Tag Archives: VAT

Value-Added Tax in Mongolia



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Our Mongolian lawyers have recently been assisting a company to register as a withholding Value-Added Tax payer in Mongolia. This post contains the questions that have arisen during that process, along with my answer.

A VAT withholding taxpayer may be an individual, legal entity or representative of foreign legal entity whose sale amount of goods, work or services in Mongolia has reached 50 million MNT or more. They obliged to withhold value added tax and pay to the government under the Mongolian VAT law. Whereas, the VAT payer is the last user, ultimately accountable for the VAT cost. If an individual or entity determined as a withholding tax payer, registration must be submitted to the relevant tax office within 10 working days of exceeding the amount of sale, and the tax authority will issue a VAT certificate to the individual or entity confirming its registration within 3 working days.

VAT is imposed at the rate of 10% on the supply of taxable goods and services within the territory of Mongolia as well as on imports into Mongolia. Followings will be subject to Zero rated VAT:

  • exports of all types of goods, work, and services,
  • international transport service,
  • service related to international air travel,
  • service provided to foreign citizens not residing in Mongolia
  • exported final mining products  

The imposition timing period shall be the day when the seller receives payment for selling goods, work or services, the day when the invoice is issued by the seller or the day when the goods, work, services are purchased by the buyer. The invoice amount issued by withholding tax payer is the taxable amount of VAT for goods, work and services.

Since the VAT law revised in 2016, an integrated electronic database system has been used to share VAT data centrally. All withholding tax payers who are registered in the system will be assigned with user account that is used to upload the information.

Tax Reform for Mongolia



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As you all aware that the Parliament of Mongolia ratified the amendments to laws on taxation and related legislation during the irregular session held on 22 March 2019 in order to the submission of Government’s tax reform packages.

The new tax laws require the Cabinet, Ministry of Finance and Mongolian Tax Authority to release a number of implementing guidelines. As these regulations largely play an important role to set the tone of the taxing rules, we encourage you to monitor these developments in a timely manner.

The newly adopted tax laws, including the General Tax Law, the Corporate Income Tax, Value Added Tax and Personal Income Tax Laws and tax implementation guidelines and regulations came into force on 1 January 2020.

A number of important changes that may have a material impact on taxpayers, requires taking appropriate actions to comply with the new requirements. There are following main revisions introduced to the tax reform: new amendments include increased supervision on suspicious tax activities, tax deductions for environmentally friendly product purchases and rehabilitation expenses by companies.

Furthermore, the higher tax refunds—up to 6 million MNT-for new apartment owners if the deed is issued in 2020. Independent contractors such as artists will pay taxes from their net income, not from their income as before. Shareholders’ dividends will be taxed at 5 percent, and individuals and organizations who make less than 50 million MNT in sales income, will be taxed 1 percent of their total sales income, and small traders will be charged 1 to 50 percent of the minimum wage, depending on their sales volume.

Basics of Mongolian VAT



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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.

Mongolia Deliberates Major Tax Revamp



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Under the leadership and coordination of the Ministry of Finance, consultations on the Ministry’s proposed tax amendments started on March 5. The first session was held with business sector representatives regarding tax law reforms and amendments at the Mongolian National Chamber of Commerce and Industry.

Ministry of Finance is conducting a public discussion on revising 24 tax-related laws, including General Taxation Law of Mongolia, Laws on Corporate Tax, Personal Income Tax and Value Added Tax, in order to hear voices of taxpayers and collect best proposals from the relevant parties. The Government noted that no fundamental changes and revisions were made to tax laws in the last decade and the taxation law ‘package’ was created to improve tax environment and decrease some taxes. The taxpayers expect favorable environment from this tax reform.

According to the proposed tax law amendment, if the annual revenue of enterprises operating in Mongolia is lower than MNT 1.5 billion, the government will return 90 percent of paid taxes. Furthermore, small and medium sized enterprises which have MNT 50 million of annual revenue, will be able to pay only one percent tax from sale revenue. The proposed amendments would also reduce the number of reports required from SMEs. Companies with an annual income of over three billion MNT would be required to issue tax reports four times a year, and those with less than three billion MNT in annual income would be required to file reports twice per year. The amendments include major changes to the VAT law.

The proposed amendments expect to be discussed and voted on during the spring parliamentary session and, if approved, will come into force on  January 1, 2019.

Keep up to Date on The Mongolia VAT



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As we posted previously, the newly adopted Mongolia Value-Added Tax  (VAT) law has come into effect since January 1, 2016.

According to the VAT law, “Any citizen and legal person, who is engaged in the import and export of goods as well as the sale and manufacturing of any goods, performance of work and rendering of services in the territory of Mongolia, shall be value-added taxpayers.” VAT shall be applicable for the following goods, works and services where operational income value reaches 50 or more million tugrugs:

  • all types of goods, works and services sold within the territory of Mongolia;
  • all types of goods, works and services imported from abroad to Mongolia; and
  • all types of goods, works and services exported from Mongolia;

Furthermore, the VAT shall apply to the representative office of a foreign legal entity whose revenue of sold goods, performed works and rendered services in the territory of Mongolia, has reached 50 million tugrugs or more.

In almost all cases, the value-added tax shall be imposed at the rate of 10 percent of the taxable amount of imported, manufactured or sold goods, performed works and rendered services.  However, some certain types of goods, work and services can be subject to zero (“0”) percent VAT. The payment of VAT must be within the first ten days of the following month.

The newly adopted law also creates an incentive system with the possibility of recovering up to 20 percent of paid taxes if certain conditions are met. Initial such tax returns are expected to refund in the first quarter of this year.

A conference with our Mongolian Tax Law specialists can help you determine whether your company may be able to take advantage of the 0% VAT, or the VAT recovery.

Basics of Mongolia Customs Restrictions



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Mongolia recognizes 4 categories of commodities for purposes of cross-border trade. Items are classified as either:

  1. Forbidden;
  2. Licensed;
  3. Taxed;
  4. General.

An item classified as Forbidden is not allowed to pass through Customs whether by import or export. Narcotic s and related equipment for production or use are Forbidden.

Items which are not Forbidden, but which are subject to certain legal restrictions are Licensed. There must be an appropriate license for import or export. Some licenses are restricted to only export, or only import. Medical drugs and alcoholic beverages are examples of items which must be licensed. Imported or exported metals must also be accompanied by a license, however there is an exception for used aluminum drink cans. Other items which must have a license for export or import are toxic chemicals, blood and organs for donation, raw or processed uranium, firearms, historic or cultural items, and Mongolian pedigree cattle.

Some items which do not require a license are nevertheless subject to special taxation on import or export. As of September 09, 2016 changes to the law, such taxes on goat cashmere and camel wool are removed. Only processes and unprocessed timber remain subject to special taxation.

2016 Update to VAT



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

The new VAT law revised key terminology and broadened the types of activities which are subject to VAT. The VAT Law increased the threshold for the 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 remains possible if the income of the entity reaches 10 million MNT.

The Law also introduces a system of incentivizing taxpayers with the possibility of recovering up to 20 percent of taxes paid if certain conditions are met. It 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.

The VAT rate of 10 percent remains the same, 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”) percent VAT.