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. Now it is defined as a unit through which the business activities of the foreign entity are wholly or partly carried out. The following PE types are specified:
- A construction PE should be constituted for a building site; construction, installation, and assembly project; and connected supervisory services, if it lasts for 90 or more days during a consecutive 12-month period.
- A service PE should be constituted if a foreign entity is providing services, including technical, consultancy, management, supervision, and other services (through a non-resident’s own employees or other contracted personnel) to a resident taxpayer for 183 and more days during a consecutive 12-month period.
- An agency PE should be constituted if a person carries out the following activities in Mongolia on behalf of a non-resident taxpayer: (i) storing, selling, supplying the goods and (ii) concluding a contract or playing the principal role leading to the conclusion of the contract without material modification to the main terms or conditions of the non-resident’s contract.
Detailed PE guidance, including registration and tax reporting aspects, was issued by the tax authorities.