Tests Of Doing Business And Penalties For Unregistered Entities Considered As Doing Business In Mongolia

1) What is considered doing business without registration?

Operating a business without proper registration in Mongolia is prohibited by law.

Under the Civil Code, a legal entity acquires the right to conduct business activities and obtains legal capacity only upon registration with the State Registration Authority. However, an individual entrepreneur may conduct business activities without being required to register.

Therefore, a failure to register with the State Registration Authority shall be considered as conducting business without registration.

2) What are the key indicators of doing business?

Doing business activities requires compliance with the conditions prescribed by law, including the selection of an appropriate legal form and registration as a legal entity with the State Registration Authority. A legal entity with a foreign investment requires minimum share capital of USD 100,000 or equivalent in MNT. 

To complete registration, a business entity must have a registered address, a legal name, designated assets, a permanent bank account, and a scope of business activities.

In addition to being registered in Mongolia, an entrepreneur refers to a profit or non-profit legal entity, an organization without legal entity status, or an individual. Accordingly, such an entity or person must fulfill other obligations prescribed by law in connection with conducting profit or non-profit activities.

3) What are the legal consequences of doing business without registration?

Per the Civil Code and the Law on State Registration of Legal Entities, the legal capacity of a legal entity shall commence upon its registration in the state registration authority, and it shall be prohibited from participating in civil legal relations prior to its registration in the state registration authority.

Any person or legal entity that violates the Law on State Registration of Legal Entities shall be subject to liability under the Law on Infringements[Khulan1] . The type of liability imposed depends on the nature and severity of the unlawful act, and may include:

• imposition of a fine;
• community service;
• restriction of the right to travel;
• imprisonment; or
• deprivation of rights.

4) What is the penalty amount in 2025?

According to the Law on Infringement, if the applicant for state registration fails to fulfill the obligations prescribed by law, a fine of MNT 50,000 (app. USD 14) shall be imposed on the individual, and a fine of MNT 500,000 (app. USD 140) shall be imposed on the legal entity.

5) Is criminal liability possible?

No criminal liability shall be imposed.

6) Who identifies unregistered business activity?

According to the General Law on State Registration, the State Administrative Body in charge of State Registration (General Authority for State Registration or GASR) has functions including monitoring the activities of registration and the implementation of legislation. Therefore, if a business entity is unregistered, the GASR and the state registration inspectors would identify and handle that non-compliance.

7) What should be done if the activity is already ongoing without registration?

Any person or entity engaged in such activities must either register with the State Registration Authority or cease operations. Failure to do so may result in the initiation of a violation case and investigation.

8) What obligations arise after registering a business?

After registering a business, the entity must comply with registration in the Tax and Social Insurance Authority to maintain proper accounting, submit annual tax and financial reports, comply with labor law obligations, and notify the state registration of any changes. Also, certain types of activities may only be carried out upon obtaining a special permit or license from the competent authority.

9) From what income level must an individual register as an entrepreneur?

An individual trader is not required to register his/her business activities with the State Registration Authority. However, individuals whose sales income exceeds MNT 50 million (app. USD 14,000) in a tax year must register as a VAT payer with the Tax Authority.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.