Mongolia

A resident taxpayer of Mongolia includes any economic entity incorporated under Mongolian law or a foreign entity with its effective place of management in Mongolia.

A foreign entity is considered to have its effective place of management in Mongolia if it meets at least three of the following criteria:

• More than 50% of its shareholders, or shareholders who exercise their rights and responsibilities directly or indirectly through representatives, reside in Mongolia.
• Over the past four consecutive years prior to the current tax year, more than 50% of shareholder meetings have been held in Mongolia.
• The company’s accounting and financial records are maintained in Mongolia.
• At least 25% of the Board of Directors (BOD) members, or those who exercise BOD rights and responsibilities directly or indirectly through representatives, reside in Mongolia.
• At least 60% of the company’s total sales revenue is earned in or sourced from Mongolia.

A non-resident company is a foreign entity that conducts its business in Mongolia and earns income from Mongolian sources.

Permanent establishment (PE)

The new CIT law includes an expanded definition of 'permanent establishment' (PE) that aligns with international tax rules. A PE is now defined as a unit through which the business activities of a foreign entity are wholly or partly carried out. The specified types of PE are as follows:

• Construction PE: Constituted for a building site, construction, installation, or assembly project, including connected supervisory services, if it lasts for 90 or more days within a consecutive 12-month period.
• Service PE: Constituted if a foreign entity provides services, including technical, consultancy, management, supervision, or other services (through a non-resident's employees or contracted personnel) to a resident taxpayer for 183 or more days within a consecutive 12-month period.
• Agency PE: Constituted if a person carries out the following activities in Mongolia on behalf of a non-resident taxpayer: (i) storing, selling, or supplying goods, and (ii) concluding a contract or playing the principal role leading to the conclusion of a contract without material modification to the main terms or conditions of the non-resident’s contract.

Detailed guidance on PE, including registration and tax reporting aspects, has been issued by the tax authorities.