Mongolia: Entities with Middle-Aged Personnel to be Free from Social Insurance Tax

New amendments to the country’s social insurance law may interest entities who employ middle aged individuals, as a draft law suggests releasing them from paying such employees’ social insurance payments.

According to the law, all entities are currently paying the following rates for each employee:

• 7 percent for pension insurance
• 0.5 percent for benefit insurance
• 2 percent for health insurance
• 1-3 percent for industrial accident and occupational disease insurance
• 0.5 percent for unemployment insurance

In accordance with the draft document, employers will be granted a remission from social insurance taxation for female personnel who are 35 years and older and male staff who are 40 years and older.

Mongolia is one of the youngest Asian nations with the average age for males at just 25.8 years and the median age for females estimated at just 26.6 years, as of 2011. The median age in the capital city of Ulaanbaatar is even lower at 24 years, according to the CIA World Factbook as of January 2012. Due to the existing demographic situation, employers prefer to take up with younger people – typically unmarried, with no kids, no health problems, etc.

“When I visit the region, many people complained that they cannot find jobs because of the age limit. Elderly people want to work but employers want to hire young people. This draft law is addressing what should be done to make employers hire older people,” P.Altangerel, one of the authors of the draft law and a member of State Great Khural (Mongolian Parliament) said to the local press.

“There are no job vacancies in Mongolia for older people,” he added. P.Altangerel believes the Parliament will approve the amendments before the end of the last session for current deputies, who will resign by the end of June.

Among Mongolia’s 3,133,318 million citizens (July 2011 estimate), between 1.7 and 1.8 million (15-64 years old) are fit for work, moreover, 145, 000 Mongolians are currently under-employed or fully unemployed and only 38,300 of these citizens are registered with the employment agency.

As much as 66 percent of currently unemployed people countrywide are above the age of 40 and if the Parliament will approve the draft law, some of these people may benefit from the amendments.

According to sociologists, Mongolia’s working age population will increase significantly in the coming decade. According to some estimates, 43 percent of residents are under 18 years old.

Dezan Shira & Associates is a specialist foreign direct investment practice, providing business advisory, tax, accounting, payroll and due diligence services to multinationals investing in China, Hong Kong, India, Singapore, and Vietnam. Established in 1992, the firm is a leading regional practice in Asia with twenty offices in five jurisdictions, employing over 180 business advisory and tax professionals. For professional advice on doing business in Mongolia, please contact Dezan Shira & Associates at info@dezshira.com or visit www.dezshira.com.