How to Register a Sole Proprietorship (Хувь хүн бизнес) in Mongolia

Mongolia’s growing freelance economy and digital infrastructure make it increasingly attractive for professionals who want to work independently. Setting up as a sole proprietor—known locally as a хувь хүн бизнес (khuv’ hun biznes)—allows you to operate your own business with minimal paperwork and full flexibility.

The process is relatively straightforward, though understanding the country’s tax rules and social insurance system takes a bit of care. For many, the benefits outweigh the challenges: low setup costs, simple reporting, and direct access to profits. The main hurdles are usually related to registering for taxes, managing contributions, and keeping detailed records for compliance.

Disclaimer: This article is for informational purposes only and is not a substitute for legal advice. Please always check official sources or seek professional guidance before taking action.

What is a sole proprietorship in Mongolia?

In Mongolia, a sole proprietorship is known as хувь хүн бизнес (khuv’ hun biznes). In English, it is often referred to as:

• Sole trader
• Self-employed worker
• Independent contractor

All these terms describe a business run by one person who is legally responsible for all profits, losses, and obligations.

How does a sole proprietorship (хувь хүн бизнес) work in Mongolia?

Хувь хүн бизнес vs. other business structures in Mongolia

While a sole proprietorship is ideal for small-scale work, there are other business structures in Mongolia that may be better suited for expansion or partnerships—particularly the Limited Liability Company (LLC / ХХК**)**. These alternatives offer limited liability protection and greater credibility but involve more complex registration and higher costs. The table below compares the two main structures to help you decide.

Step-by-step guide: How to register a sole proprietorship in Mongolia

Step 1: Check your eligibility

Mongolian citizens with a valid ID can register easily. Foreign nationals must have a valid residence permit, passport, and proof of address. Registration is available to anyone earning taxable income in Mongolia, regardless of industry.

Step 2: Choose your business name

Sole proprietors can operate under their personal name. If you wish to use a trade name, ensure it doesn’t conflict with existing trademarks. There’s no separate business name registry for sole proprietorships, but uniqueness is recommended for branding and tax clarity.

Step 3: Gather required documents

You’ll need to prepare:

• National ID card (or passport for foreigners)
• Proof of address / residence permit
• One or two passport-style photos
• Completed Form TB-03 (Tax Registration Form)

Step 4: Register with the Mongolian Tax Administration

You can register either in person or online. New taxpayers usually submit Form TB-03 and supporting documents at their local branch of the Mongolian Tax Administration. Once approved, you’ll receive a taxpayer registration number and certificate. If you already have a tax record, registration can also be completed online through the E-Tax portal.

Step 5: Pay registration fees and contributions

There are no major upfront registration fees or capital requirements for sole proprietorships in Mongolia. After registration, you’ll only need to pay ongoing taxes and social insurance contributions as they become due, based on your declared income.

Step 6: Complete post-registration obligations

Once registered, you must comply with Mongolia’s tax and accounting regulations. This includes issuing invoices, maintaining accurate financial records, filing tax returns, paying social insurance contributions, and notifying the tax authority of any business changes, such as address, name, or cessation of operations.

Financial and tax obligations for sole proprietors in Mongolia

You are responsible for:

• Income tax: Sole proprietors in Mongolia pay a flat 10 % tax on operating income under the Personal Income Tax Law, or 1 % if their annual turnover is MNT 50 million or less and they are registered for the simplified regime. Larger businesses or incorporated entities fall under the corporate tax system, paying 10 % on taxable profits up to MNT 6 billion and 25 % on profits above that threshold. Returns are filed through the Mongolian Tax Administration.
• VAT: The standard VAT rate is 10 %, applicable to goods, services, and imports. Registration is mandatory if your annual taxable turnover exceeds MNT 50 million. VAT returns are filed monthly or quarterly through the MTA E-Tax system. Reverse-charge VAT applies to certain imported services.
• Social security contributions: Sole proprietors must register with the Social Insurance General Office (SIGO) and contribute to Mongolia’s social insurance schemes. If you work for yourself, you pay the full combined social insurance rate—about 24–26 % of your declared monthly income base—since you are both employer and employee for insurance purposes. If you later hire staff, you must also pay 12.5–14.5 % employer contributions and withhold 11.5% employee contributions for them. The maximum contribution base in 2025 is approximately MNT 910,800, and payments are made monthly through local SIGO offices or online.
• Record-keeping: You must maintain complete and accurate records of all invoices, receipts, contracts, and financial documents in Mongolian (or officially translated form). Records must be kept for at least four years, as the tax authority may request them during audits.
• Invoicing: Each invoice must include your taxpayer registration number, business or personal name, client details, issue date, description of goods or services, amounts charged, and applicable VAT. Invoices must be sequentially numbered and securely stored for at least four years. (Mongolian Tax Administration)

Launch your contracting career and stay compliant with Deel

Registering as a sole proprietor gives you independence, but it also means handling taxes, invoices, and records on your own. Deel’s all-in-one platform helps you manage obligations without the stress. With Deel, you can:

• Automate invoicing and expense tracking with essential Bookkeeping tools
• Create, send, and sign localised work agreements
• Keep accurate records for tax season
• Access expert tax advice and compliance support
• Get paid through multiple payment and withdrawal methods
• Spend your earnings in USD with the Deel Card
• Access funds early with Deel Advance
• Enjoy contractor perks from 150+ partners

Stay independent, without the admin overload. Sign up to Deel for free today.

FAQs

What is the minimum capital required to start a хувь хүн бизнес in Mongolia?
None. There is no minimum capital requirement.

Do хувь хүн бизнес need to register for VAT?
Yes, if your annual turnover exceeds MNT 50 million.

How much are the standard monthly or annual contributions?
If you work for yourself as a sole proprietor, you must register with the Social Insurance General Office (SIGO) and contribute as a self-employed person. You’ll pay the full combined social insurance rate, which is about 24–26 % of your declared monthly income base, up to a maximum contribution base of MNT 910,800 per month (2025). If you later hire employees, you’ll also need to contribute 12.5–14.5 % as the employer and withhold 11.5 % from each employee’s salary for their share.

Can a хувь хүн бизнес hire employees?
Yes. You may hire staff, but must withhold income tax and pay social contributions on their behalf.

How long does it take to register as a хувь хүн бизнес in Mongolia?
Usually within one to three working days.

Can foreign nationals register as a хувь хүн бизнес in Mongolia?
Yes, provided they hold a valid residence permit and meet registration requirements.

Do хувь хүн бизнес need a separate business bank account?
Not legally required, but highly recommended for financial clarity.

What happens if I stop working as a хувь хүн бизнес?
You must notify the MTA, file final tax returns, and close your taxpayer account.

Are there any incentives for new хувь хүн бизнес?
Yes. For sole proprietors earning operating income below MNT 50 million in the prior year, and upon registration, you may apply the simplified 1 % tax regime (on gross revenue) instead of the standard 10 %.

Can I use Deel as a хувь хүн бизнес to get paid by international clients?
Yes. Deel supports Mongolian sole proprietors to receive payments globally in multiple currencies with low fees and transparent exchange rates.

Does Deel generate compliant invoices for хувь хүн бизнес?
Yes. Deel automatically generates invoices that meet Mongolian tax standards.

Can Deel help me with taxes as a sole proprietor in Mongolia?
Yes. Deel provides downloadable tax and payment reports for easy filing.

Does Deel offer contracts for freelancers and хувь хүн бизнес?
Yes. Deel provides compliant contract templates for secure client relationships.

Can I access benefits through Deel as a хувь хүн бизнес?
Yes. Deel offers optional benefits such as health insurance and retirement savings plans.