Mongolia began regulating gift agreements with the adoption of the Civil Code in 2002. These contracts involve the transfer of property as a gift between family members, friends, and acquaintances, a practice deeply rooted in society. A core characteristic of such agreements is that they are typically free of charge.[1] However, several essential conditions must be considered when entering into this legal relationship.
An example of a gift agreement is the transfer of real estate without charge. The agreement is executed by registering the transfer of ownership rights in the State Register of Property Rights. A distinguishing feature of a gift agreement compared to a Purchase and Sale Agreement is that the donor does not receive income, exempting them from the 2% tax on proceeds from real estate sales as specified under the Personal Income Tax law. It is common for individuals to sell real estate under the guise of a gift agreement rather than through a sale-purchase agreement. However, transactions made to conceal other transactions specified in the Civil Code are invalid. Additionally, if a gift agreement is used to disguise a sale-purchase agreement for the purpose of tax evasion when transferring significant taxable real estate, it is considered a criminal act. The State Tax Inspectorate can identify such violations and impose penalties. [2][3][4]
In some circumstances, a promise to give a gift at a later date may be seen as a gift in substance, but the legal obligations of the contract will be binding on the donor. A gift contract enforceable upon conclusion must be notarized; if the formal requirements are not met, the promise is considered invalid, and the recipient cannot demand the gift. [5]
When a gift agreement transfers property for a specific purpose or as a donation, the donor retains the right to require that the recipient use the gift according to the stated purpose and conditions. [6] However, a donor with a duty of care cannot donate essential living resources needed by dependents. [7] In such cases, the law restricts the donor’s property rights to ensure the basic needs of their family members are met. [8]
Furthermore, the law allows the donor or their heirs to revoke the gift and reclaim the property if the recipient commits serious misconduct, such as intentionally harming the donor or their relatives. However, this right to revoke the gift cannot be exercised if more than one year has passed since the right to claim arose.[9]
Source:
[1] Article 276, Section 276.1 of the Civil Code
[2] Article 18, Section 18.3 of the Criminal Code
[3] Article 1.8, Section 6.12 of the Law on Violation
[4] Article 56, Section 56.1.3 of the Civil Code
[5] Article 276, Section 276.4 of the Civil Code
[6] Article 276, Section 276.5 of the Civil Code
[7] Article 277, Section 277.1 of the Civil Code
[8] Yo. Kayut and others, Interpretation of the Civil Code of Mongolia, 2010
[9] Article 280 of the Civil Code
Disclaimer: This legal information and article are intended for general informational purposes only and have been prepared in accordance with the laws in effect at the time of writing. For legal advice, please consult a professional attorney.