Mongolia

Corporate - Income determination

Last reviewed - 09 June 2022

Inventory valuation

There is no specific provision in the tax law for inventory valuation, but results of inventory revaluation are not deductible from taxable income.

Capital gains

Capital and ordinary transactions are treated in the same way for tax purposes (i.e. included in annual taxable income). An exception is provided for income from sales of immovable property, which is subject to tax of 2% on gross sales proceeds.

A non-resident taxpayer’s income earned in Mongolia or from a Mongolian source is taxed in Mongolia. The definition of Mongolian-source income includes income from a sale or transfer of asset and associated rights in Mongolia (including shares). Such income is taxed with a 20% withholding tax (WHT) on a gross basis.

Obligations for withholding, reporting, and paying such tax rests with a Mongolian resident taxpayer who provides such income to a non-resident. However, in absence of this agent (i.e. in case a transaction is done between two non-residents), a non-resident-seller should be responsible for tax reporting and payment of a Mongolian WHT on a self-assessment basis.

Dividend income

Dividend income earned by a Mongolian resident entity is subject to WHT of 10%. Dividend income to be remitted out of the country to a foreign tax resident is subject to WHT at 20% but may be reduced by an applicable double tax treaty (DTT).

Interest income

Interest income is subject to a special income tax of 10%. Interest income to be remitted out of the country to a foreign tax resident is subject to WHT at 20% but may be reduced by an applicable DTT.

A special 5% rate applies on interest income of an investor who purchased debt instruments of a local entity (not holding mineral resources, oil exploration, and mining special licenses) traded in local and international stock markets.

Rental income

Rental income is included in taxable income for tax determination.

Royalty income

Royalty income is taxed at a special rate of 10%. Royalty income to be remitted out of the country to a foreign tax resident is subject to WHT at 20% but may be reduced by an applicable DTT.

Partnership income

There is no transparent partnership concept in Mongolia. Partnership income is treated as income of a legal entity and is subject to CIT.

Unrealised currency exchange gains/losses

Unrealised currency exchange gains are not considered as taxable income, and, at the same time, unrealised losses are not deductible from taxable income.

Foreign income

Mongolian legal entities pay tax on their worldwide income. Unremitted earnings are taxed the same as ordinary earnings.

Credit relief is available with respect to foreign tax on income arising from countries that have exchange of information agreements with the Mongolian tax authorities, capped at the level of Mongolian tax that would have been due on the same income in Mongolia.