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Mongolia

General Information

Country Name: Mongolia
Currency: Mongolian Tugrik (MNT)
Primary Tax Authority: General Department of Taxation (GDT)

Key Legislation

  • Constitution of Mongolia: Establishes the basic principles of taxation and economic governance.
  • Law on Personal Income Tax: Regulates personal income taxation.
  • Law on Corporate Income Tax: Governs corporate taxation.
  • Value Added Tax Law: Provides the framework for VAT in Mongolia.
  • Law on Customs: Regulates customs duties and import/export controls.
  • Law on Social Insurance: Covers social insurance contributions and related obligations.

Fiscal Authority Allocation

Mongolia has a centralized tax system, with the General Department of Taxation (GDT) responsible for tax administration and collection. Local governments have limited taxing powers.

Taxes Collected by Central Authorities:

  • Personal income tax (PIT)
  • Corporate income tax (CIT)
  • Value-added tax (VAT)
  • Customs duties
  • Excise tax

Taxes Collected by Local Authorities:

  • Property tax
  • Land use tax
  • Local fees and charges

Revenue Sharing Mechanisms:

Local governments receive transfers from the central government but have limited direct taxing authority. Most major taxes are collected centrally.

Corporate Income Tax (CIT)

  • Standard CIT Rate: 25% on corporate profits.
  • Reduced CIT Rate: 10% for small businesses with annual revenue up to MNT 1 billion.
  • Tax Incentives: Special incentives for investment in certain industries and regions, including reduced rates and tax holidays.
  • Loss Carryforwards: Losses can be carried forward for up to 3 years. Carrybacks are not allowed.

Value-Added Tax (VAT)

  • Standard VAT Rate: 10% on most goods and services.
  • Exemptions: Certain goods and services such as education, healthcare, and public transportation are exempt from VAT.
  • Refunds: VAT refunds are available for exports and certain eligible businesses.

Personal Income Tax (PIT)

  • Progressive Tax Rates: Rates range from 10% to 25%. The top rate applies to income exceeding MNT 30 million annually.
  • Tax-Free Threshold: Income up to MNT 300,000 per month is tax-free.
  • Allowances: Various personal allowances are available, including for dependents and specific expenses.
  • Dividends: 10% withholding tax on dividends.
  • Capital Gains: Capital gains are generally taxed at 10%.

Additional Mandatory Contributions

Social Security Contributions:

  • Total Contribution Rate: Approximately 23% of gross salary.
  • Employer Contribution: 10% for social insurance, including pension, health, and unemployment insurance.
  • Employee Contribution: 13% for social insurance.

Contribution Thresholds:

Contributions are calculated up to a ceiling adjusted annually. For 2024, the ceiling for social insurance contributions is MNT 2 million per month.

Tax Deductibility:

Social security contributions are deductible for income tax purposes.

Withholding Taxes

  • Dividends: 10% withholding tax on dividends paid to residents and non-residents.
  • Interest: 10% withholding tax on interest payments.
  • Royalties: 10% withholding tax on royalties paid to non-residents.
  • Service Fees: Payments for services provided by non-residents are subject to a 10% withholding tax.

Transfer Pricing Rules

Mongolia follows the OECD guidelines for transfer pricing. Companies must adhere to the arm’s length principle and maintain documentation for related-party transactions.

Special Tax Regimes

  • Free Economic Zones: Businesses operating in Free Economic Zones may benefit from tax exemptions and reduced rates.
  • Investment Incentives: Specific incentives for investment in priority sectors and regions, including reduced CIT rates and tax holidays.

Other Taxes

  • Excise Tax: Applied to certain goods such as alcohol, tobacco, and fuel at varying rates.
  • Property Tax: Levied on property owners based on property value.
  • Land Use Tax: Applied to landowners and users, with rates depending on land use and location.

Double Taxation Agreements (DTAs)

Mongolia has signed 40 DTAs to avoid double taxation and provide reduced withholding tax rates on dividends, interest, and royalties.

Compliance and Reporting

  • Corporate Tax Filing Deadline: Corporate tax returns must be filed annually by March 15 of the following year.
  • VAT Filing: VAT returns are filed monthly.
  • Personal Income Tax Filing: PIT returns are due annually by April 15 of the following year.
  • Penalties for Non-Compliance: Penalties for late filing or underpayment of taxes include fines and interest on unpaid amounts.

Recent Developments

  • Digital Tax Initiatives: Mongolia is working on improving its tax administration systems through digitalization.
  • Tax Incentives for Investment: New tax incentives have been introduced to attract foreign investment, especially in mining and infrastructure sectors.
  • Revisions to VAT Regulations: Updates to VAT regulations aim to simplify compliance and enhance efficiency.

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