Tax reform became effective from 1 January 2020
The Parliament of Mongolia passed the revisions to the General Tax Law (GT Law), the Corporate Income Tax Law (CIT Law), the Value Added Tax Law (VAT Law), and Personal Income Tax Law (PIT Law) on 22 March 2019. The revision of the tax laws became effective starting from 1 January 2020.
In brief, the revision of the tax laws changed the previous rules and introduced several new regulations and concepts, as follows:
- General Anti Avoidance Rule (GAAR) and transfer pricing (TP) rules.
- Regulation on exchange of information in tax matters with foreign tax authorities.
- Changes in the tax dispute process.
- Tax fines and penalties.
- VAT deduction rules.
- Changed definition of a resident and non-resident taxpayers.
- Detailed regulation on a permanent establishment (PE).
- Changes to income recognition for tax purposes.
- Changes to rules for deduction of expenses for CIT purposes.
- Change to a tax loss carryforward.
- Tax credit for taxes paid in foreign countries.
- Controlled Foreign Company (CFC) rules.
Comprehensive TP rules are introduced to align with the Organisation for Economic Cooperation and Development (OECD) requirements. The qualifying entities would be required to report the annual TP report, local file, master file, and country-by-country (CbC) reporting. Detailed guidance on the TP reporting is expected to be issued.
For details regarding each change, please refer to the corresponding sections of this tax summary.