Overview of the corporate tax system

Taxpayers in Mongolia are separated into two separate classifications − resident and non-resident taxpayers, with different rates applying to various revenue streams depending on whether the entity is a tax resident in Mongolia.

  • A resident taxpayer is an entity that resides in Mongolia on a permanent basis and comprises of entities established under Mongolian law and foreign entities that have their headquarters in Mongolia.
  • A non-resident taxpayer is an entity that undertakes business activities in Mongolia through a permanent establishment (PE) or foreign entities that earn income sourced in Mongolia.

We outline the applicable tax rates for taxpayers considered Mongolian tax residents below. 

The payment date requirements vary depending on the type of income. Local advice should be sought to ensure that you comply with the various payment date requirements.

Income from Activities  Income From Property
Income from activities Movable and immovable property leases
Income from property Royalty Income 
Income from sale of property Dividend income
Interest income 
Permanent resident taxpayer Non-resident taxpayer of Mongolia Related party /if the following relation is present with a taxpayer, it shall be “a related party/
An economic entity formed within the laws of Mongolia A foreign economic entity that conducts its business activities in Mongolia under its representative office

•Branch (unit and section) •Plant

•Trade and service provider •Oil and natural gas well or a mine that extracts natural resource

Holds 20 percent or more of the common stock
A foreign economic entity that has its headquarter office located in Mongolia A foreign economic entity that earns income in the territory of Mongolia or from a source in Mongolia in forms other than representative office Has the right to receive 20 percent or more of the dividends or distributions
Has the right to appoint 20 percent or more of the management of the economic entity or is otherwise able to determine its policies

Taxable income and rates

A taxpayer that resides in Mongolia

Income From Activities  Income From Property
  • Income from primary and auxiliary production and sale of work and services; 
  • Income from goods, work and service received from others free of charge;
  • Realized gain from foreign currency exchange rate;
  • Income from technical, management, consulting, and other services;
  • Income from interest and/or penalty for nonperformance of contract duties, and compensation for a damage;
  • Income from immovable and movable property lease;
  • Income from sale of movable property;
  • Income from sale of share and securities; 
  • Income from sale tangible asset;
Up to MNT6 billion taxable income- 10% excess of MNT6 Billion – 25% CIT rate is 1% for business entities with annual turnover under MNT300 million and certain qualifying conditions may apply. 
  • Income from interest; 
  • Income from dividend; 
  • Income from royalty;
10%
Income from sale of rights;  10%
  • Income from quiz, gambling and lottery; 
  • Income from sale and rental of erotic publications, books, and video recording and service of erotic performance
40% 
Income from sale of immovable property; 2% 

A taxpayer that does not reside in Mongolia

Income from dividend; 20%
Loan interest and payment for issuing a guarantee;
Income from royalty; 
Income from interest on finance lease, payment for administrative expense;
Income from tangible and intangible asset lease;
Income from goods sold, work performed, and service provided in the territory of Mongolia
In the case of the representative office of a foreign economic entity transfers its own profit to overseas;

Time frame for Tax Reporting

Quarterly tax statement shall be reported by the 20th of the first month of the following quarter. Annual tax statement shall be reported by the February 10th of the following year to the corresponding tax authority and make yearend settlement.

Value Added Tax

VAT is imposed at the rate of 10% on the supply of taxable goods and services in Mongolia and on imports into Mongolia. Taxpayers are required to register with the tax authorities for Mongolian
VAT purposes when their taxable turnover exceeds 10,0 million MNT. Taxpayers may also voluntarily register whether the sale revenue of the primary manufacturing work and service reached or not 10.0 million MNT. If they have invested more than USD$2,0 million in Mongolia. VAT is levied on the following in Mongolia:

  • Work performed or services rendered in Mongolia;
  • Goods sold in Mongolia;
  • Goods imported into Mongolia to be sold or used; and
  • Goods exported from Mongolia for use or consumption outside Mongolia
10% rate of VAT is imposed on (i) the supply of taxable goods 
and services in Mongolia, (ii) exports from Mongolia and (iii) 
imports into Mongolia. Exported goods and services are taxed at 
0% rate and are listed in the law

Customs Duty

Most imported goods are subject to 5% ad valorem Customs duty while others are subject to seasonal duties. Certain goods for export are subject to specific Customs duties. Any person (physical or legal) engaged in foreign trade is liable to pay Customs duties, as well as some other taxes and fees upon importation or exportation of goods.

You can find more information from the General Department of Customs 
at www.ecustoms.mn or through its hotline 1800-1281

Mongolia reforms its key tax legislation

Mongolia engaged an extensive tax reform discussion over the past months. As a consequence, key tax laws including General Law on Taxation, Corporate Income Tax Law, Personal Income Tax Law and
VAT Law revised substantially by Mongolian Parliament (the legislative body), under Government’s tax reform packages.

The package of amendments to the laws on taxation effective from January, 2020.

The approved package of tax amendments includes the following changes:

  1. General Law on Taxation
    • The tax payment deadline for companies experiencing financial
      difficulties have been extended from 2 months to 24 months.
    • Taxes overpaid due to unfounded requests by tax authorities will
      be refunded immediately, along with the principal payment and
      any fines paid.
    • Taxpayers who have been determined to be “no risk” taxpayers,
      will not be audited.
    • An electronic tax registration and tax information portal with
      taxpayer information will be created, and services provided by tax
      authorities will be based on the electronic system.
  2. General Law on Taxation
    • The license transfer tax was decreased from 30% to 10%, and will
      now be applied to net income instead of gross income.
    • The interest income of Mongolia’s commercial banks for loans
      and debt instruments obtained from local and foreign stock
      markets will be taxed at 5%.
    • The tax of 10% on financing obtained through debt instruments
      from initial and secondary markets has been lowered to 5%.
    • If a foreigner is found by the Tax Administration to owe 20 million MNT or more in unpaid taxes, and he does not have the funds to pay his debt, the Tax Administration can request a ban on crossing the Mongolian border until the foreigner pays off the tax debt.
    • The statute of limitations for tax audits, as well as penalties, fines, and tax payments assessed as a result of such audits, was lowered from 5 years to 4 years.
    • The interest income from loans and debt instruments of Mongolia’s commercial banks from local and foreign sources will be taxed at5%.
    • International regulations aligning transfer pricing rules with OECD standards (including reporting requirements) will be implemented.
  3. Personal Income Tax
    • A flat 10% personal income tax will be applied
    • Resident tax was lowered from 20% to 15%, with interest at 10%
    • The tax return for first-time homeowners was raised from 3
      million MNT to 6 million MNT.
    • A tax credit will be given for the difference between account
      interest for mortgage loans and subsidized loans.
You can find more information from the General Department of Customs 
at www.ecustoms.mn or through its hotline 1800-1281

Tax Treaties

Bilateral foreign tax credits are only available to residents of Mongolia. To avoid double taxation, Mongolia uses the ‘tax sparing method’. In this case, the amount of foreign tax paid is allowed as a credit against the Mongolian tax payable on the same income or capital.

However, the amount of such tax credits should not exceed the amount of tax payable on the same amount of income in Mongolia. The chart below shows the withholding tax rates (in percent)on Mongolian source dividends, interest and royalties remitted to a resident of other contracting state where the income is not connected with a permanent establishment in Mongolia.

Country In force since
1 The People’s Republic of China        Jan 01, 1993
2 The Republic of Korea Jan 01, 1993
3 The Federal Republic of Germany Jan 01, 1997
4 The Republic of India Jan 01, 1997
5 The Socialist Republic of Vietnam Jan 01, 1997
6 The Republic of Turkey Jan 01, 1997
7 The United Kingdom of Great Britain and Northern Ireland Jan 01, 1997
8 The Republic of Hungary Jan 01, 1997
9 Malaysia Jan 01, 1997
10 The Russian Federation Jan 01, 1998
11 The Republic of Indonesia Jan 01, 1998
12 The Republic of France Jan 01, 1999
13 Czech Republic Jan 01, 1999
14 The Kingdom of Belgium Jan 01, 1999
15 The Republic of Kazakhstan Jan 01, 2000
16 The Republic of Kyrgyz Jan 01, 2000
17 The Republic of Poland Jan 01, 2002
18 The Republic of Bulgaria Jan 01, 2002
19 The Swiss Confederation Jan 01, 2002
20 Ukraine Jan 01, 2003
21 Canada Jan 01, 2003
22 The Republic of Singapore Jan 01, 2005
23 The Democratic People’s Republic of Korea Jan 01, 2005
24 The Republic of Austria Jan 01, 2005
25 The Republic of Belarus May 28, 2001

Tax stabilization

The legal entity which is going to implement an investment project in Mongolia can obtain Stabilization certificate upon application if it meets the requirements specified in the Law on Investment of Mongolia (2013). Stabilization Certificate is a certificate issued by the National Development Agency for the purposes of stabilizing tax rates for a
specified period of time. The rates of the following four taxes are stabilized under the stabilization certificates from 5 up to 18 years depending on the size and target region of investment:

  1. Corporate Income Tax;
  2. VAT;
  3. Customs Tax;
  4. Royalty;
  • Criteria for issuing the stabilization certificate:
    • Thresholds based on the regions;
    • Environmentally friendly;
    • New technology & know-how;
    • Stable job creation;

The first table below illustrates the scope of Stabilization Certificates for the minerals, heavy industry and infrastructure development sectors. The second table below other sectors. Investment Law does not apply to investments in the nuclear energy sector, which are governed by the Nuclear Energy Law.

National Development Agency’s team is happy to
help you via its complimentary e-Consulting service.