Value-added tax (VAT)
According to the VAT Law, a person (covering legal entities, individuals, and PEs) whose sales income has reached MNT 50 million or more has to be registered as a VAT withholder. The threshold for voluntary registration is MNT 10 million of sales income. A sale of fixed assets is not considered for the VAT registration thresholds.
VAT at the rate of 10% is imposed on the supply of goods, services, and works imported, exported, and sold in Mongolia.
One of specific features of the Mongolian VAT legislation is that works and services received from a non-resident (irrespective of whether they are supplied in Mongolia or not) are subject to VAT under the reverse-charge procedure (the RC VAT).
A customs tariff varies between 5% and 40% depending on the type of goods imported into Mongolia, except for gas condense, petroleum oils, crude, oils obtained from bituminous minerals, automatic data processing machines, electrical machinery, equipment and parts, medical equipment, and pure-bred livestock, which are zero-rated.
Export duties apply to certain exported goods, such as unprocessed camel wool, wood, and wooden materials.
Excise tax is levied on goods manufactured in or imported into Mongolia, such as tobacco, alcohol, gasoline and diesel fuel, and passenger vehicles. Excise tax is also levied on the physical units of special-purpose technical devices and equipment used for betting games and gambling and on the activities of individuals and legal entities that conduct such activities. Currently, the excise tax rate on the goods such as alcohol and tobacco varies between MNT 320 and MNT 19,140 per 1 litre of alcohol and 100 cigarettes of tobacco, and it will be increased by 5% in 2019 and 4% in 2020 and later years. For special-purpose technical devices and equipment, it varies between MNT 4.35 million and MNT 116 million per unit according to the origin and type.
The excise tax rates for gasoline and diesel that are produced in Mongolia are as follows:
- MNT 0 to MNT 15,950 per tonne (up to 90 octane).
- MNT 0 to MNT 17,400 per tonne (above 90 octane).
- Diesel: MNT 0 to MNT 21,750 per tonne.
For imported gasoline and diesel, the excise tax rates vary between MNT 0 and MNT 850,000, depending on the port of import.
Excise tax for imported automobiles varies between MNT 375,000 and MNT 65,975,000, depending on the year of production, type of automobile, and engine capacity.
Immovable property tax
Immovable property tax is an annual tax that varies between 0.6% and 1%, depending on the decisions made by the local representatives’ committee, on the value of the immovable property that is owned. For tax purposes, the value used is the value registered with the government registration authority. If the property is unregistered, the insured value is used. In the absence of either a registered or insured value, the accounting value is used.
This tax does not apply to property of legal entities that are financed through the state budget, to any dwelling houses, or to any public nature buildings and construction.
Mongolia does not have a separate transfer tax. Transfer of certain rights (like land possession or usage rights and mining licences) is treated as sale of right and taxed at 30% under CIT law (for more details, please refer to the Taxes on corporate income section). For individuals, transfer of a land right is subject to 10% under personal income tax (PIT) law.
In the case of transfer of property, stamp duty will be applied.
Under the Law of Mongolia on State Stamp Duties, there are 45 types of activities subject to stamp duties, including the following:
- Settlement of a legal dispute 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 that need permissions and rights from the state authorities.
The amount of duty varies depending on the types of services or activities involved.
There are no payroll taxes applicable for the employer other than social insurance contribution by employer (see below). The employer should withhold PIT at 10% or 20% from employees’ employment income (10% rate is applied for Mongolian tax residents, whereas 20% rate is applied for tax non-residents) and submit PIT returns electronically on a quarterly basis.
Social insurance contribution by employer
Employers’ social insurance contribution depends on the industry type and is subject to rates between 12.5% and 14.5%, which is comprised of 8.5% for pension, 1% for benefits, 2% for health, 0.2% for unemployment, and 0.8% to 2.8% for industrial accident and occupational disease insurance. Employer charges are not capped. Social insurance taxes paid by employers are deductible in determining taxable income.
The employer should also withhold social insurance taxes (11.5%,capped at MNT 483,000 per month if an employee’s income exceeds MNT 4,200,000) from employees and submit returns electronically and by paper before the 5th day of the following month on a monthly basis. Payments should be made before the end of the month to the social insurance fund account.
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 License 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.