Mongolia

Value-added tax (VAT)

According to the VAT Law, any person (including legal entities, individuals, and PEs) whose sales income reaches MNT 50 million or more within 12 consecutive months must register as a VAT withholder. The threshold for voluntary registration is MNT 10 million in sales income. The sale of fixed assets is not considered when determining VAT registration thresholds.

A VAT rate of 10% is imposed on the supply of goods, services, and works that are imported, exported, or sold in Mongolia.

A distinctive feature of Mongolian VAT legislation is that services and works received from a non-resident, regardless of whether they are supplied in Mongolia or not, are subject to VAT under the reverse-charge procedure (RC VAT).

Customs duty

Customs tariffs in Mongolia range between 5% and 40%, depending on the type of goods imported. However, certain items, such as gas condensate, petroleum oils, crude oils, oils obtained from bituminous minerals, automatic data processing machines, electrical machinery and equipment and their parts, medical equipment, and pure-bred livestock, are zero-rated.

Export duties apply to specific exported goods, including unprocessed camel wool, wood, and wooden materials.

Excise tax

Excise tax is levied on goods manufactured in or imported into Mongolia, including tobacco, alcohol, gasoline, diesel fuel, and passenger vehicles. Additionally, excise tax is imposed on the physical units of special-purpose technical devices and equipment used for betting games and gambling, as well as on the activities of individuals and legal entities conducting such activities.

Currently, the excise tax rates on goods such as alcohol and tobacco vary. For instance, the tax is MNT 350 per litre for Shimiin arkhi (a traditional Mongolian alcoholic drink) distilled using a production method, and MNT 4,180 per 100 cigarettes of tobacco. For other types of alcoholic beverages, the excise rate varies based on the alcohol content and is set to progressively increase over the next few years.

For special-purpose technical devices and equipment used for betting games and gambling, the excise tax ranges from MNT 4.35 million to MNT 116 million per unit, depending on the origin and type of equipment.

For imported gasoline and diesel, the excise tax rates range from MNT 0 to MNT 850,000, depending on the port of import.

For imported automobiles, the excise tax varies between MNT 750,000 and MNT 65,975,000, based on the year of production, type of automobile, and engine capacity.

Immovable property tax (IPT)

The IPT is an annual tax that ranges from 0.6% to 2%, depending on factors such as location, usage, size, market demand, and supply conditions of the property. The exact tax rate within this range is determined by the Citizens' Representatives Khurals of the Aimag and Capital City, considering the location, designation, size, market needs, and requirements of the property.

The tax is levied on the value of immovable property as reported in state registration records. If the property is unregistered, the insured value is used. In the absence of both a registered and insured value, the accounting value is utilised.

This tax does not apply to properties owned by legal entities financed through the state budget, dwelling houses, or buildings and constructions of a public nature. Other tax-exempt properties include:

• Buildings and structures registered in the special zone of the capital city.
• Two apartments owned by a citizen or legal entity in the soum, aimag, or the capital (previously, all apartments were exempt from IPT).
• Real estate located in the territory of an industrial and technological park, which is exempt from IPT for the first five years and 50% exempt for the following five years. This amendment is effective as of 1 August 2022.

Transfer taxes

Mongolia does not have a separate transfer tax. Instead, the transfer of a right or licence, except for intellectual property (IP) rights, granted by state authorities is treated as a sale of rights and is taxed at 10% under the CIT law. The sale of IP rights is subject to a 5% CIT (for more details, please refer to the Taxes on corporate income section). For individuals, the transfer of land rights is subject to a 10% tax under the personal income tax (PIT) law.

In the case of transfer of property, stamp duty will be applied.

Stamp duty

Under the Law of Mongolia on State Stamp Duties, there are 45 types of activities subject to stamp duties, including the following:

• Settlement of legal disputes by a court.
• Court involvement in arbitration.
• Notary services.
• Consulate services.
• State registration services for legal entities.
• Registration services for foreign-invested economic entities and representative offices of foreign organisations.
• Other specific activities requiring permissions and rights from state authorities.

The amount of the duty varies depending on the type of service or activity involved.

Social insurance contribution by employer

Employers’ social insurance contributions in Mongolia vary depending on the industry type and the job positions of the employees, ranging from 12.5% to 14.5%. This contribution includes 8.5% for pensions, 1% for benefits, 2% for health, 0.2% for unemployment, and 0.8% to 2.8% for industrial accident and occupational disease insurance. Employer contributions are not capped and are deductible when determining taxable income.

Employers are also required to withhold social insurance taxes from employees, generally at a rate of 11.5%. This amount is capped at MNT 759,000 per month if an employee’s income exceeds MNT 6,600,000. Employers must submit social insurance returns electronically and by paper before the fifth day of the following month on a monthly basis. Payments should be made to the social insurance fund account before the end of the month.

Payroll taxes

In addition to social insurance contributions, employers in Mongolia are subject to payroll taxes. Employers are required to withhold PIT from employees' employment income at progressive rates of 10% to 20% for Mongolian tax residents and a flat rate of 20% for tax non-residents. Employers must submit PIT returns electronically on a quarterly basis.

Fees and taxes applicable to the extractive industry

A range of fees and other taxes are payable for activities in the extractive industry. The primary ones include the following:

• Mining Licence Fee that is agreed to up front and stated in the mining licence.
• Mining Royalty Tax.
• Water Pollution Fee.
• Air Pollution Fee.
• Land Use Fee.
• Natural Resources Usage Fee.