As part of its ongoing efforts to encourage corporate social responsibility (CSR), the Mongolian government has introduced significant amendments to the Corporate Income Tax (CIT) Law. Effective from August 30, 2024, these provisions allow businesses to claim tax relief for specific activities that benefit society, the environment, and public welfare. Here’s a breakdown of the new tax relief opportunities available under section 22.9 of the law.
Key Highlights of the Tax Relief Provisions
Under these amendments, businesses can deduct certain expenses from their taxable income as part of their social responsibility initiatives. These expenses must align with the law’s stipulations and are subject to the following conditions:
- The expenses must be unrelated to the taxpayer’s income-generating operations.
- Deductions include investments in depreciable fixed assets, financial support for unrelated entities, and charitable contributions.
- The total deduction is capped at 1% of the taxable income for the relevant tax year.
Activities Eligible for Tax Relief
To qualify for this tax benefit, businesses must invest in one or more of the following activities:
- Environmental Conservation
- Initiatives aimed at reducing pollution, restoring ecosystems, and protecting natural resources.
- Care for Vulnerable Groups
- Supporting senior citizens, individuals with disabilities, and children through care facilities and programs.
- Cultural Heritage and the Arts
- Projects that protect and restore cultural sites, or provide support to museums, libraries, and artistic endeavors.
- Public Infrastructure Development
- Funding and maintaining essential infrastructure such as parks, roads, and public transportation systems.
- Sports Development
- Building and maintaining sports facilities or supporting athletes participating in Olympic-level competitions.
- Education and Scholarships
- Providing scholarships for students and funding educational institutions to enhance learning opportunities.
- Research and Development
- Supporting innovation through grants to universities and scientific organizations.
To ensure transparency and alignment with the law, businesses must adhere to reporting standards set by relevant government ministries. These ministries will also establish guidelines to verify compliance with the eligibility criteria for tax relief.
The amendments are applicable from August 30, 2024, and will remain in effect until January 1, 2035. Businesses planning to take advantage of this tax relief must carefully document and report eligible expenses to qualify.
Conclusion
The revised CIT law provides a dual benefit—encouraging businesses to engage in socially responsible activities while easing their tax burden. By aligning corporate operations with these initiatives, companies can contribute to the broader development of society, culture, and the environment.
If you’re a business owner or finance professional, now is the time to explore how your organization can benefit from these provisions while making a positive impact.