The law of the free zone
General understanding
The purpose of this law is to set out principles pertaining to establishment, reorganization and dissolution of Free Zone, their location, management powers, control systems, and determines the legal basis for taxes, customs, entry/exit clearance, registration of legal entities and individuals, and employment to be adopted at Free Zone and regulates the relations connected therewith.
"Free Zone" means a special site within the territory of Mongolia that are deemed to be outside of the customs territory for the purposes of customs area, customs duties and other taxes, adopting special regulatory treatments for a business activity. The purpose for establishing a Free Zone is to increase an economic growth by ways of accelerating regional development, facilitating trade, introducing and adopting new technologies, increasing transits and logistics, developing new industries of trade and services and tourism, attracting investments, promoting exports and imports by individuals and business entities and developing export-oriented production upon creation of favorable regulatory and investment environments in the region. There are currently 4 Free Zones in Mongolia, of which Tsagaannuur, Altanbulag, and Zamiin-Uud free zones are actively operating. According to Resolution No. 10 of 2022 by the State Great Khural of Mongolia, the Khushig Valley Economic Free Zone was established in Sergelen Soum, Tuv Aimag.
Establishment, Reorganization and Dissolution of Free Zones
The State Great Khural shall make resolutions with regard to establishment of a Free Zone in the territory of Mongolia, determination of its location, size of an area to be allocated to the Free Zone, its boundaries, and its reorganization, dissolution, and defining types and areas of operation upon submission of the Government. Free Zones shall be set up in border areas or in such regions as recommended by the Government.
A cross-border Free Zone may be set up under an agreement or treaty entered by Governments. The policies and directions to be adopted by such Free Zone shall be subject to an agreement signed with the relevant country. In accordance with inter-governmental agreements, an economic cooperation zone may be established with a neighboring country, and the policies and directions to be followed in a Free Zone as well as the issue of connecting them through cross-border facilities shall be regulated by the agreement concluded with the relevant country.
The Government shall make a decision on opening or temporary closure of the Free Zone activities upon the proposal of the Cabinet member in charge of Free Zone issues. If the issue of opening or temporarily closing the activities of an economic cooperation zone is specified in the international agreements concluded with the neighboring countries and relevant laws and regulations except for clause 6.4, it shall be resolved in a diplomatic way.
For further information, please contact V. Bolormaa, GRATA International Law Firm partner at bvolodya@gratanet.com and associate B. Norovsuren at nbayarsaikhan@gratanet.com or +976 70155031.
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