Foreign Investors in Mongolia: Know the Immovable Property Tax

The Immovable Property Tax Law was adopted in 2000 by the Mongolian Parliament and has been effective since 2001, over 16 years. Under the law, tax is imposed on all kinds of immovable properties which cannot be used for their original purpose when they are separated from the land. All persons or legal entities, who own immovable property in the territory of Mongolia, are considered taxpayers.

Local governments at the provincial level, and in Ulaanbaatar, are responsible for imposing a tax on immovable property within their respective locality. The tax level may be .6 – 1.0 of the value of the property as calculated considering the location, intended use, size, and overall demand of the property in question.

For tax purposes, the value of immovable property excluding the underlying land is determined, firstly, by the valuation as registered with immovable property state registry. If there is no such registration, the value is determined by the valuation of insurance on the property. And if there is no registration or insurance valuation, the value will be established as the value that is written down in financial records of the property owner in accordance with the law.

According to the law, the following immovable property types are exempt from immovable property tax:

  • immovable property of legal persons financed by state and local budget (state owned or funded enterprises);
  • residential houses;
  • buildings and developments for public use;
  • management of industrial and technological parks, unit production, structures within technological parks and other immovable properties; and
  • buildings and facilities constructed and registered in a designated tax free zone.

A Mongolian company or other legal entity which owns taxable immovable property will pay equal amounts of tax on the immovable property before the 15th of last month of each quarter for their annual tax liability. An individual citizen of Mongolia, or a foreign citizen who owns immovable property, must pay a once annual tax on immovable property before the 15th of February.

We have encountered many clients which confuse the immovable property tax with the tax on income from the sale of immovable property, but these are not the same. The tax on income from sale of immovable property is a onetime tax assessed upon transfer of real estate, and will be equal to 2% of the transaction cost. In contrast the Immovable property tax is owed each year for the duration of ownership of the property.

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