. 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ISBN: 978-0-8213-7960-8 E-ISBN: 978-0-8213-8630-9 DOI: 10.1596/978-0-8213-7960-8 ISSN: 1729-2638 Library of Congress Cataloging-in-Publication data has been applied for. Printed in the United States Current features News on the Doing Business project http://www.doingbusiness.org Rankings How economies rank-from 1 to 183 http://www.doingbusiness.org/rankings/ Contents Reformers Short summaries of DB2011 reforms, lists of reformers since DB2004 Introduction and a ranking simulation tool and Aggregate Rankings http://www.doingbusiness.org/reforms/ 5 - Year Measure of Historical data Cumulative Change Customized data sets since DB2004 http://www.doingbusiness.org/custom-query/ Starting a Business Methodology and research Dealing with The methodologies and research papers underlying Doing Business Construction Permits http://www.doingbusiness.org/Methodology/ Registering Property Download reports Access to Doing Business reports as well as subnational and regional Getting Credit reports, reform case studies and customized country and regional profiles Protecting Investors http://www.doingbusiness.org/reports/ Paying Taxes Subnational and regional projects Differences in business regulations at the subnational and regional Trading Across Borders level http://www.doingbusiness.org/subnational-reports/ Enforcing Contracts Law Library Closing a Business Online collection of business laws and regulations relating to business and gender issues Doing Business 2011 http://www.doingbusiness.org/law-library/ Business Reforms http://wbl.worldbank.org/ Local partners More than 8,200 specialists in 183 economies who participate in Doing Business http://www.doingbusiness.org/Local-Partners/Doing-Business/ Business Planet Interactive map on the ease of doing business http://rru.worldbank.org/businessplanet Doing Business 2011 : Making a Difference for Entrepreneurs is the eighth in a series of annual reports investigating regulations that enhance business activity and those that constrain it. Doing Business presents quantitative indicators on business regulations and the protection of property rights that can be compared across 183 economies, from Afghanistan to Zimbabwe, over time. A set of regulations affecting 9 stages of a business's life are measured: starting a business, dealing with construction permits, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business. Data in Doing Business 2011 are current as of June 1, 2010*. The indicators are used to analyze economic outcomes and identify what reforms have worked, where, and why. The Doing Business methodology has limitations. Other areas important to business such as an economy 's proximity to large markets, the quality of its infrastructure services (other than those related to trading across borders), the security of property from theft and looting, the transparency of government procurement, macroeconomic conditions or the underlying strength of institutions, are not studied directly by Doing Business. To make the data comparable across economies, the indicators refer to a specific type of business, generally a local limited liability company operating in the largest business city. Because standard assumptions are used in the data collection, comparisons and benchmarks are valid across economies. The data not only highlight the extent of obstacles to doing business; they also help identify the source of those obstacles, supporting policymakers in designing reform. The data set covers 183 economies: 46 in Sub-Saharan Africa, 32 in Latin America and the Caribbean, 25 in Eastern Europe and Central Asia, 24 in East Asia and Pacific, 18 in the Middle East and North Africa and 8 in South Asia, as well as 30 OECD high-income economies. The following pages present the summary Doing Business indicators for Mongolia. The data used for this economy profile come from the Doing Business database and are summarized in graphs. These graphs allow a comparison of the economies in each region not only with one another but also with the "good practice" economy for each indicator. The good-practice economies are identified by their position in each indicator as well as their overall ranking and by their capacity to provide good examples of business regulation to other countries. These good -practice economies do not necessarily rank number 1 in the topic or indicator, but they are in the top 10. More information is available in the full report. Doing Business 2011 : Making a Difference for Entrepreneurs presents the indicators, analyzes their relationship with economic outcomes and recommends reforms. The data, along with information on ordering the report, are available on the Doing Business website (www.doingbusiness.org). * Except for the Paying Taxes indicator that refers to the period January to December of 2009. Note: 2008-2010 Doing Business data and rankings have been recalculated to reflect changes to the methodology and the addition of new economies (in the case of the rankings). 1 Economy Rankings - Ease of Doing Business Mongolia is ranked 73 out of 183 economies. Singapore is the top ranked economy in the Ease of Doing Business. Mongolia - Compared to global good practice economy as well as selected economies: Mongolia's ranking in Doing Business 2011 Rank Doing Business 2011 Ease of Doing Business 73 Starting a Business 86 Dealing with Construction Permits 104 Registering Property 27 Getting Credit 72 Protecting Investors 28 Paying Taxes 66 Trading Across Borders 158 Enforcing Contracts 35 Closing a Business 119 2 Summary of Indicators - Mongolia Starting a Business Procedures (number) 7 Time (days) 13 Cost (% of income per capita) 3.2 Min. capital (% of income per capita) 46.8 Dealing with Construction Permits Procedures (number) 21 Time (days) 215 Cost (% of income per capita) 65.1 Registering Property Procedures (number) 5 Time (days) 11 Cost (% of property value) 2.2 Getting Credit Strength of legal rights index (0-10) 6 Depth of credit information index (0-6) 3 Public registry coverage (% of adults) 19.2 Private bureau coverage (% of adults) 0.0 Protecting Investors Extent of disclosure index (0-10) 5 Extent of director liability index (0-10) 8 Ease of shareholder suits index (0-10) 6 Strength of investor protection index (0-10) 6.3 Paying Taxes Payments (number per year) 43 Time (hours per year) 192 Profit tax (%) 9.5 Labor tax and contributions (%) 12.4 Other taxes (%) 1.0 Total tax rate (% profit) 23.0 Trading Across Borders Documents to export (number) 8 Time to export (days) 46 Cost to export (US$ per container) 2131 Documents to import (number) 8 Time to import (days) 47 Cost to import (US$ per container) 2274 3 Enforcing Contracts Procedures (number) 32 Time (days) 314 Cost (% of claim) 30.6 Closing a Business Recovery rate (cents on the dollar) 20.0 Time (years) 4.0 Cost (% of estate) 8 The 5 year measure of cumulative change illustrates how the business regulatory environment has changed in 174 economies from Doing Business 2006 to Doing Business 2011. Instead of highlighting which countries currently have the most business friendly environment, this new approach shows the extent to which an economy's regulatory environment for business has changed compared with 5 years ago. This snapshot reflects all cumulative changes in an economy's business regulation as measured by the Doing Business indicators-such as a reduction in the time to start a business thanks to a one-stop shop or an increase in the strength of investor protection index thanks to new stock exchange rules that tighten disclosure requirements for related -party transactions. This figure shows the distribution of cumulative change across the 9 indicators and time between Doing Business 2006 and Doing Business 2011 0.24 0.20 Doing business has 0.16 become easier (DB change 0.12 score) 0.08 0.04 0.00 Kazakhstan China Russian Korea, Mongolia Taiwan, Japan Federation Rep. China 6 1. Benchmarking Starting a Business Regulations: Mongolia is ranked 86 overall for Starting a Business. Ranking of Mongolia in Starting a Business - Compared to good practice and selected economies: 7 The following table shows Starting a Business data for Mongolia compared to good practice and comparator economies: Good Practice Procedures Time (days) Cost (% of Min. capital (number) income per (% of income Economies capita) per capita) Denmark* 0.0 New Zealand* 1 1 0.0 Selected Economy Mongolia 7 13 3.2 46.8 Comparator Economies China 14 38 4.5 118.3 Japan 8 23 7.5 0.0 Kazakhstan 6 19 1.0 0.0 Korea, Rep. 8 14 14.7 0.0 Russian Federation 9 30 3.6 1.9 Taiwan, China 6 15 4.1 0.0 * The following economies are also good practice economies for : Procedures (number): Canada Cost (% of income per capita): Slovenia 8 2. Historical data: Starting a Business in Mongolia Starting a Business data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 80 86 Procedures (number) 7 7 7 7 Time (days) 13 13 13 13 Cost (% of income per capita) 6.6 4.0 3.0 3.2 Min. capital (% of income per capita) 96.3 58.5 44.0 46.8 3. The following graphs illustrate the Starting a Business sub indicators in Mongolia over the past 4 years: 9 Starting a Business Summary - Mongolia This table summarizes the procedures and costs associated with setting up a business in Mongolia. STANDARDIZED COMPANY Legal Form: Limited Liability Company (HHK) City: Ulan Bator Registration Requirements: No: Procedure Time to complete Cost to complete 1 Check name for uniqueness at the State Registration Department of 1 MNT 500 the Tax Authority. 2 Deposit capital in a temporary account and obtain a proof; pay the 1 no charge registration fee 3 Notarize the statutes and charters of the company; notarize the 1 MNT 10,000 schedule showing the equity share held by each partner 4 Register at the State Registration Office, under the General 6 MNT 10,000 Department of State Taxation 5 Register at local Tax Office 2 MNT 2,000 6 Apply for social security with the Social Insurance Department 1 no charge 7 Make a seal 1 MNT 46,000 10 Starting a Business Details - Mongolia Procedure 1 Check name for uniqueness at the State Registration Department of the Tax Authority. Time to complete: 1 Cost to complete: MNT 500 Comment: Once the name has been checked, the State Registration Office gives the entrepreneur a card authorizing him or her to open a bank account. The entrepreneur opens a temporary account at the bank and, at the same time, can instruct the bank to make a payment to the account of the Tax Authority. Procedure 2 Deposit capital in a temporary account and obtain a proof; pay the registration fee Time to complete: 1 Cost to complete: no charge Comment: Procedure 3 Notarize the statutes and charters of the company; notarize the schedule showing the equity share held by each partner Time to complete: 1 Cost to complete: MNT 10,000 Comment: The new Law on State Registration of Legal Entities requires that the decision to found the company and its charter to be either originals or notarized copies. Under Resolution No.147 of 1997 of the Minister of Justice and Internal Affairs, notary fees to certify incorporation documents are MNT 3,000. If the shareholders want to notarize the other documents, notary fees are MNT10,000 or higher. It is common practice for documents to be notarized to prevent future shareholder disputes. Procedure 4 Register at the State Registration Office, under the General Department of State Taxation Time to complete: 6 Cost to complete: MNT 10,000 Comment: By registering at the State Registration Office, the company also registers for VAT and corporate income tax. The Registry automatically publishes a notice of company formation. The Registry issues a letter of approval to open bank accounts. The legal time limit is 5 days (Law on State Registration of Legal Entities of May 23, 2003). Procedure 5 Register at local Tax Office Time to complete: 2 Cost to complete: MNT 2,000 Comment: After the account is opened, an officer of the State Registration Office will assign a company registration number and give the applicant approval to register with the relevant district tax office, 11 which will open a file for the new company. Henceforth, one tax officer will be responsible this company (for example, serving as a point-of contact for submission of financial reports). The district tax office registers the company based on the letter issued by State Registration Office. Procedure 6 Apply for social security with the Social Insurance Department Time to complete: 1 Cost to complete: no charge Comment: Procedure 7 Make a seal Time to complete: 1 Cost to complete: MNT 46,000 Comment: 12 13 1. Benchmarking Dealing with Construction Permits Regulations: Mongolia is ranked 104 overall for Dealing with Construction Permits. Ranking of Mongolia in Dealing with Construction Permits - Compared to good practice and selected economies: 14 The following table shows Dealing with Construction Permits data for Mongolia compared to good practice and comparator economies: Good Practice Procedures Time (days) Cost (% of (number) income per Economies capita) Denmark 6 Qatar 0.8 Singapore 25 Selected Economy Mongolia 21 215 65.1 Comparator Economies China 37 336 523.4 Japan 15 187 20.8 Kazakhstan 34 219 119.8 Korea, Rep. 13 34 131.2 Russian Federation 53 540 4141.0 Taiwan, China 28 142 100.9 15 2. Historical data: Dealing with Construction Permits in Mongolia Dealing with Construction Permits data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 103 104 Procedures (number) 21 21 21 21 Time (days) 215 215 215 215 Cost (% of income per capita) 133.9 81.3 61.2 65.1 3. The following graphs illustrate the Dealing with Construction Permits sub indicators in Mongolia over the past 4 years: 16 Dealing with Construction Permits in Mongolia The table below summarizes the procedures, time, and costs to build a warehouse in Mongolia. BUILDING A WAREHOUSE City: Ulan Bator Registration Requirements: No: Procedure Time to complete Cost to complete 1 Request and obtain environmental impact assessment from the City 28 days no charge Environmental Office 2 Request and obtain land possession agreement and permission to build. 15 days no charge 3 Request and obtain approval of preliminary drawings from the Urban 14 days MNT 60,000 Development Department 4 Request and obtain approval of preliminary drawings from the Technical 14 days no charge Commission 5 * Request and obtain technical conditions from the following agencies 24 days MNT 300,000 through the Technical Commission: 6 Request and obtain approval of final drawings from the Fire Department 1 day MNT 150,000 7 Request and obtain approval of final drawings from the Sanitation 14 days MNT 25,000 Department 17 8 Request and obtain approval of final drawings from the Chief Architect 7 days MNT 60,000 9 Request and obtain permission from the State Technical Expert. 30 days MNT 756,949 10 Request and obtain a license "to engage in the construction works" 21 days no charge (permission to build) 11 Request and receive inspection from the Electrical Power Network 3 days no charge Authority 12 Request and receive inspection from the Water Use Authority 2 days no charge 13 Request and receive inspection from telecom services 1 day no charge 14 Connect to power services through the Electrical Power Network 4 days no charge Authority 15 Connect to water services through the Water Use Authority 2 days no charge 16 Connect to telecom services 1 day no charge 17 Request on-site inspection from the Technical Commission. 14 days no charge 18 Receive on-site inspection from the Technical Commission and approval 1 day no charge 19 Request on-site inspection by the State Inspection Authority 1 day no charge 20 Receive on-site inspection and obtain approval of the building by the State 17 days no charge Commission 21 Register the building in the real estate registry 14 days MNT 38,455 * Takes place simultaneously with another procedure. 18 Dealing with Construction Permits Details - Mongolia Procedure 1 Request and obtain environmental impact assessment from the City Environmental Office Time to complete: 28 days Cost to complete: no charge Agency: City Environmental Office Comment: Article 4.6 of the Law on Environmental Impact Assessment, adopted in 1998 and amended on July 20, 2006, provided that authorized investigators will make a general environmental impact assessment within 12 working days. If necessary, the related state authority may extend this time. However, in practice, this takes on average 28­30 days. Procedure 2 Request and obtain land possession agreement and permission to build. Time to complete: 15 days Cost to complete: no charge Agency: Land Affairs, Geodesy and Cartography Agency Comment: This agreement can be obtained from the Land Department of the Office of the Capital City Governor. Procedure 3 Request and obtain approval of preliminary drawings from the Urban Development Department Time to complete: 14 days Cost to complete: MNT 60,000 Agency: Land Affairs, Geodesy and Cartography Agency Comment: One letter with drawings is sent to the Urban Development Department and it is first approved by the Capital City General Architect (within the Urban Development Department, UDD), then the District Architect, a member of UDD, approves the drawings and both approvals are stamped on the same page and sent back to the architect. Procedure 4 Request and obtain approval of preliminary drawings from the Technical Commission Time to complete: 14 days Cost to complete: no charge Agency: Technical Comission Comment: The company must obtain an approval from the Technical Commission stating that the proposed construction work will not affect any heating, electrical power, water, sewage or telecommunication lines. The Technical Commission consists of members from the Heating Network Authority, Electric Power Network Authority, Water Use Authority, Telecom Mongolia, Radio Network Authority, Housing and Public Utilities Authority, Environmental Protection Authority, Hygiene and Sanitation Control Authority, and Fire Fighting Department. There is no need for the company to visit each authority separately. 19 Procedure 5 Request and obtain technical conditions from the following agencies through the Technical Commission: Time to complete: 24 days Cost to complete: MNT 300,000 Agency: Technical Comission Comment: The company must submit a letter of application to receive technical specifications from the agencies. No other procedures are necessary for obtaining power connection. Obtaining all technical conditions take on average 24­30 days. The fee is estimated to vary from MNT 75,000 to MNT 390,000. Procedure 6 Request and obtain approval of final drawings from the Fire Department Time to complete: 1 day Cost to complete: MNT 150,000 Agency: Fire Department Comment: For a building of less than 3000 square meters, this is obtained from the City Fire Department. Project drawings are inspected and a fee is calculated based on a schedule set by the Organization of Special Emergencies. Procedure 7 Request and obtain approval of final drawings from the Sanitation Department Time to complete: 14 days Cost to complete: MNT 25,000 Agency: Sanitation Department Comment: Procedure 8 Request and obtain approval of final drawings from the Chief Architect Time to complete: 7 days Cost to complete: MNT 60,000 Agency: Land Affairs, Geodesy and Cartography Agency Comment: Submit a copy of the sketch, working drawing, certificate from the Fire Department and certificate from the Sanitation department to the Chief Architect to approve. Procedure 9 Request and obtain permission from the State Technical Expert. Time to complete: 30 days Cost to complete: MNT 756,949 Agency: Authorized consultant 20 Comment: The expert examination of a construction drawing shall be made by a consultant selected by Agency of Land Affairs, Geodesy and Cartography trough a tender. The cost might vary according to the consultant (9700 togrog/m2 X 1300.6 m2 X .06= FEE). Procedure 10 Request and obtain a license "to engage in the construction works" (permission to build) Time to complete: 21 days Cost to complete: no charge Agency: State inspector for technical control of construction Comment: To start the actual construction, BuildCo must obtain a license "to engage in the construction works" (permission to build) from the Ministry of Construction and Town Planning. The law authorizes a period of 21 business days to issue the license. In practice, however, it varies. Procedure 11 Request and receive inspection from the Electrical Power Network Authority Time to complete: 3 days Cost to complete: no charge Agency: Water Authority of Mongolia Comment: Procedure 12 Request and receive inspection from the Water Use Authority Time to complete: 2 days Cost to complete: no charge Agency: Post and Telecommunications Authority (PTA) Comment: Procedure 13 Request and receive inspection from telecom services Time to complete: 1 day Cost to complete: no charge Agency: Post and Telecommunications Authority (PTA) Comment: Procedure 14 Connect to power services through the Electrical Power Network Authority Time to complete: 4 days Cost to complete: no charge 21 Agency: National Electricity Network Authority Comment: Procedure 15 Connect to water services through the Water Use Authority Time to complete: 2 days Cost to complete: no charge Agency: Ministry of Construction and Town Planning Comment: Procedure 16 Connect to telecom services Time to complete: 1 day Cost to complete: no charge Agency: National Electricity Network Authority Comment: Procedure 17 Request on-site inspection from the Technical Commission. Time to complete: 14 days Cost to complete: no charge Agency: Water Authority of Mongolia Comment: Procedure 18 Receive on-site inspection from the Technical Commission and approval Time to complete: 1 day Cost to complete: no charge Agency: Post and Telecommunications Authority (PTA) Comment: Procedure 19 Request on-site inspection by the State Inspection Authority Time to complete: 1 day Cost to complete: no charge 22 Agency: State General Specialized Inspection Department Comment: Procedure 20 Receive on-site inspection and obtain approval of the building by the State Commission Time to complete: 17 days Cost to complete: no charge Agency: State General Specialized Inspection Department Comment: After the inspection has been completed, the company waits on average 10 days for approval. Procedure 21 Register the building in the real estate registry Time to complete: 14 days Cost to complete: MNT 38,455 Agency: Real Estate Registry Comment: The Office for Registration of Ownership and Related Rights registers the right of ownership within 14 days of the application date, and issues a certificate of ownership. The registration fees to be paid are equal to 0.01% of the value of the real property. 23 24 1. Benchmarking Registering Property Regulations: Mongolia is ranked 27 overall for Registering Property. Ranking of Mongolia in Registering Property - Compared to good practice and selected economies: 25 The following table shows Registering Property data for Mongolia compared to good practice and comparator economies: Good Practice Procedures Time (days) Cost (% of (number) property Economies value) New Zealand* 2 Norway* 1 Saudi Arabia 0.0 Selected Economy Mongolia 5 11 2.2 Comparator Economies China 4 29 3.6 Japan 6 14 5.5 Kazakhstan 4 40 0.1 Korea, Rep. 7 11 5.1 Russian Federation 6 43 0.1 Taiwan, China 3 5 6.2 * The following economies are also good practice economies for : Procedures (number): United Arab Emirates Time (days): Saudi Arabia, Thailand, United Arab Emirates 26 2. Historical data: Registering Property in Mongolia Registering Property data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 25 27 Procedures (number) 5 5 5 5 Time (days) 11 11 11 11 Cost (% of property value) 2.2 2.1 2.1 2.2 3. The following graphs illustrate the Registering Property sub indicators in Mongolia over the past 4 years: 27 Registering Property in Mongolia This topic examines the steps, time, and cost involved in registering property in Mongolia. STANDARDIZED PROPERTY Property Value: 106,845,016.91 City: Ulan Bator Registration Requirements: No: Procedure Time to complete Cost to complete 1 Obtain a non-encumbrance certificate from the 3 days (regular MNT 5,000 (regular Immovable Property Registration Office procedure) or 1 day procedure) or MNT 10,000 (urgent procedure) (urgent procedure) 2 Notarization of the contract of purchase 1 day Notary fees according to the following schedule: Value of contract (in MNT)Notary fees (in MNT) Up to 1,000,0000.5% of value of contract From 1,000,001 to 10,000,000MNT 10,000 From 10,000,001 to 25,000,000MNT 25,000 From 25,000,001 to 100,000,000MNT 50,000 From 100,000,001 to 300,000,000MNT 100,000 Above 300,000,000MNT 200,000 3 Payment of Income or Transfer Tax at a commercial 1 day 2% of property value bank 28 4 Submit application to the Immovable Property 7 days (regular Regular service fee (in Registration Agency procedure) or 1 day MNT)Urgent service fee (in (urgent procedure) MNT) Base fee = 65,000Base fee = 125,000 Certificate fee = 5,000Certificate fee = 5,000 5 Transfer of the land use right 7 days MNT 10,000 fee for new certificate 29 Registering Property Details - Mongolia Procedure 1 Obtain a non-encumbrance certificate from the Immovable Property Registration Office Time to complete: 3 days (regular procedure) or 1 day (urgent procedure) Cost to complete: MNT 5,000 (regular procedure) or MNT 10,000 (urgent procedure) Agency: Immovable Property Registration Office Comment: The seller obtains, before signing the contract, the mortgage-free certification from the Immovable Property Registration Office. Procedure 2 Notarization of the contract of purchase Time to complete: 1 day Cost to complete: Notary fees according to the following schedule: Value of contract (in MNT)Notary fees (in MNT) Up to 1,000,0000.5% of value of contract From 1,000,001 to 10,000,000MNT 10,000 From 10,000,001 to 25,000,000MNT 25,000 From 25,000,001 to 100,000,000MNT 50,000 From 100,000,001 to 300,000,000MNT 100,000 Above 300,000,000MNT 200,000 Comment: The contract must be certified by the notary public who is authorized to operate in the district in which the immovable property is situated. The contract is prepared by the parties. The authorized representatives of the parties must be present at the notary office. In Mongolia, a legal entity cannot own land, only real estate. Thus calculation shall be made only for the building. As to the land ownership the purchaser after the transfer of the title of the immovable property, shall make an application to the Land department of the relevant district to transfer the Land use right to the purchaser's name. The documentation shall include: · Non-encumbrance certificate (obtained in Procedure 1) · Immovable property registration certificate (already in possession of seller) · ID card number and registration number of citizen or name, address and state registration number of legal entity who is certifying documents. · Permission of citizen, legal entity and authorized organization if required by law · Copy of contract · Copy of power of attorney, if required · All documents shall be in original or notarized. Procedure 3 Payment of Income or Transfer Tax at a commercial bank Time to complete: 1 day Cost to complete: 2% of property value Agency: Commercial Bank Comment: The Mongolian legal system established a special tax for the sale of immoveable property which is called income tax. The income tax is imposed no matter whether there will be profit or not. Income tax is calculated based on the total income that is realized from the sale of an asset. 30 Procedure 4 Submit application to the Immovable Property Registration Agency Time to complete: 7 days (regular procedure) or 1 day (urgent procedure) Cost to complete: Regular service fee (in MNT)Urgent service fee (in MNT) Base fee = 65,000Base fee = 125,000 Certificate fee = 5,000Certificate fee = 5,000 Agency: Immovable Property Registration Office Comment: Parties submit relevant materials to the Immoveable Property Registration Agency. At the desk, the officer will check all documents and if satisfied will receive the application; if not he will note the missing documents and reject the application. The certificate of ownership will be issued within 7 days after the Registration Agency analyzes all the documentation presented, if the normal procedure is followed but in 1 day if the urgent procedure is chosen. The documentation shall include: · A request for registration (fill an application form) · Original immovable property registration certificate. · A notarized copy of the contract (obtained in Procedure 2) · Notarized permission of a citizen, legal entity and authorized organization if required by law. Procedure 5 Transfer of the land use right Time to complete: 7 days Cost to complete: MNT 10,000 fee for new certificate Agency: Land Department Comment: Ownership of the land belongs to the state. Only Mongolian citizens own land for family use. Therefore the land use rights are transferred with immovable property. This means who owns the immovable property then automatically holds land use right of the site. The land department of the relevant district will issue a new land use certificate for the new owner of the immovable property and will make a land use contract with the new owner. The documentation shall include: · A request for registration from both parties. · Copy of the immovable property registration certificate. · A notarized copy of the contract (obtained in Procedure 2) · Notarized permission of a citizen, legal entity and authorized organization if required by law. 31 32 1. Benchmarking Getting Credit Regulations: Mongolia is ranked 72 overall for Getting Credit. Ranking of Mongolia in Getting Credit - Compared to good practice and selected economies: 33 The following table shows Getting Credit data for Mongolia compared to good practice and comparator economies: Good Practice Strength of Depth of Public Private legal rights credit registry bureau Economies index (0-10) information coverage (% coverage (% index (0-6) of adults) of adults) New Zealand* 100.0 Portugal 67.1 Singapore* 10 United Kingdom 6 Selected Economy Mongolia 6 3 19.2 0.0 Comparator Economies China 6 4 63.9 0.0 Japan 7 6 0.0 76.1 Kazakhstan 4 5 0.0 29.9 Korea, Rep. 7 6 0.0 93.3 Russian Federation 3 5 0.0 14.4 Taiwan, China 4 5 0.0 90.4 * The following economies are also good practice economies for : Strength of legal rights index (0-10): Hong Kong, China, Kenya, Kyrgyz Republic, Malaysia Private bureau coverage (% of adults): Argentina, Australia, Canada, Iceland, Ireland, Norway, Sweden, United Kingdom, United States 27 countries have the highest credit information index. 34 2. Historical data: Getting Credit in Mongolia Getting Credit data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 69 72 Strength of legal rights index (0-10) 6 6 6 6 Depth of credit information index (0-6) 3 3 3 3 Private bureau coverage (% of adults) 0.0 0.0 0.0 0.0 Public registry coverage (% of adults) 10.8 22.7 22.2 19.2 3. The following graphs illustrate the Getting Credit sub indicators in Mongolia over the past 4 years: 35 Getting Credit in Mongolia The following table summarize legal rights of borrowers and lenders, and the availability and legal framework of credit registries in Mongolia. Getting Credit Indicators (2010) Indicator Private credit Public credit Private bureau coverage (% of adults) 3 bureau registry Are data on both firms and individuals distributed? No Yes 1 Are both positive and negative data distributed? No Yes 1 Does the registry distribute credit information from retailers, trade No No 0 creditors or utility companies as well as financial institutions? Are more than 2 years of historical credit information distributed? No Yes 1 Is data on all loans below 1% of income per capita distributed? No No 0 Is it guaranteed by law that borrowers can inspect their data in the No No 0 largest credit registry? Coverage 0.0 19.2 Number of individuals 0 .. Number of firms 0 .. 36 Strength of legal rights index (0-10) 6 Can any business use movable assets as collateral while keeping possession of the assets; and any financial Yes institution accept such assets as collateral ? Does the law allow businesses to grant a non possessory security right in a single category of movable assets, Yes without requiring a specific description of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without Yes requiring a specific description of collateral? May a security right extend to future or after-acquired assets, and may it extend automatically to the products, Yes proceeds or replacements of the original assets ? Is a general description of debts and obligations permitted in collateral agreements, so that all types of obligations Yes and debts can be secured by stating a maximum amount rather than a specific amount between the parties ? Is a collateral registry in operation, that is unified geographically and by asset type, as well as indexed by the No grantor's name of a security right ? Do secured creditors have absolute priority to their collateral outside bankruptcy procedures? No Do secured creditors have absolute priority to their collateral in bankruptcy procedures? No During reorganization, are secured creditors' claims exempt from an automatic stay on enforcement? No Does the law authorize parties to agree on out of court enforcement? Yes 37 38 1. Benchmarking Protecting Investors Regulations: Mongolia is ranked 28 overall for Protecting Investors. Ranking of Mongolia in Protecting Investors - Compared to good practice and selected economies: 39 The following table shows Protecting Investors data for Mongolia compared to good practice and comparator economies: Good Practice Strength of investor Economies protection index (0-10) New Zealand 9.7 Selected Economy Mongolia 6.3 Comparator Economies China 5.0 Japan 7.0 Kazakhstan 6.0 Korea, Rep. 5.3 Russian Federation 5.0 Taiwan, China 5.3 40 2. Historical data: Protecting Investors in Mongolia Protecting Investors data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 27 28 Strength of investor protection index (0-10) 6.3 6.3 6.3 6.3 3. The following graph illustrates the Protecting Investors index in Mongolia compared to best practice and selected Economies: 9.7 7.0 6.3 6.0 5.3 5.3 5.0 5.0 ia an n ol . nd hi n, na pa ep t ra n g C iwa hs hi a on de sia ,R Ja n al ak na C tio M Ta Fe us Ze ea az R or ew K K N Note: The higher the score, the greater the investor protection. 41 Protecting Investors in Mongolia The table below provides a full breakdown of how the disclosure, director liability, and shareholder suits indexes are calculated in Mongolia. Protecting Investors Data (2010) Indicator Extent of disclosure index (0-10) 5 3 What corporate body provides legally sufficient approval for the transaction? 0 Whether immediate disclosure of the transaction to the public and/or shareholders is required? 1 Whether disclosure of the transaction in published periodic filings (annual reports) is required? 1 Whether disclosure of the conflict of interest by Mr. James to the board of directors is required? 0 Whether an external body must review the terms of the transaction before it takes place? Extent of director liability index (0-10) 8 2 Whether shareholders can hold Mr. James liable for the damage that the Buyer-Seller transaction causes to the company? 2 Whether shareholders can hold the approving body (the CEO or board of directors) liable for the damage that the Buyer-Seller transaction causes to the company? 2 Whether a court can void the transaction upon a successful claim by a shareholder plaintiff? 1 Whether Mr. James pays damages for the harm caused to the company upon a successful claim by the shareholder plaintiff? 42 0 Whether Mr. James repays profits made from the transaction upon a successful claim by the shareholder plaintiff? 0 Whether fines and imprisonment can be applied against Mr. James? 1 Whether shareholders can sue directly or derivatively for the damage that the Buyer-Seller transaction causes to the company? Ease of shareholder suits index (0-10) 6 4 Whether the plaintiff can obtain any documents from the defendant and witnesses during trial? 0 Whether the plaintiff can directly question the defendant and witnesses during trial? 0 Whether the plaintiff can request categories of documents from the defendant without identifying specific ones? 0 Whether shareholders owning 10% or less of Buyer's shares can request an inspector to investigate the transaction? 1 Whether the level of proof required for civil suits is lower than that of criminal cases? 1 Whether shareholders owning 10% or less of Buyer's shares can inspect transaction documents before filing suit? Strength of investor protection index (0-10) 6.3 43 44 1. Benchmarking Paying Taxes Regulations: Mongolia is ranked 66 overall for Paying Taxes. Ranking of Mongolia in Paying Taxes - Compared to good practice and selected economies: 45 The following table shows Paying Taxes data for Mongolia compared to good practice and comparator economies: Good Practice Payments Time (hours Total tax rate (number per per year) (% profit) Economies year) Maldives* 3 0 Timor-Leste 0.2 Selected Economy Mongolia 43 192 23.0 Comparator Economies China 7 398 63.5 Japan 14 355 48.6 Kazakhstan 9 271 29.6 Korea, Rep. 14 250 29.8 Russian Federation 11 320 46.5 Taiwan, China 17 269 41.9 * The following economies are also good practice economies for : Payments (number per year): Qatar 46 2. Historical data: Paying Taxes in Mongolia Paying Taxes data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 67 66 Total tax rate (% profit) 38.4 32.6 22.8 23.0 Payments (number per year) 43 43 43 43 Time (hours per year) 204 204 192 192 3. The following graphs illustrate the Paying Taxes sub indicators in Mongolia over the past 4 years: 47 Paying Taxes in Mongolia The table below addresses the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year in Mongolia, as well as measures of administrative burden in paying taxes. Tax or mandatory Payments Notes on Time Statutory tax Tax Totaltax rate Notes on contribution (number) Payments (hours) rate base (% profit) TTR Value added tax (VAT) 12 72 10.0% value added and land sale Property transfer tax 1 2.0% capital gains 0.10 Vehicle tax 4 varies up to 0.20 MNT 100,000) Interest tax 1 10.0% interest 0.30 income Property tax 1 0.6% property 0.60 value Corporate income tax 12 57 10% (25% if taxable 9.40 > 3bn profits togrogs) (there's a 50% discount for the second year) Social insurance 12 63 20% gross salaries 12.40 contributions (divided b/n employee/r) 48 Totals 43 192 23.0 49 50 1. Benchmarking Trading Across Borders Regulations: Mongolia is ranked 158 overall for Trading Across Borders. Ranking of Mongolia in Trading Across Borders - Compared to good practice and selected economies: 51 The following table shows Trading Across Borders data for Mongolia compared to good practice and comparator economies: Good Practice Documents to Time to Cost to Documents to Time to Cost to export export (days) export (US$ import import (days) import (US$ Economies (number) per (number) per container) container) Denmark* 5 France 2 2 Malaysia 450 Singapore 4 439 Selected Economy Mongolia 8 46 2131 8 47 2274 Comparator Economies China 7 21 500 5 24 545 Japan 4 10 1010 5 11 1060 Kazakhstan 10 81 3005 12 67 3055 Korea, Rep. 3 8 790 3 7 790 Russian Federation 8 36 1850 13 36 1850 Taiwan, China 5 12 645 6 12 700 * The following economies are also good practice economies for : Time to export (days): Estonia 52 2. Historical data: Trading Across Borders in Mongolia Trading Across Borders data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 156 158 Cost to export (US$ per container) 1807 2131 2131 2131 Cost to import (US$ per container) 2274 2274 2274 2274 Documents to export (number) 8 8 8 8 Documents to import (number) 8 8 8 8 Time to export (days) 33 49 46 46 Time to import (days) 33 49 47 47 3. The following graphs illustrate the Trading Across Borders sub indicators in Mongolia over the past 4 years: 53 54 Trading Across Borders in Mongolia These tables list the procedures necessary to import and export a standardized cargo of goods in Mongolia. The documents required to export and import the goods are also shown. Nature of Export Procedures (2010) Duration (days) US$ Cost Documents preparation 28 145 Customs clearance and technical control 2 126 Ports and terminal handling 2 80 Inland transportation and handling 14 1780 Totals 46 2131 Nature of Import Procedures (2010) Duration (days) US$ Cost Documents preparation 28 144 Customs clearance and technical control 4 50 Ports and terminal handling 2 80 Inland transportation and handling 13 2000 Totals 47 2274 55 Documents for Export and Import Export Bill of lading Certificate of origin Commercial invoice Customs export declaration Insurance certificate Packing list Technical standard/health certificate Transit document Import Bill of lading Certificate of origin Commercial invoice Customs import declaration Transit document Insurance certificate Packing list Technical standard/health certificate 56 57 1. Benchmarking Enforcing Contracts Regulations: Mongolia is ranked 35 overall for Enforcing Contracts. Ranking of Mongolia in Enforcing Contracts - Compared to good practice and selected economies: 58 The following table shows Enforcing Contracts data for Mongolia compared to good practice and comparator economies: Good Practice Procedures Time (days) Cost (% of (number) claim) Economies Bhutan 0.1 Ireland 20 Singapore 150 Selected Economy Mongolia 32 314 30.6 Comparator Economies China 34 406 11.1 Japan 30 360 22.7 Kazakhstan 38 390 22.0 Korea, Rep. 35 230 10.3 Russian Federation 37 281 13.4 Taiwan, China 47 510 17.7 59 2. Historical data: Enforcing Contracts in Mongolia Enforcing Contracts data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 35 35 Procedures (number) 32 32 32 32 Time (days) 314 314 314 314 Cost (% of claim) 30.6 30.6 30.6 30.6 3. The following graphs illustrate the Enforcing Contracts sub indicators in Mongolia over the past 4 years: 60 Enforcing Contracts in Mongolia This topic looks at the efficiency of contract enforcement in Mongolia. Nature of Procedure (2010) Indicator Procedures (number) 32 Time (days) 314 Filing and service 14.0 Trial and judgment 120.0 Enforcement of judgment 180.0 Cost (% of claim)* 30.60 Attorney cost (% of claim) 14.9 Court cost (% of claim) 7.2 Enforcement Cost (% of claim) 8.5 61 Court information: Ulaanbaatar District Court ("Duurgiin Shuukh") * Claim assumed to be equivalent to 200% of income per capita. 62 63 1. Benchmarking Closing Business Regulations: Mongolia is ranked 119 overall for Closing a Business. Ranking of Mongolia in Closing Business - Compared to good practice and selected economies: 64 The following table shows Closing Business data for Mongolia compared to good practice and comparator economies: Good Practice Recovery rate Time (years) Cost (% of (cents on the estate) Economies dollar) Ireland 0.4 Japan 92.7 Singapore* 1 Selected Economy Mongolia 20.0 4.0 8 Comparator Economies China 36.4 1.7 22 Japan 92.7 0.6 4 Kazakhstan 43.3 1.5 15 Korea, Rep. 81.7 1.5 4 Russian Federation 25.3 3.8 9 Taiwan, China 82.2 1.9 4 * The following economies are also good practice economies for : Cost (% of estate): Colombia, Kuwait, Norway 65 2. Historical data: Closing Business in Mongolia Closing a Business data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 109 119 Time (years) 4.0 4.0 4.0 4.0 Cost (% of estate) 8 8 8 8 Recovery rate (cents on the dollar) 20.1 22.0 22.0 20.0 3. The following graphs illustrate the Closing Business sub indicators in Mongolia over the past 4 years: 66 Since 2004 Doing Business has been tracking reforms aimed at simplifying business regulations, strengthening property rights, opening access to credit and enforcing contracts by measuring their impact on 10 indicator sets . * Nearly 1,000 reforms have had an impact on these indicators. Doing Business 2011, covering June 2009 to June 2010, reports that 117 economies implemented 216 reforms to make it easier to start a business. 64% of economies measured by Doing Business have reformed this year, focusing on easing business start-up, lightening the tax burden, simplifying import and export regulations and improving credit information systems. The top 10 most-improved in Doing Business 2011 Dealing with Construction Trading Across Borders Positive Change Registering Property Enforcing Contracts Protecting Investors Starting a Business Closing a Business Negative Change Getting Credit Paying Taxes Permits Economy Kazakhstan Rwanda Peru Vietnam Cape Verde Tajikistan Zambia Hungary Grenada Brunei Darussalam * For Doing Business 2011 the Employing Workers indicator is not included in the aggregate ease of doing business ranking. 67 Summary of changes to business regulation in top 10 most improved economies in Doing Business 2011 and selected comparator economies. Brunei Darussalam Brunei Darussalam made starting a business easier by improving efficiency at the company registrar and implementing an electronic system for name searches. Brunei Darussalam reduced the corporate income tax rate from 23.5% to 22% while also introducing a lower tax rate for small businesses, ranging from 5.5% to 11%. The introduction of an electronic customs system in Brunei Darussalam made trading easier. Cape Verde Cape Verde made start-up easier by eliminating the need for a municipal inspection before a business begins operations and computerizing the system for delivering the municipal license. Cape Verde eased property registration by switching from fees based on a percentage of the property value to lower fixed rates. Cape Verde abolished the stamp duties on sales and checks. China China's new corporate income tax law unified the tax regimes for domestic and foreign enterprises and clarified the calculation of taxable income for corporate income tax purposes. Grenada Grenada eased business start-up by transferring responsibility for the commercial registry from the courts to the civil administration. The appointment of a registrar focusing only on property cut the time needed to transfer property in Grenada by almost half. Grenada's customs administration made trading faster by simplifying procedures, reducing inspections, improving staff training and enhancing communication with users. Hungary Hungary implemented a time limit for the issuance of building permits. Hungary reduced the property registration fee by 6% of the property value. Hungary simplified taxes and tax bases. Amendments to Hungary's bankruptcy law encourage insolvent companies to consider reaching agreements with creditors out of court so as to avoid bankruptcy. Japan Japan made it easier to deal with insolvency by establishing a new entity, the Enterprise Turnaround Initiative Corporation, to support the revitalization of companies suffering from excessive debt but professionally managed. Kazakhstan Kazakhstan eased business start-up by reducing the minimum capital requirement to 100 tenge ($0.70) and eliminating the need to have the memorandum of association and company charter notarized. Kazakhstan made dealing with construction permits easier by implementing a one-stop shop related to technical conditions for utilities. Kazakhstan strengthened investor protections by requiring greater corporate disclosure in company annual reports. Kazakhstan speeded up trade through efforts to modernize customs, including implementation of a risk management system and improvements in customs automation. Korea, Rep. Korea made it easier to deal with insolvency by introducing postfiling financing, granting superpriority to the repayment of loans given to companies undergoing reorganization. Peru Peru eased business start-up by simplifying the requirements for operating licenses and creating an online one-stop shop for business registration. Peru streamlined construction permitting by implementing administrative reforms. Peru introduced fast-track procedures at the land registry, cutting by half the time needed to register property. Peru made trading easier by implementing a new web-based electronic data interchange system, risk-based inspections and payment deferrals. Russian Federation Russia eased construction permitting by implementing a single window for all procedures related to land use. Russia introduced a series of legislative measures in 2009 to improve creditor rights and the insolvency system. Rwanda Rwanda made dealing with construction permits easier by passing new building regulations at the end of April 2010 and implementing new time limits for the issuance of various permits. Rwanda enhanced access to credit by allowing borrowers the right to inspect their own credit report and mandating that loans of all sizes be reported to the central bank's public credit registry. Rwanda reduced the number of trade documents required and enhanced its joint border management procedures with Uganda and other neighbors, leading to an improvement in the trade logistics environment. Taiwan, China Taiwan (China) eased business start-up by reducing the time required to check company names, register retirement plans and apply for health, pension and labor insurance. Taiwan (China) reduced the corporate income tax rate and simplified tax return forms, rules for assessing corporate income tax and the calculation of interim tax payments. 68 Tajikistan Tajikistan made starting a business easier by creating a one-stop shop that consolidates registration with the state and the tax authority. Tajikistan strengthened investor protections by requiring greater corporate disclosure in the annual report and greater access to corporate information for minority investors. Tajikistan lowered its corporate income tax rate. Vietnam Vietnam eased company start-up by creating a one-stop shop that combines the processes for obtaining a business license and tax license and by eliminating the need for a seal for company licensing. Vietnam made dealing with construction permits easier by reducing the cost to register newly completed buildings by 50% and transferring the authority to register buildings from local authorities to the Department of National Resources and Environment. Vietnam improved its credit information system by allowing borrowers to examine their own credit report and correct errors. Zambia Zambia eased business start-up by eliminating the minimum capital requirement. Zambia eased trade by implementing a one-stop border post with Zimbabwe, launching web-based submission of customs declarations and introducing scanning machines at border posts. Zambia improved contract enforcement by introducing an electronic case management system in the courts that provides electronic referencing of cases, a database of laws, real-time court reporting and public access to court records. 69 70