Mongolia

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 during 12 consecutive months 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).

Customs duty

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

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 rates on goods such as alcohol and tobacco vary between MNT 350 per 1 litre of Shimiin arkhi (Mongolian traditional alcoholic drink) distilled using a production method and MNT 4,180 per 100 cigarettes of tobacco. For all other types of alcohol beverages, the excise rate varies based on the percent of alcohol content and will progressively rise over the next few years as follows:

For special-purpose technical devices and equipment used for betting games and gambling, excise tax varies between MNT 4.35 million and MNT 116 million per unit according to the origin and type.

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 750,000 and MNT 65,975,000, depending on the year of production, type of automobile, and engine capacity.

Immovable property tax (IPT)

IPT is an annual tax that varies between 0.6% and 2% depending on the location, usage, size, market demand, and supply conditions of the immovable property. Actual tax rate shall be determined within this range by the Citizens Representatives Khurals of the Aimag and Capital City, by taking into account the location, designation, size, status of the market needs, and requirements of such immovable property. The tax is levied on the value of immovable property reported at the state registration. 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.

Other tax exempted property includes:

• 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 in the capital (previously, all apartments were exempted from IPT).
• Real estate located in the territory of the industrial and technological park, which will be exempted from IPT for the first five years and 50% exempted for the following five years. This amendment is effective as of 1 August 2022.

Transfer taxes

Mongolia does not have a separate transfer tax. Transfer of a right/licence, except intellectual property (IP) right, granted by the state authorities is treated as sale of right and taxed at 10% under CIT law. A sale of the IP right is subject to 5% CIT (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.

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 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.

Payroll taxes

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% to 20% (progressive tax rate) or 20% from employees’ employment income (10% to 20% 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 the job positions of the employees, 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 (generally, 11.5%, capped at MNT 759,000 per month if an employee’s income exceeds MNT 6,600,000) from employees and submit returns electronically and by paper before the fifth 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 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.