Mongolia

Taxable period

The tax year is the calendar year.

Tax returns

Companies must submit a quarterly or semi-annual return by the 20th day of the month following the end of each respective period and an annual return by 10 February after the end of the tax year.

A withholder must prepare and submit a WHT return on a quarterly basis by the 20th day of the first month of the following respective period and an annual return by 10 February after the end of the tax year.

Payment of tax

A taxpayer shall pay the taxes due in advance by the 25th day of each month in accordance with the payment schedule based on the previous year. However, the tax authorities practically do not use their right to establish the payment schedule, and the tax payment deadline is the same as the tax reporting deadline. Year-end settlement is made by 10 February of the following year (along with the annual tax statement).

In practice, the Mongolian tax authorities allow concessions as follows:

In instances where the total tax remitted exceeds the tax obligation, the surplus amount may be applied as a credit toward settling other outstanding taxes or future tax liabilities. Additionally, there is a potential for the overpaid amount to be refunded.

An economic entity or organisation that has withheld tax from a payment of dividends, royalties, sale of rights, or a payment of income to a taxpayer should transfer the WHT to the tax authorities within ten working days. Tax withheld relating to the sale of immovable property should be transferred to the tax authorities within ten working days.

Tax audit process

The tax audit process is based on a risk-based system. Hence, there is no pre-defined cycle. However, the regular cycle in Mongolia is up to four years in practice due the statute of limitation period of four years. The tax audit is also conducted if the company requests a tax refund from tax authorities or liquidates its company. Moreover, a tax audit can be conducted anytime if the tax authorities suspect some risk or misuse of the legislation or receive information from a trustworthy source about tax evasion.

Statute of limitations

The statute of limitations in Mongolia is four years for tax arrears, fines, and penalties. However, the dispute settlement timeframe shall not pertain to payment of tax, fine, and penalty debts.

Topics of focus for tax authorities

The tax authorities typically concentrate on issues such as the understatement of income, overstatement of expenses, and the withholding obligations of taxpayers. In this context, they are particularly vigilant in scrutinising cross-border transactions between related parties.

Another prominent issue in Mongolia currently is transfer pricing. The concept of transfer pricing became more comprehensive in 2020, with the introduction of detailed rules designed to align with the OECD Transfer Pricing Guidelines. Specifically, the regulations now include a list of controlled transactions, prescribed transfer pricing methods, requirements for transfer pricing documentation, and a detailed comparability analysis, all based on the OECD guidelines.

PE is also emerging as a key area of focus for the tax authorities. Although it is possible for PEs to be registered as taxpayers, the determination of taxable income for PEs remains an area of uncertainty.