Introduction of VAT

The Value-Added Tax Law came into effect on 1 January 2016. 

The VAT Law increased the threshold for requirement to register as a VAT payer from 10 million MNT to 50 million MNT in an effort to support small and medium sized enterprises. Voluntary registration as a VAT payer is possible if the income of the entity reaches 10 million MNT.

The Law also introduced a system of incentivizing taxpayers with the possibility of recovering up to 20 per cent of the taxes paid if certain conditions are met. Its further attempts to improve the system and procedure for collating, processing and reporting data relating to the payment of VAT by creating a consolidated registration system.

Who is the taxpayer?

Taxpayer will be individual and legal entity.

In connection with individual, a person who purchases goods, works or services in any form or otherwise purchases, for the purpose of own use regarded as a taxpayer.

With regard to legal entity, legal entity sold, imported, exported goods, works, services and whose operational sales income value reached to 50 or more million tugrugs and obligated to impose and withhold taxes and pay to budget shall be a withholder.

For individuals who work permanently or temporarily under the labor contract is not subject of VAT levy.

What kind of goods and services will be subject of VAT?

• Imported, exported and sold all goods, works and services;
•  sale of rights;
•  closing of any debts through barter such as goods, work and service
• Sold, performed or rendered goods, works, services by foreigner to Mongolian
• electricity, heat, gas, water supply, sewerage, post, communication and other services;
• leasing of goods or granting rights to possess or use in other manner;
•  renting of accommodation in a hotel or similar establishment or granting of rights to possess or use in other manner;
• renting of immoveable or moveable properties, or granting of rights to possess or use in other forms;
• transfer, lease and sale of intellectual property;
• lottery, quiz and gambling;
•  mediation trade representation, commission service;
•  interests, fine or forfeiture;
•  asset evaluation service;
• budget financing, subsidy or promotion by government;
• funding through acquiring right to demand (factoring, forfaiting and transactions similar to them);
• legal service
• all types of services including hairdresser, beauty salon, repair, washing and dry cleaning.

VAT Rate

The current VAT rate is 10 per cent, however, there have been some changes in the types of goods, work and services that are exempted from value-added tax and those that are subject to zero (“0”) per cent VAT.

10 percentages value added taxes will be imposed on the all types of goods, works and services sold within Mongolia and imported from abroad to Mongolia. No valued added tax will be imposed on export goods. 0-10 percent rate of tax will be imposed on the amount of imported, manufactured and sold petrolium and dissiel, however, Government of Mongolia will determine the rate of tax within the frame.  

Zero Tax Rate

Zero tax will be imposed on the goods exported and declared with the customs office; passenger and cargo services rendered from Mongolia to foreign countries, from foreign countries to Mongolia, as well as transiting through Mongolia according to the international treaties of Mongolia; any services rendered outside of Mongolia and rendering services to non residents  /”including non-taxable services”/;  any services of air navigation management, technical and fuel, catering, cleaning services provided for both foreign and domestic airplanes conducting international flight, state medals, currencies or coins manufactured domestically by order of Government or Bank of Mongolia; final mining products.