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.
Dear Sirs, I am wondering whether is possible to buy goods in Mongolia without VAT in case I am an “habitual exporter” as it happens in the VAT italian system (see art. 8 par. 1, lett. c) law decree n. 633/1972). The habitual exporter is the taxpayer, liable to VAT, who has carried out foreign transactions (exports that are VAT free) for a certain amount (i.e. in Italy exceeding 10%) of his turnover during the previous calendar year. As a matter of fact, regular exporters have the possibility to purchase goods and services, or carry out VAT-free imports. This can be done within the limits of the total amount of foreign transactions in the previous calendar year.
The idea is that, if the finished product or goods will be sold abroad without VAT, the purchase of the goods must also be VAT-free. The ordinary exporter has a permanent credit with the State because he pays VAT on the purchases, which is considered by the Revenue Agency as a credit to be refunded. If he is allowed to buy without VAT at the end of year he will not have a VAT credit. Moreover, do you know the average time to get VAT refund in Mongolia? Thank you for your professionality.