A resident taxpayer of Mongolia includes an economic entity incorporated under the laws of Mongolia or a foreign economic entity with its effective place of management in Mongolia.
A foreign economic entity with its effective place of management in Mongolia shall include a foreign economic entity that meets at least three or more of the following requirements:
- More than 50% of the shareholders, or shareholders who are directly and indirectly exercising their shareholding rights and responsibilities through representatives, are residing in Mongolia.
- In the past consecutive four years prior to the current tax year, more than 50% of the total shareholder's meetings were held in Mongolia.
- The company’s accounting and financial documents are kept in Mongolia.
- Not less than 25% of the Board of Directors (BOD) members, or those who are directly and indirectly exercising BOD member's rights and responsibilities through their representatives, are residing in Mongolia.
- Not less than 60% of total sales revenue is earned in Mongolia or sourced from Mongolia.
A non-resident company is a foreign economic entity that conducts its business in Mongolia and earns income from Mongolian sources.
Permanent establishment (PE)
An expanded PE definition is included in the new CIT law, which is in line with the international tax rules. The following concepts are introduced:
- A construction PE should be constituted if a foreign entity is carrying on activities for 90 days or more in Mongolia.
- A service PE should be constituted if a foreign entity is providing services through employees or other personnel that are present in Mongolia for 183 days or more within 12 consecutive months.
- An agency PE should be constituted if an agent “habitually plays the principal role leading to the conclusion of contracts that are routinely concluded without material modification by the enterprise”.
Detailed PE guidance, including registration and tax reporting aspects, was issued by the tax authorities.