Mongolia

Last modified: 13/01/2025 10:59

Corporate taxation

	Rate
Corporate income tax rate for entities with annual revenue of up to MNT 300 million (except for those operating in the mining, petroleum, alcoholic beverage and tobacco industries)	1%
Corporate income tax rate for the first MNT 6 billion of annual taxable income	10%
Corporate income tax rate for annual taxable income exceeding MNT 6 billion (in addition to the CIT of MNT 600 million)	25%

The following are excluded from the annual taxable income and are taxed on a gross basis at the below rates:

	Rate
Sale and transfer of immovable property	2%
Dividends	10%
Royalties [1]	5%/10%
Interest	10%
Insurance reimbursement	10%
Income from the sale of intellectual property rights	5%
Cash funds returned in accordance with Article 9.11 of the Law on Environmental Impact Assessment and Articles 11.1.4 and 12.5 of the Law on Petroleum	10%
Sale of rights (e.g. special licenses granted by state-authorized organizations) [2]	10%/30%
Gambling, betting games and lotteries (net)	40%

1.  A special 5% rate applies on fee income for software license and server rental for the usage in operations of a resident taxpayer, whose main activities are software development, transferred to a non-resident legal entity; 10% in all other cases.

2. The tax rate applicable for the gain on partial or full transfer of the special license for the rights to possess or use land, or to carry out mineral, petroleum or radioactive mineral extraction and exploration activities in the form of a gift or inheritance of shares, participation or voting rights by the UBO of a legal entity holding a special license for extraction of strategically significant mineral resource deposits shall be 30%; 10% in all other cases.

Residence: Resident taxpayers are entities incorporated in Mongolia within the framework of laws in force in Mongolia, or foreign entities incorporated elsewhere but have their place of effective management (POEM) in Mongolia. A foreign legal entity shall qualify as having a POEM in Mongolia if 3 or more criteria below are met:

1. More than 50% of the shareholders, or shareholders who are directly and indirectly exercising their shareholding rights and responsibilities through their representatives, are residents of Mongolia.

2. In the past four consecutive years prior to the current tax year, more than 50% of the total shareholders’ meetings were held in Mongolia.

3. The company’s accounting and financial documents are kept in Mongolia.

4. Not less than 25% of the members of the Board of Directors (BOD), or members of the BOD who are directly and indirectly exercising their rights and responsibilities through their representatives, are residents of Mongolia.

5. Not less than 60% of total sales revenue is earned in Mongolia or sourced from Mongolia.

Non-resident taxpayers are either foreign entities that have a representative office and operate through this office in Mongolia (Permanent Establishment), or those that earn revenue from conducting their business in Mongolia and earn revenue from Mongolian sources (those that are described in Article 4.1.7 of CIT law of Mongolia).

A Permanent Establishment (PE) is defined as a unit through which the business activities of the foreign entity are wholly or partly carried out, and includes a place where business is managed, a branch or department, a place where training, seminars and trade fairs are held, a space for storage, trade or services, a mine, oil or natural gas well or any other place where minerals are extracted and a factory/plant.

The following are also considered to be PEs:

• A unit constitutes a PE if it carries out construction of building sites, buildings and infrastructure, installation and assembly projects and provision of related supervisory services, which last for 90 or more days during a consecutive 12-month period.

• A unit constitutes a PE if it provides technical, consulting, management, supervision and other services through its own employees or other contracted personnel to a resident taxpayer for 183 or more days during a consecutive 12-month period.

• A unit constitutes a PE if it carries out the following activities in Mongolia on behalf of a non-resident taxpayer:

a) storing, selling, supplying goods and products; or

b) concluding a contract or managing and organizing the conclusion of a contract of the non-resident taxpayer without changing the main terms or conditions of the contract.

• Notwithstanding the above, if a non-resident taxpayer receives insurance premiums other than those collected as part of a reinsurance in Mongolia through other parties or provides risk insurance services, this taxpayer shall be considered to have a PE in Mongolia.

• A PE as defined in the effective double tax treaties concluded with countries ratified by the Parliament of Mongolia shall also be considered a PE under CIT law.

Basis: Resident taxpayers are taxed on the taxable income generated in Mongolia or from Mongolian sources, and the income from foreign countries in the given tax year. Non-resident taxpayers who earn income through their PE are taxed on the taxable income generated as part of operations of the PE in Mongolia or from Mongolian sources in the given tax year. Other non-resident taxpayers are taxed on the taxable income generated in Mongolia or from Mongolian sources in the given tax year.

Income from Mongolian sources as defined in the CIT Law includes the following: • Income provided by a resident taxpayer and/or a PE in Mongolia to a non-resident taxpayer for goods sold in Mongolia or for work performed and services provided directly or electronically; • Income earned by a non-resident taxpayer with no PE in Mongolia from sports, arts, culture and other events organised in the territory of Mongolia; • Dividend income paid by a resident taxpayer to a non-resident taxpayer; • Interest income paid or transferred by the state or local administrative organizations, or by a resident taxpayer and/or by a PE in Mongolia to a non-resident taxpayer; • Income from the sale, transfer or lease of an asset or associated rights that are possessed, used or owned by a non-resident taxpayer in Mongolia; • Royalty income, income from the lease and sale/transfer of the right to use movable and immovable properties and intangible assets, interest income on finance leases, and income from technical, management, consulting and other services provided by a resident taxpayer to a non-resident taxpayer; • Income transferred by a PE in Mongolia to a non-resident taxpayer operating through the PE; • Income from the sale or transfer of an asset or associated rights that are possessed, used or owned by a PE of a non-resident taxpayer; • Income earned by a non-resident taxpayer from the sale or lease of movable and immovable properties or intangible assets used for the activities of a PE in Mongolia; • Other income equivalent to those specified above.

Taxable income: Taxable income includes operating income, property income, capital gains and other similar income, and CIT is imposed on the amount after allowable deductions and the net operating losses carried forward, excluding exempt income under the CIT law.

Property income includes rental income, dividend income, interest income and royalty income. (the applicable tax rates were included in the above table)

Ultimate beneficial owner (UBO): The UBO for tax purposes is defined in the General Tax Law (GTL) as “a person who owns 30% or more of the shares, ownership interest or voting rights of a legal entity holding a special license to carry out mining, petroleum extraction or radioactive mining activities or a license for the right to possess or use land for these purposes (the right holder) either directly or indirectly through legal entities with a chain of ownership at one or more levels; or implements voting rights; or has a right to receive dividends through these entities”.

The taxpayer (the right holder) must register its UBO for tax purposes to the tax authorities. If the UBO changes, the taxpayer must notify the authorities within 30 days. If the tax UBO’s share ownership in the license holding company is changed as a result of a share sale or transfer transaction, the transaction is considered an ‘indirect sale/transfer of the rights’, and it is subject to CIT as a capital gain on sale or transfer of rights granted by state-authorized organizations.

The taxable income shall be assessed based on the value of rights pro-rated to the number of shares or percentage of participation that are transferred from a right-holding entity or its UBOs, and shall be the amount of proceeds estimated based on the methodologies approved by the Ministry of Finance after deducting the fees paid for acquisition of the license to the state-authorized organizations or the consideration paid to another party for the sale/transfer.

If the shares of the right holder, their UBO or legal entity which is part of the chain are publicly traded on a domestic or foreign stock exchange, the gain on the sale or transfer of the shares or interests for 12 consecutive months or the gain on sale or transfer of the rights equivalent to up to 20 percent of the voting rights shall be exempt from CIT. Exempt income

The following income of the taxpayer is exempt from CIT:

• Repayments of, interest and penalty interest on debt securities /bonds/ issued by the Government, the capital city and the Development Bank of Mongolia;

• Total dividends on the profit of mining and mineral processing entities for the state-owned shares, the shares of which are owned up to 34 percent by the state, or dividends corresponding to 34 percent of total shares on the profit of mining and mineral processing entities for the state-owned shares, the shares of which are owned more than 34 percent by the state;

• Income allocated from the state budget to the Future Heritage Fund, Savings Fund and Development Fund and investment income of the Funds

• Dividend income and operating income from the sale of products belonging to the taxpayer operating in the territory of the country in accordance with the Production Sharing Agreements in the oil sector and the agreement specified in Article 5.3 of the Law on Support for Oil Refineries; and the above income transferred to foreign countries; • Income from the principal activity of a Credit Guarantee Institution in accordance with the relevant law;

• Fee and charge income of a Deposit Insurance Fund; • Dividends distributed by state-owned enterprises to the Government; • Operating income of educational institutions and health care and service providers;

• Operating income from business activities related to the implementation of the goals specified in the charter of a non-profit legal entity;

• Service fee income collected from members of the Apartment Owners Association (AOA) specified in the charter of the AOA and the funds collected as specified in the regulations for the establishment and collection of funds for the operation of the AOA;

• Income of the cooperative from the price difference obtained as mediation fee for the sale of products of its members.

• Income from the mediation of intellectual property rights; • Interest income on loans secured by intellectual property rights; • Operating income of Investment Funds;

• Income from the sale or transfer of mineral, radioactive mineral and oil exploration and exploitation special licenses by state- or locally owned legal entity or legal entity with state or local ownership to the revenue collecting legal entities specified in Article 4.1.5 of the Law on National Wealth Fund. Deductible expenses:

The CIT law provides specific criteria for deductible expenses. Any expense items that have not met such criteria or additional qualifying conditions for deduction must be added back when computing taxable income. In general, expenses which meet the following criteria simultaneously are deductible:

– They were incurred in the given tax year; – They were incurred directly in relation to the operations of the taxpayer which generate the taxable income; – They were actually incurred, were recognized according to the Accounting Law and are verifiable with qualifying supporting documents.

– The expenses incurred on the provision of services or performance of works by the taxpayer (excluding non-resident taxpayers without any PEs) and expenses incurred in relation to the purchase of movable and immovable properties or intangible assets shall be verifiable by the uniquely numbered VAT receipt and customs duty payment document for imported goods;

– They were paid or are expected to be paid by the taxpayer as reflected in their tax return. The expenses which meet the above criteria are subject to the following restrictions:

– The tax, fee or charge was reported in the tax return to be paid to the state budget; – Business trip expenses not exceedingly double the amount of allowable business trip expenses of state officials shall be deductible; – The funds collected for the allowance for credit losses on loans provided by banks and non-bank financial institutions shall not include the allowances recognized for performing loans;

– Expenses incurred in relation to the elimination of damages caused by disasters in accordance with the Law on Protection against Disasters must be confirmed by the conclusion of relevant organizations;

– Ceremonial expenses incurred shall not exceed 5 percent of total salary expenses incurred and provided to employees who were employed under labor contracts and special condition labor contracts specified in the Labor Law in the given tax year; – Voluntary insurance premium paid by a taxpayer (excluding the insurance provider entities that operate under special licenses in accordance with Insurance Law) shall not exceed 15 percent of their taxable income for the given tax year;

– Voluntary insurance premium paid to is a related party of the insurance provider entities that operate under special licenses in accordance with Insurance Law shall not exceed 15 percent of their taxable income for the given tax year; – Routine repair and maintenance expenses, including the spare parts expenses, shall not exceed 2 percent of the carrying amount of the given immovable property and 5 percent of the carrying amount for other assets, and the excess amount shall be capitalized as cost of the asset;

– Social and health insurance charges and personal income tax shall be imposed and withheld on salary, wages, incentives and other similar employment expenses;

– Personal income tax shall be imposed and withheld on indirect income specified in Article 11 of the PIT Law; – Deductible interest expenses are restricted as described in the ‘Interest restriction‘ part of the ‘ANTI-AVOIDANCE LEGISLATION’ section; – For income which is taxed by withholding taxes, the relevant taxes shall be withheld and reported. Other deductible expenses include (subject to the above criteria and restrictions):

• Normal loss of inventories produced; • Social and health insurance charges; • Taxes, fees, and charges reported to be paid to the state budget except for the VAT and other withholding taxes paid to the state budget by the withholders of capital city tax and VAT in accordance with CIT law;

• Expenses incurred to create a professional/vocational training or production training environment, supply the training establishment with relevant equipment and repair the training establishment;

• Expenses incurred for training of teachers as specified in Articles 11.5 and 18 of the Law on Professional and Technical Education and Training;

• Funds collected for the allowance for credit losses on loans provided by banks and non-bank financial institutions; • Funds collected for the credit risk fund of savings and credit cooperatives and for the contingency fund of cooperatives engaged in other activities;

• Cash funds transferred to the state fund, the account specified in Article 11.2.9 of the Law on Petroleum and the special fund started by the relevant government organization and reflected in the annual environmental plan of the project implementer, contractor and special license holder in accordance with the Law on Environmental Impact Assessment, the Law on Minerals, the Law on Petroleum and the Law on Nuclear Energy;

• Expenses accumulated in the Senior Citizens Fund within the limits specified in Article 14.7 of the Law on Senior Citizens. • Costs for the renovation of sanitary facilities of tourism organizations specified in Article 6 of the Law on Tourism at accommodation points and temporary rest areas along the road and for the construction of new sanitary facilities that meet standard requirements.

• Expenses that meet the criteria for deductible expenses incurred directly in connection with the construction or renovation of public sanitation facilities that meet the standards established by the competent authority are deductible from taxable income at an amount increased by 100 percent.

• Expenses that meet the criteria for deductible expenses incurred directly in connection with the purchase and installation of surveillance cameras that meet the standards established by the competent authority in streets and other similar areas are deductible from taxable income at an amount increased by 100 percent.

In the event that a taxpayer who does not hold a special license for the exploration or use of minerals, radioactive minerals or oil incurs expenses to move their factory/plant or warehouse located in the capital city from the borders of the capital city excluding those at Baganuur, Bagakhangai and Nalaikh districts, which meet the above criteria, these qualifying expenses shall be increased by 50 percent and deducted from taxable income.

In the event that the general administration of a legal entity which does not hold a special license for the exploration or use of minerals, radioactive minerals or oil and which carries out its main activities outside the borders of the capital city, excluding those at Baganuur, Bagakhangai and Nalaikh districts, is registered with the local authority of where it operates, and employs a jobseeker citizen taxpayer who is registered to the tax office of this local authority for a total of 183 days during the employment period of 12 consecutive months under a labor contract for the first time, the salary expenses for this period shall be increased by 20 percent and deducted once from taxable income. In the event that a resident taxpayer who does not hold a special license for the exploration or use of minerals, radioactive minerals or oil issues securities to be traded publicly on the primary foreign and domestic markets, the expenses incurred directly in relation to this issue and which meet the above criteria shall be increased by 20 percent and deducted from taxable income.

In the event that a resident taxpayer provides tickets or other type of permit to use public transportation specified in Article 3.1.11 of Law on Vehicles within the capital city in a form other than cash to an employee, the expenses incurred in relation to the purchase of this ticket or permit which meet the above criteria shall be increased by 50 percent and deducted from taxable income. Expenses incurred in connection with the possession and transfer of a special license for the usage of minerals shall be included in operating expenses and deducted from taxable income in equal amounts every year during the period of validity of the special license. In accordance with the Law on Minerals, the Law on Petroleum and the Law on Nuclear Energy, the amount of cash balances accumulated by the licensee and contractor for environmental restoration and mine closure costs shall be included in operating expenses and deducted from taxable income in equal amounts every year during the period of validity of the license.

Expenses deductible from the taxable income of special license holders for exploration and use of minerals, radioactive minerals and oil shall be estimated for each report as specified in the CIT law. Non-deductible expenses

The following expenses are not deductible from taxable income:

• The expenses that do not meet the above criteria and restrictions for deductible expenses;

• Principal lease payments made by a lessee for the lease of an asset;

• Payments, interest, penalty interest and fines paid to others due to non-fulfillment of contractual obligations;

• Recreational and other similar expenses incurred for employees and customer organizations and individuals;

• Loss on sale of assets to related parties;

• Interest payments, lease payments for lease of movable and immovable properties, royalty fees, technical and management consulting fees paid and other service fees transferred by PEs to the parent companies;

• Expenses incurred in connection with earning exempt income specified in the CIT law;

• Taxes withheld on income earned by others and VAT paid to the state budget by the withholders of capital city tax and VAT in accordance with CIT law;

• Unrealized loss on foreign currency exchange; • Inventory revaluation difference;

• Loans written off using the allowance for credit losses by entities which operate as banks, non-bank financial institutions and savings and credit cooperatives;

• Donations other than those specified in the “Tax-based incentives” section. Depreciation: Depreciation and amortization of assets to be used for more than 1 year shall be estimated as follows: No

– Class of asset

– Useful life (in years) 1

– Buildings and facilities, land improvement (excluding mining stockpile preparation costs)

– 40 (For entities which hold special licenses for the exploration and use of minerals, radioactive minerals and petroleum) – 25 (Others) 2 – Machinery, plant and equipment

– 10 3 – Computer and its accessories, software

– 2 4 – Intangible assets with definite useful lives (including the special licenses for exploration and use of minerals)

– For the effective period of the asset/license 5

– Other assets – 10 No depreciation or amortization shall be estimated for the revalued amount of the asset, and any insurance expenses incurred to purchase, construct, assemble or transport non-current assets and capital repair costs shall be included in the cost to depreciate for tax purposes.

If a certain part of an asset subject to depreciation or amortization is used to generate taxable income, the depreciation or amortization shall be calculated in proportionality with that part and deducted from the taxable income. In the event that a depreciable/amortizable asset owned for purposes of generating a taxable income is no longer used for this purpose, the asset shall be deemed to have been sold at the higher of its carrying amount and market price for tax purposes.

The holder of a special license for the exploration of minerals and radioactive minerals and the contractor specified in the Petroleum Law shall accumulate and recognize the exploration costs, special license fees and expenses incurred in connection with the acquisition, sale and transfer of the special license as an exploration and evaluation asset, and amortize the asset for the period of use of the mine and field. (These include the cash balances transferred to escrow accounts by holders of the special licenses for the future fulfillment of their obligation for restoration, decommissioning or prevention from nuclear and radiation accidents in relation to their activities as specified in Laws on Petroleum, Minerals and Nuclear Energy.)

A taxpayer who does not hold a special license for exploration and use of minerals, radioactive minerals and petroleum can elect to depreciate their buildings and facilities and land improvement newly constructed or acquired in Baganuur, Bagakhangai and Nalaikh districts of the capital or other soums, cities and provinces for a period of 15 years on a straight-line basis from 1 January 2023.

Significant local taxes on income: N/A

Alternative minimum tax: N/A

Taxation of dividends: Dividend income includes monetary and non-monetary income from share ownership, partnership or cooperation agreements, profit share, and other income considered as dividends in accordance with the laws of Mongolia. Dividends distributed by state-owned entities to the Government and dividends specified in the Law on Future Heritage Fund are exempt from tax. Dividends received from a resident taxpayer are taxable for the non-resident recipient company. Dividend income earned by a Mongolian resident entity is subject to WHT of 10% if the recipient is a Mongolian resident taxpayer. Dividend income to be remitted out of the country to a foreign tax resident is subject to WHT at 20% but may be reduced by an applicable double tax treaty (DTT).

Capital gains: Capital gains include gains from the sale of immovable properties, shares, securities, other financial instruments, other tangible and intangible assets and the sale and transfer of rights granted by state-authorized organizations. These gains are taxed as part of the annual taxable income, with the exception of income from sales of immovable property and sale and transfer of rights, which are taxed at the rates specified in the above table. The definition of Mongolian-source income includes income from a sale or transfer of assets and associated rights in Mongolia (including shares). Such income is taxed with a 20% withholding tax (WHT) on a gross basis.

Losses: Net operating losses verified by the tax authorities can be carried forward for 4 consecutive years and are limited to be deducted from not more than 50 percent of taxable income each year. There are no provisions in the CIT law for the carryback of losses.

Foreign tax relief: Mongolian legal entities pay tax on their worldwide income. Unremitted earnings are taxed the same as ordinary earnings. Credit relief is available with respect to foreign tax on income arising from countries that have exchange of information agreements with the Mongolian tax authorities, capped at the level of Mongolian tax that would have been due on the same income in Mongolia.

Participation exemption: N/A

Holding-company regime: N/A

Tax-based incentives: The tax-based incentives include:

• A tax incentive of 90% is available to entities incorporated in Mongolia whose revenue is less than MNT 1.5 billion and which operate in industries other than mining, petroleum, alcoholic beverage, and tobacco.

• Companies that employ disabled people (i.e. people who lost more than 50% of their working capacity) can get a tax incentive in proportion to the percentage of disabled employees to the total number of employees.

• If 2 thirds or more employees of the entity with more than 25 employees are people with disabilities, the corresponding income shall be subject to a tax incentive.

• A 50% tax reduction is available from CIT for entities that produce or grow the following products:

– Grains, potatoes, and vegetables; – Milk;

– Fruits and berries;

– Fodder and fodder plants;

– Meat and meat products produced in intensive poultry farming.

• The primary activity income of a heating and electric power production project that commenced 1 January 2023 onwards shall receive a tax credit of 90% for the first three years and 50% for the following three years starting from the subsequent reporting period of gaining profit.

• Tax incentives are available on income from the sale of eco-friendly technology and equipment for efficient use of natural resources, and reduction of environmental pollution and waste.

• Tax incentives are available on income from sales of newly domestically produced innovative products, works, and services of the start-up company specified in the Law on Innovation and sales of IT products, works and services of legal entities registered in the virtual zone specified in Article 11.1 of the Law on Support for Information Technology Production for the first five years from the date of registration in the state register.

• Tax incentives of 50% are available on the income from operating activities of an entity that has built sports buildings, sports halls, fields, and infrastructure that meet the standards specified in Article 26.2 of the Law on Physical Education and Sports for 5 years after the use of the said sports buildings, sports halls, and fields.

• Tax incentives are available on the income equal to the financing provided by citizens, enterprises, and organizations that finance measures to improve the quality of natural water and restore rivers and streams in order to increase the water resources of certain territories and create reliable water supplies.

• Tax incentives are available on income from sales of tourism products and services specified in Article 5.2.3 of the Law on Tourism of the start-up company for three years from the date of registration in the state register.

• A 90 percent tax incentive is available on income from the production of main and auxiliary equipment for sources with a capacity of more than 5 megawatts of electricity or 1.5 megawatts of thermal energy.

• The tax on the income from the sale of newly built public housing in the local area shall be discounted by 50 percent in 2024-2026, and 20 percent in 2027-2029 located in Baganuur, Bagakhangai, Nalaikh districts and border areas within central soums of Darkhan-Uul and Orkhon provinces and 90 percent in 2024-2026 and 50 percent in 2027-2029 for those located in border areas within central soums of other provinces.

• Tax incentives are available on income from the lease of apartments for public residence purposes located in Baganuur, Bagakhangai, and Nalaikh districts of the capital and those constructed in the border areas within central soums of provinces at 90 percent in 2024-2026 and 50 percent in 2027-2029.

• Tax incentives are available on income from the sale of debt instruments/bonds/, shares and other securities traded openly in the primary and secondary markets of domestic securities at 90 percent in 2024-2026 and 50 percent in 2027-2029. • A tax incentive of 90 percent is available on the income of the organization that implements the apartment construction activities in ger areas.

• Tax incentives are available on income earned from the sale or transfer of land ownership, possession and usage rights to the organization that implements the apartment construction activities in ger areas in accordance with the contract for the apartment construction in ger areas.

• Tax incentives are available on the operating income of enterprises specified in Article 6.2.1 of the Law on Tourism.

• For legal entities established under Mongolian laws that permanently operate in provinces or soums, the centers of which are further than 500 km from the capital Ulaanbaatar, the general administration of which is registered in that province, interacts with the local tax office and provides employment/verifiable by the payment of social insurance contributions/, the tax on taxable income from operations in the said province is subject to incentives of 50 percent for provinces and soums more than 500 km away from Ulaanbaatar and 90 percent for those that are more than 1000 km away. (except for mining, alcoholic beverage, tobacco, petroleum, telephone service, energy, civil aviation and road construction sectors)

• Tax incentives of 100 percent are available on the tax imposed on income earned by an entity from producing the organic products specified in Article 4.1.2 of the Organic Products Law for the first five years after it starts to earn income and incentives of 50 percent for the five years after that are also available.

• Tax incentives of 90 percent are available on the tax imposed on income from the main activities of a cultural and creative production entity for the first 3 years of operation and registration with the competent authority, and incentives of 50 percent are available for 3 years after that.

• Tax incentives of 90 percent are available on the tax imposed on income from main activities of the import substitution and export promotion project specified in the Regional Development Concept of Mongolia, which is to be implemented after 1 January 2025, for a period of 5 years starting from the next reporting period in which the project starts to earn income (not to be duplicated with any other tax incentives if applicable).

• Investments in depreciable fixed assets, financial support and donations provided to other unrelated parties for the purpose of supporting the following activities within the scope of social responsibility that are not related to the income-generating activities of the taxpayer shall be deducted from the taxable income as tax incentives.

The tax incentive amount shall not exceed 1 percent of the taxable income for the given tax year (given that they satisfy the criteria for deductible expenses provided in the “Deductible expenses” paragraph of the “Taxable income” section, with the exclusion of the second criteria): o protection, rational use and restoration of, increase the reserves of natural resources such as forests, animals and water, reduction of air, water and soil pollution, and reduction of desertification (with the exclusion of environmental restoration and mine closure costs incurred by contractors and license holders under the Minerals, Petroleum and Nuclear Energy laws and the cost of measures taken to improve the quality of natural water and restore rivers and streams in order to increase the water resources of certain territories and create reliable water supplies); o provision of care services for the elderly, disabled citizens and children, guarantee and protection of their rights, creation of an adapted environment for disabled citizens, construction and use of playgrounds, camps and parks for children; o protection and restoration of cultural heritages, museum and library activities, creation, performance and distribution of music, film, handicraft and stage artworks, construction and use of cultural and creative production complexes; o construction, use, protection, improvement of and cultivation of gardens on public roads, squares and parks, and support for the development of public transport; o compensation for damage caused by force majeure and other similar disasters; o construction and use of sports facilities, organization of Olympic-type sports competitions, and financial support provided to Olympic-type sports associations registered with the Mongolian National Olympic Committee and the teams, professional athletes and coaches registered with these associations; o tuition scholarships provided to students studying at foreign universities and domestic accredited universities and institutes of higher education to major in priority occupations announced as such by the Government of Mongolia, as well as students of vocational and technical education institutions; o grants provided to universities, institutes of higher education and academies of science for research and analysis purposes; o activities of state and provincial educational and health institutions; o activities of the Government Special Fund. o activities of legal entities registered in the virtual zone established to provide support for information technology production specified by the relevant law. Free Trade Zones:

Certain tax incentives are available to infrastructure developers in the free trade zones (FTZ) established in Mongolia, subject to certain qualifying conditions as follows: • Entities which have invested funds of USD 500 thousand or more in infrastructures, such as energy and heating sources, pipeline networks, clean water supplies, wastewater sewage, auto roads, railways, airports, and basic communication lines for the FTZ shall qualify for an incentive on their taxable income generated in the FTZ equal to 50% of the amount of investment made in the FTZ. • Entities which have invested funds of USD 300 thousand or more in the construction of warehouses, loading and unloading facilities, hotels, tourist camps, or plants for the production of goods for export and import-substituted goods in the FTZ shall qualify for an incentive on their taxable income generated in the FTZ equal to 50% of the amount of investment made in the FTZ. • Goods imported to the FTZs are exempt from VAT, excise tax and customs duty. If goods are to be transferred from the customs territory to the FTZs, there will also be no VAT, excise tax and customs duty on those goods, and any previously paid taxes will be reimbursed accordingly based on related documents. In addition, other tax incentives apply for these taxes in the FTZs in accordance with the Law on FTZs. Loss-making entities which invested in the FTZs can carry forward their losses reflected on their CIT return up to four consecutive years from the year following the commencement of intended production and operations after completion of the construction work to reduce their future tax payable. Tax stabilization:

As the CIT rate varies according to the turnover of the company, the Mongolian Tax Law provides the opportunity to create a more stable tax environment. The investor that obtains a stabilization certificate will stabilize tax rates for period from 5 to 18 years depending on the amount of investment, industry of investment and geographic location of investment in Mongolia. Tax stabilization of CIT, VAT, customs duties and mineral resource royalties per investment made is obtainable under “stabilization certificates” in accordance with the Law on Investment.

An investor who invested in tobacco and alcohol related activities cannot benefit from tax stabilization. The investment should meet the following criteria to qualify for an issue of a stabilization certificate: • The total investment amount specified in the business plan and feasibility study is above the thresholds specified in the stabilization certificate terms (please refer to the Law on Investment for details);

• An environmental impact assessment was carried out as required by the law;

• The investment creates new permanent jobs; and

• The investment introduces advanced and innovative technologies. If certain conditions are met, the stabilization certificate period may be extended by 1.5 times for some projects, and by 2 years upon the request of the certificate holder. Under the valid period of a stabilization certificate, investors also have the right to apply effective tax rates provided in general legislation if such rates are more beneficial for investors.

Group relief/fiscal unity: N/A

Small company/alternative tax regimes: A taxpayer whose total sales revenue was less than MNT 50 million as verified by the previous year tax returns can elect to file a request within the 3rd quarter of that tax year to only be taxed on their operating income starting from the next tax year, in the event that the tax authorities accept this request and register as such. This simplified tax regime does not apply to the following taxpayers: – A taxpayer registered as a VAT payer after meeting the conditions and requirements specified in the Law on Value Added Tax; – A taxpayer operating in the mining, alcoholic beverage, tobacco and petroleum sectors.

Corporate taxation: compliance

Tax year: Calendar year, 1 January to 31 December

Consolidated returns: N/A

Filing and payment: Taxpayers with PY taxable income above MNT 6 billion shall submit a quarterly return by the 20th day of the first month following the quarter and an annual return by 10 February after the end of the tax year. Taxpayers with PY taxable income below MNT 6 billion but are not registered under the simplified regime shall submit the first semi-annual return by 20 July of each year and a year-end return by 10 February after the end of the tax year. A taxpayer shall pay the taxes due in advance by the 25th day of each month for monthly tax payables, by the 20th day of the first month after the quarter-end for quarterly tax payables and by 10 February of the following year for the year-end tax payables in accordance with the payment schedule provided by the local tax authority. If it is necessary to withhold tax on dividends, royalties, sales of rights, transfers of profits overseas by permanent establishments of foreign companies and other Mongolian-source income earned by non-resident taxpayers, the withholding tax must be remitted to the state within 10 working days. All withholding tax statements must be submitted within 20 days after the end of the quarter, and an annual statement must be filed by 10 February following the end of the tax year.

Penalties: Late payment penalty interest is calculated at 1.2 times the weighted average annual loan interest rate of commercial banks as published by the Bank of Mongolia. If the taxpayer reports a reduced amount of taxes or fails to report the correct amount in order to conceal their taxable income, to avoid paying their taxes, or to deliberately reduce their tax payables, the state tax inspector shall reimpose the relevant tax and fine the following amounts: – if the tax payable was understated by up to 50 percent, at 30 percent of the amount of tax to be reimposed; – if the tax payable was understated by more than 50 percent, at 40 percent of the amount of tax to be reimposed. If the above violations, which were previously detected by an inspection of the tax authorities and determined as reimposed taxes in the tax report, are repeated, the fine shall be 50 percent of the relevant reimposed tax amount. The fine for the unjustified excess tax collected by the tax authorities shall be the weighted average annual loan interest rate of commercial banks as published by the Bank of Mongolia.

Rulings: Tax rulings of an explanatory nature may be requested from the legal departments of tax authorities to clarify the application of the law. However, these rulings are not legally binding.

Taxation of individuals

Type of taxable income	Rate
Salaries and wages, incentives, bonuses and other similar employment income; and indirect income of MNT 0-120 million per annum	10%
Salaries and wages, incentives, bonuses and other similar employment income; and indirect income of MNT 120-180 million per annum (on the amount in excess of MNT 120 million)	15%
Salaries and wages, incentives, bonuses and other similar employment income; and indirect income above MNT 180 million per annum (on the amount in excess of MNT 180 million)	20%
Gain on sale of immovable property	2%
Prizes for art and sports competitions, festivals and other similar income	5%
Income from betting games, gambling, and lotteries	40%
Capital gains (excluding gain on sale of immovable property)	10%
Property income	10%
Operating income	10%
Dividend income and interest income from debt instruments, bonds, stocks and securities issued by a resident taxpayer and traded in primary and secondary markets (notwithstanding the property income tax of 10% and non-resident taxpayer’s income tax of 20%)	5%
Non-resident taxpayer’s taxable income (gross)	20%
Total operating income as total taxable income (as requested by the taxpayer)	1%

Residence: Resident taxpayers are those individuals that either have resided in Mongolia for more than 183 days in a period of 12 consecutive months, or more than 50 percent of whose taxable income is earned in Mongolia or from Mongolian-sourced income. A Mongolian civil servant who is assigned to work in a foreign country shall be considered to be a taxpayer who is a permanent resident of Mongolia. Non-resident taxpayers are those individuals who have earned taxable income in Mongolia or from Mongolian sources, who do not meet the above criteria.

Basis: Resident individuals are taxed on their income earned in Mongolia, from Mongolian sources and outside of Mongolia in the given tax year. Non-resident individuals are only taxed on their income earned in Mongolia or from Mongolian sources in the given tax year.

Taxable income: Taxable income includes salaries and wages, incentives, bonuses and other similar employment income, operating income, property income, capital gains, indirect income and other income. The PIT is imposed on salaries and wages, incentives, bonuses and other similar employment income after deducting social and health insurance contributions made by the employee as per the Social Insurance Law of Mongolia, and is paid after standard deductions. Operating income is taxed on the income after deductions and excluding the exempt income. Upon request by an individual and its acceptance by the tax authorities, the total operating income of the individual can be taxed as total taxable income. For property income, rental income is taxed on the income from the lease of the asset after deducting the relevant lease expenses which can be supported with appropriate documentation. Royalty, dividend and interest income are taxed on the gross amount. Indirect income is taxed on the gross amount, and includes additional income provided from the employer which is not directly related to the performance of the employees’ official duties and obligations, and indirect income provided to the employee from an employer in order to improve their working conditions, and shall equal to the total expenses incurred by the employer. Other income includes prizes for art and sports competitions, festivals and other similar income (gross amount taxed); income from betting games, gambling, and lotteries (gross amount taxed); and income from micro-trade, small business work and services (as operating income upon request of the individual, or for individuals who operate without a specific workplace or location, such as a counter, the income tax is calculated at an amount between 1 to 50 percent of minimum wage, or for individuals who engage in passenger or cargo transportation services, the income tax is calculated at an amount between 5 percent of the minimum wage to the total amount of minimum wage). For non-resident taxpayers, the taxable income shall be clearly reflected in the relevant contract signed with a resident taxpayer, and if no such contract was signed, the taxable income shall be the total expenses incurred in relation to the arrival and work performed by the non-resident individual. Income from the sale of debt instruments, bonds, stocks and securities issued by a resident taxpayer and traded in primary and secondary markets shall also be taxable.

Capital gains: Gain on sale and transfer of assets is taxed as follows: – Gain sale of immovable properties is taxed on the gross amount. – Gain on transfer and sale of rights to possess or use land and other intangible assets is taxed on the amount after deducting the fees paid to the relevant Government agency for obtaining the rights which are supported by the relevant documentation. – Gain on sale of movable properties are taxed on the amount after deducting the expenses incurred in relation to the sale/transfer. – Gain on sale of shares, securities and other financial instruments are taxed on the amount after deducting the purchase price and any other relevant expenses.

Deductions and allowances: Standard tax credits are deducted from taxes payable from salaries and wages, incentives, bonuses and other similar employment income, depending on the income amount as provided below:

*Annual taxable income of MNT 0 to 6,000,000

– Standard tax credit of MNT 240,000 *Annual taxable income of MNT 6,000,000 to 12,000,000

– Standard tax credit of MNT 216,000 *Annual taxable income of MNT 12,000,000 to 18,000,000

– Standard tax credit of MNT 192,000 *Annual taxable income of MNT 18,000,000 to 24,000,000

– Standard tax credit of MNT 168,000 *Annual taxable income of MNT 24,000,000 to 30,000,000

– Standard tax credit of MNT 144,000 *Annual taxable income of MNT 30,000,000 to 36,000,000

– Standard tax credit of MNT 120,000 *Annual taxable income of MNT 36,000,000 and above

– no tax credit There are no deductions for non-business expenses in Mongolia.

The following additional tax credits are available:

• Tax credit equal to 50 percent of taxable income is provided if income is earned from producing or planting certain agricultural products.

• A tax credit equal to the difference between the maximum mortgage loan interest rate set by the Government and the discounted mortgage interest rate is provided to a citizen of Mongolia who has purchased a residential apartment for their own use for the first time using the mortgage-backed loan.

• Tax credit of up to MNT 6 million and equal to the income tax taxable on the relevant income used as financing is provided to a citizen of Mongolia who has constructed a residential house or purchased a residential apartment for the first time only for their own residency purposes using either his/her own taxed income or a loan obtained from bank and financial institutions

• For a citizen of Mongolia whose birth, step, adopted child or ward is enrolled as a student in a local or foreign university, college, vocational or technical education institution, a tax credit equal to the income tax on the tuition fees paid during the course of their first bachelor’s or diploma course in the given tax year, which are supported by the relevant documentation.

• For a citizen of Mongolia who has enrolled as a student in a university, college, vocational or technical education institution for the first time and paid for their tuition from their own employment income, tax credit shall be provided as above.

• For a taxpayer who purchased solar, wind, geothermal, or other renewable energy equipment, equipment for the production of semi-coking coal, gas or liquid fuel from coal, standard or low-pressure stoves, insulation materials, or an electric or gas heater for their own use, a tax credit equal to the income tax imposed on the purchase price is available provided that it is supported by the relevant documentation

. • Tax credit is available on the amount equal to the tax imposed on donations made for the purpose of rehabilitation and protection of cultural heritage and supported by the relevant documentation.

• Tax credits are provided for the donor compensation and insurance compensation income, and prizes and rewards granted by the Mongolian state, government, People’s and Honored titles and scientific discovery prizes at the total amount.

• Tax credit of 50 percent is available on the operating income of a citizen of Mongolia who lives and is registered in a province or soum the center of which is located further than 500 km away from Ulaanbaatar, and at 90 percent for those citizens who are registered or live in provinces or soums, the centers of which are located further than 1000 km away from Ulaanbaatar.

• Tax credits are available on income from the lease of apartments for public residence purposes located in Baganuur, Bagakhangai, and Nalaikh districts of the capital and those constructed in the border areas within central soums of provinces at 90 percent in 2024-2026 and 50 percent in 2027-2029.

• Tax credits are available on income from the sale of debt instruments/bonds/, shares and other securities traded openly in the primary and secondary markets of domestic securities at 90 percent in 2024-2026 and 50 percent in 2027-2029.

Foreign tax relief: A foreign tax credit is available for foreign taxes paid up to the amount of the Mongolian tax liability that would have been due on the same amount. Provided certain conditions are met, taxes paid in foreign countries that have exchange of information agreements with the Mongolian tax authorities can also be credited against taxes payable in Mongolia.

Taxation of individuals: compliance

Tax year: Calendar year, 1 January to 31 December

Filing and payment: If an employee (local or expatriate) receives employment income from a Mongolian employer, the responsibility for reporting, withholding, and payment lies with that employer. If an employee receives other income (e.g. income from the sale of shares) or if there is no Mongolian employer, the responsibility for reporting, withholding, and payment lies with the employee.

Bank and financial institutions shall withhold, file and pay the taxes on the interest income earned by individuals every time it is accrued on their current and deposit accounts. The tax agent, or the employer, should transfer the tax withheld from a taxpayer’s income to the relevant budget by the tenth day of the following month.

The taxpayer individual shall estimate and pay the tax on their income (except for their operating, lease income, capital gains on rights, movable properties and financial instruments) within 15 February of the following year, and within the 15th day of the following month.

For salaries, wages, incentives and other similar income, royalty, dividend and interest income, indirect income, other income (excl. micro-trade), gain on sale of immovable property and taxable income of non-resident taxpayers, the tax agent shall submit a quarter-to-date report of tax withheld by the 20th day of the first month following the given quarter and a year-to-date tax report by 15 February of the following year to the corresponding tax authority. For operating, lease income and capital gains (excl. sale of immovable properties), the taxpayer individual shall submit a year-to-date tax report by 15 February of the following year to the corresponding tax authority.

Penalties: Penalties and fines apply for late filing or late payment under the same principle as with the CIT.

Rulings: Tax rulings of an explanatory nature may be requested from the legal departments of tax authorities to clarify the application of the law. However, these rulings are not legally binding.

Withholding taxes

Type of Payment	Resident recipients		Non-residents recipients[1]
	Company	Individual	Company	Individual
	Rate (%)	Rate (%)	Rate (%)	Rate (%)
Provision of labor services/ management fees	1% to 25%	10% to 20%	20%	20%
Goods sold/ services provided (operating income)	1% to 25%	10%	20%	20%
Interest income on loans and debt instruments of commercial banks of Mongolia drawn from foreign and domestic sources	5%	5%	20%	20%
Sale of debt instruments, bonds, stocks and other securities issued by a resident taxpayer and traded in primary and secondary markets	10%	10%	20%	20%
Dividend and interest income of an investor who purchased debt instruments or shares of a local entity (not holding mineral resources, oil exploration, and mining special licenses) traded in local and international stock markets.	5%	5%	5%	5%
Sale and transfer of immovable property	2%	2%	20%	20%
Dividends (excluding the above)	10%	10%	20%	20%
Interest (excluding the above)	10%	10%	20%	20%
Rental	10%	10%	20%	20%
Royalty	10%	10%	20%	20%

1. If there is a DTT between Mongolia and the non-resident recipient’s country, the actual withholding tax rate applied for the non-resident recipients will refer to the DTT instructed.

Branch remittance tax: Remittance tax or branch profit tax at the rate of 20% is applicable on the remittance of after-tax profits to the foreign head office, unless the rate is reduced under a tax treaty.

Anti-avoidance legislation

Transfer pricing: Transfer pricing provisions are addressed in the CIT Law and the General Tax Law (GTL) of Mongolia as a comprehensive set of rules, which were updated in 2019 to align with the requirements developed by the Organization for Economic Co-operation and Development (OECD), and these are effective from 1 January 2020. The GTL provides an updated definition of ‘related parties’, which is referable in all tax relationships and broadly involves persons who can influence terms of transactions and their economic outcome between each other directly or indirectly, by involvement in assets, control, and managerial activities. In addition, the Mongolian tax authorities introduced rules strengthening the reporting requirements for transactions between related parties in the CIT law. Under these reporting requirements, in particular, all foreign-invested and affected domestic entities will need to submit the transactional transfer pricing report, the local file, and the master file alongside the annual CIT return. In addition, the qualifying entities will need to submit the country-by-country (CbC) report.

Interest restriction: A thin capitalization rule applies to direct shareholders, and interest paid in excess of the 3:1 debt-to-equity ratio is not deductible and is treated as a dividend. This is applied on an investor-by-investor basis as opposed to the company as a whole; no restriction applies to interest that is not paid to an investor. In addition, deductible interest expense incurred on a loan received from related parties is limited to 30% of the earnings before interest, taxes, depreciation, and amortization (EBITDA).

Controlled foreign companies: The CFC rules were introduced in 2020, which define CFC as a foreign entity in which a related party (i.e. a Mongolian tax resident entity or an individual permanently residing in Mongolia) holds 50% or more of the total shares or voting rights of a foreign entity during any period of the current tax year directly or through one or more legal entities in the chain. For taxation purposes, a CFC is treated as a resident taxpayer, but these rules shall not apply to a CFC that is established for IPO purposes.

Hybrid mismatches: N/A

Disclosure requirements: N/A

Exit taxes: N/A

General anti-avoidance rule: If, during the tax inspection, it is identified that the following conditions exist, but the tax cannot be reimposed by implementing the measures prescribed by law, the General anti-avoidance rules shall be applied: – the taxpayer has organized a tax scheme on their own or jointly with other persons; – within the framework of the aforementioned tax scheme, the taxpayer has obtained tax benefits by avoiding taxes. If the taxpayer has obtained tax benefits by avoiding taxes as mentioned above, the tax department shall redetermine the tax amount under the assumption of what the amount would have been had the taxpayer not used the above-mentioned tax scheme or not obtained the tax benefits, and make adjustments to the tax payable, and the relevant tax shall be reimposed. The reimposition measures shall be commenced within the limitation period of 4 years, and it shall cover the 4 years prior to the identification of the above conditions. The taxpayer is considered to have obtained tax benefits as a result of a tax scheme if these result in the following: – change in the accounting policy for the items relating to exempt income, tax credits, withholding tax calculations and deductible expenses from taxable income; – deferral of the obligation to pay taxes; – benefits obtained as a result of deferring the obligation to pay taxes; – reduction in taxable income due to the increase in exempt income or non-taxable income; – failure to impose taxes on taxable income.

Digital services tax and Other significant anti-avoidance legislation: No other rules.

Value-added tax/Goods and services tax

Type of tax: VAT applies to goods, works and services imported to, exported from and sold in Mongolia by individuals and legal entities. Mongolia operates the input-output model of VAT. The VAT withholder deducts the VAT paid on its inputs from the VAT charged on its sales and accounts for the difference. If output VAT exceeds input VAT, the difference is paid to the tax authorities. Otherwise, it is subject to refund (if eligible) or could be carried forward to offset future liabilities. According to the VAT Law, a person (covering legal entities, individuals, and PEs) whose sales income has reached MNT 50 million or more during 12 consecutive months must register as a VAT withholder, and has an obligation to withhold and pay the tax to the state budget. The threshold for voluntary registration is MNT 10 million of sales income. A sale of fixed assets is not considered for the VAT registration threshold. Some goods, works and services such as foreign currency exchange services, insurance services, services for issuing, transferring and selling securities, medical services, tour operator services, rental of residential accommodation etc. are exempt from VAT.

Standard rate: 10%

Reduced rates: 0% (goods, works and services exported), 0-10% (on gasoline and diesel fuel imported or produced for sale)

Registration: The taxpayer whose obligation to register as a VAT withholder has arisen shall submit their request to the relevant tax authority to register as a VAT withholder within 10 working days after such day. The relevant tax authority shall register the taxpayer as a VAT withholder within 3 working days upon receipt of the request and issue a certificate, after which the taxpayer will be immediately registered to the system. In the event that the taxable income of a registered taxpayer is not earned, or if it is proven that this income was below the above threshold for a period of 12 consecutive months by the tax report for this period, or that no operating activities were carried out for this period, the relevant tax authority shall remove the taxpayer from the register of VAT withholders and the certificate shall be revoked.

Filing and payment: The VAT withheld by the withholder shall be transferred to the state budget within the 10th day of the month following the sale and submit the VAT report to the relevant tax authority in accordance with the following principles: – VAT withheld on the sale of goods or provision of works and services in the given month shall be paid to the budget by the withholder; – VAT imposed on goods, works and services which have not undergone customs clearance received from a non-resident (irrespective of whether they are supplied in Mongolia or not) taxpayer are subject to VAT under the reverse-charge procedure (not applicable for imported goods). – VAT imposed on goods, works and services supplied or provided as settlement of liabilities shall be paid by the party who is making the payment. VAT imposed on imported goods, works and services is withheld and reported in accordance with the following principles: – The VAT is withheld by the customs authority and paid to the budget, and the monthly VAT report shall be submitted within the 10th day of the following month and the yearly report is submitted by 15 January of the following year. – VAT on gasoline and diesel fuel imported for the purposes of stockpiling by a company shall be imposed when the sale of these products is commenced based on the decision of the Government setting this amount for each company. – VAT on gasoline and diesel equivalent to 30 days of consumption in Mongolia will be imposed with a delay of 30 days, except those obtained for stockpiling purposes by companies which hold a special license for wholesale and production of oil products.

Social security contributions

Citizens of Mongolia, foreign citizens, and stateless persons employed under a contract by all types of economic entities, organizations, civil servants, religious or other organizations, and foreign economic entities carrying out activities in Mongolia are subject to the following compulsory social insurance taxes.

	Employer	Employee[1]
	Rate (%)	Rate (%)
Pension insurance	8.5%	8.5%
Benefit insurance	1.0%	0.8%
Unemployment insurance	0.5%	0.2%
Worker’s compensation insurance (including industrial accident and occupational disease insurance) [2]	0.5%, 1.5%, 2.5%	–
Health Insurance [3]	2%	2%

1. The insurance withheld by the employer is capped to be the relevant rate of MNT 6,600,000 if an employee’s income exceeds MNT 6,600,000 per month (10 times the minimum wage).

2. The rate differs depending on the working conditions of the workplace with occupational health and safety requirements and risks and is approved for each profession and position by the Government based on the proposal of the National Council of Social Insurance.

3. The insurance rate is 1% for children of 0-18 years of age, university/college students, self-employed individuals and herdsmen.

The employer who withheld the social insurance taxes shall submit returns electronically and by paper before the fifth day of the following month on a monthly basis. Payments should be made before the end of the month to the social insurance fund account.

Citizens who choose to pay social insurance taxes voluntarily shall pay the taxes at the following rates by entering into a contract with the social insurance authority on the income starting from the minimum wage (as specified in the contract):

	Rate (%)
Pension insurance	11.5%
Benefit insurance	1.0%
Worker’s compensation insurance	1.0%
Health Insurance	1.0%

Self-employed

Self-employed citizens shall be taxed on their income in accordance with the PIT law and tax filings and payments are made based on the processes described in the “TAXATION OF INDIVIDUALS” section. Social security contributions can be voluntarily as specified in the “SOCIAL SECURITY CONTRIBUTIONS” section.

Other taxes

Capital duty: N/A

Immovable property taxes: IPT is an annual tax that varies between 0.6% and 2% depending on the location, designation, size, market demand, and supply conditions of the immovable property.

The actual tax rate shall be determined within this range by the Citizens’ Representatives Khurals of the provinces and the capital. The tax is levied on the value of immovable property (with the exception of land) reported at the state registration. If the property is unregistered, the insured value is used. In the absence of either a registered or insured value, the accounting value is used. The value shall be as of 15 January of the given tax year.

The following properties are exempted from this tax:

– immovable properties of legal entities that are financed through the state and local budget

– first 2 apartments owned by citizens and legal entities located in the provinces, soums and the capital (only the first 2) – public buildings and structures

– buildings and structures constructed and registered in the free-trade zones

– buildings and structures registered in the special zone of the capital city – Real estate located in the territory of the industrial and technological park, which will be exempted from IPT for the first five years and 50% exempted for the following five years.

The following tax credits are available on IPT levied on land: – 95% in the capital, 97% in the center of provinces, 98% in the center of soums and villages for land owned by citizens for family use

– 30% in the capital, 70% in the center of provinces, 85% in the center of soums and villages for land owned by citizens for purposes other than farming. The IPT is payable by the taxpayer legal entity every quarter on the 15th day of the last month of the quarter in equal amounts and by the taxpayer citizen or non-resident individual on 15 February every year. The IPT on land is imposed by the state administrative body in charge of land issues, collected and transferred to the local budget by the tax inspector. The IPT report for the given tax year shall be submitted within 10 February of the following year to the relevant tax authority.

Transfer tax: N/A

Stamp duty: Under the Law of Mongolia on State Stamp Duties, there are 45 types of activities subject to stamp duties, including the following:

– Settlement of a legal dispute by the court: MNT 4,550-222,950

– Court involvement in arbitration: 0.1%; 0.05%

– Notary services: MNT 1,100-20,000; 0.03-1.2%

– Consular services: MNT 200-300,000; 0.015-1.2%

– State registration services for legal entities: MNT 5,000-200,000

– State registration services for citizens: MNT 1,000-750,000

– Registration and issuance of licenses to drive transport and self-propelled vehicles: MNT 1,000-500,000

– Registration services for foreign-invested economic entities and representative offices of foreign organizations: MNT 35,000-1,800,000

– Issuance and registration of patent and trademark certificates: MNT 20,000-120,000

– Registration of copyrights: MNT 25,000

– State registration services of property ownership rights and other related rights: 0.01%

– Registration and granting of land possession, usage and ownership rights: MNT 2,000-1,000,000

– Registration of virtual asset service providers with the Financial Regulatory Commission: MNT 50-100 million – Issuance of permits to carry out certain activities specified in the law

– Other specific activities that need permissions and rights from the state authorities The amount of duty varies depending on the type of services provided or activities involved.

Net wealth/worth tax: N/A

Inheritance/gift taxes: N/A, the tax is determined as a tax payable in Mongolia, but as of today, no provisions are made or tax laws are issued in relation to this tax.

Other: Excise tax: Excise tax is levied on goods manufactured and sold in or imported into Mongolia, such as tobacco, alcohol, gasoline and diesel fuel, passenger vehicles and kerosene, the by-product of oil production. Excise tax is also levied on the physical units of special-purpose technical devices and equipment used for betting games and gambling and on the activities of individuals and legal entities that conduct such activities. Item

– Base – Excise tax rate(MNT): Food-grade alcohol (depending on use) – Liter – MNT 1,740 to 17,400 Shimiin arkhi (Mongolian traditional alcoholic drink) distilled using a production method – Liter – MNT 350 All types of wine (depending on alcoholic content) – Liter – MNT 870 to 7,830 All types of beer – Liter – MNT 350 Cigarettes and other similar tobacco – 100 pieces – MNT 4,180 Shag (loose tobacco) and other similar tobacco – Kilogram – MNT 3,130 Gasoline fuel (depending on octane and border point through which it was imported) – Ton – MNT 0 to 17,400; MNT 0 to 750,000 (imported) Diesel fuel (depending on octane and border point through which it was imported) – Ton – MNT 0 to 21,750; MNT 0 to 850,000 (imported) Passenger vehicles (depending on the engine capacity & production year) – Unit – MNT 750,000 to 65,975,000 Kerosene, the by-product of oil production – Ton – MNT 285,000 Gaming table or roulette – Unit per month – MNT 116,000,000 Slot machines and other automated game machines – Unit per month – MNT 4,350,000 Cashier or totalizator that provides results of the gamble – Unit per month – MNT 116,000,000 Bookmaker Center for estimating the bets – Unit per month – MNT 116,000,000 A legal entity or individual providing gambling service via internet or mobile network – Each entity/ individual per month – MNT 36,250,000 For other types of alcoholic beverages than those included in the above table, the excise rate varies based on the percent of alcohol content and will progressively rise over the next few years as follows: Item

– Base – Excise tax rate (MNT) for 2023 to 2025 – 2025 to 2027 – 2027 to 2029 – 2029 onwards: All types of white alcohol, liqueurs, cordials and other spirit drinks – Liter – MNT 3,700 to 31,300 – MNT 3,900 to 34,450 – MNT 4,100 to 37,900 MNT 4,300 to 41,690 All types of brandy, whiskey, rum and gin – Liter – MNT 9,100 to 38,280 – MNT 9,600 to 44,000 – MNT 10,100 to 50,600 – MNT 10,600 to 58,200 Custom duty:

The customs tariff varies between 5% and 40% depending on the type of goods imported into Mongolia, except for certain imported products and equipment, such as certain types of wood, gas fuel, its container and equipment, equipment and artificial organs for people with disabilities, goods for official use by the foreign diplomat missions and UN, renewable energy research and production equipment and humanitarian and grant goods, which are exempt from customs tariff.

Certain imported goods, such as gas condensate, petroleum oils, crude, oils obtained from bituminous minerals, automatic data processing machines, electrical machinery, equipment and parts, medical equipment, and pure-bred livestock, are zero-rated. Export duties apply to certain exported goods, such as unprocessed camel and goat wool, and certain types of wood and wooden materials. Mineral resource royalties:

Special license holders on mineral exploitation, parties who exported minerals or who sold gold with the BoM are subject to royalty that is calculated on the sales price of minerals which are

(1) extracted from mining claim and sold, or

(2) extracted from mining claim and shipped for sales, or

(3) consumed by the license holder for its internal usage.

The sales price which is used in mineral royalty fee calculation is defined as follows:

– If the mineral resource is to be exported, the sales price shall be calculated based on the international market price which is estimated on the monthly average price of such type of mineral or similar mineral products;

– If the mineral resource is to be sold within the country or consumed by the license holder for its own usage, the sales price shall be calculated based on the internal (Mongolia) market price;

– If the market price of mineral resources is not available, the sales price that is determined by the license holder shall be considered as the basis for royalty calculation. The percentage of royalty is as follows:

– Rate of royalty on coal sold within the country or consumed for own usage shall be 2.5% of the sales price; – Rate of royalty on gold that is sold to the Bank of Mongolia or any other authorized commercial bank shall be 5.0% of the sales price; – The rate of royalty on sales of minerals other than those mentioned above shall be 5% of the sales price of the mineral. Additional rates (between 0% and 30%) vary based on the type and level of processing, and the market price of the mineral sold, shipped, or used. Other fees and taxes:

A range of other fees and taxes are payable for companies depending on their activities. The primary ones include the following: • Water Usage Fee • Water Pollution Fee • Air Pollution Fee • Land Usage Fee • Natural Resources Usage Fee • Motor and self-propelled vehicle tax • Mining License Fee that is agreed to upfront and stated in the mining license (for the mining industry)

Tax treaties

Mongolia has concluded about 26 double taxation treaties on income and assets and has tax information exchange agreements with these countries. Please obtain further detailed information for each of the treaties from the following link:

https://mta.gov.mn/main/content/6275f6e328d9562bc740bd02/%D0%94%D0%B0%D0%B2%D1%85%D0%B0%D1%80%20%D1%82%D0%B0%D1%82%D0%B2%D0%B0%D1%80%D1%8B%D0%BD%20%D0%B3%D1%8D%D1%80%D1%8D%D1%8D,%20%D0%BC%D1%8D%D0%B4%D1%8D%D1%8D%D0%BB%D1%8D%D0%BB%20%D1%85%D0%B0%D1%80%D0%B8%D0%BB%D1%86%D0%B0%D0%BD%20%D1%81%D0%BE%D0%BB%D0%B8%D0%BB%D1%86%D0%BE%D1%85

Recipient country – WHT rate: Dividends – Interest (15) – Royalties:

Austria – 5%/10%(1) – 10% – 5%/10%(2)

Belgium – 5%/15%(3) – 10% – 5%

Bulgaria – 10% – 10% – 10%

Canada – 5%/15%(4) – 10% – 5%/10%(5)

China – 5% – 10% – 10%

Czech Republic – 10% – 10% – 10%

Democratic People’s Republic of Korea – 10% – 10% – 10%

France – 5%/15%(6) – 10% – 5%

Germany – 5%/10%(7) – 10% – 10%

Hungary – 5%/15%(8) – 10% – 5% India – 15% – 15% – 15%

Indonesia – 10% – 10% – 10% Italy – 5%/15%(9) – 10% – 5%

Kazakhstan – 10% – 10% – 10%

Kyrgyzstan – 10% – 10% – 10%

Malaysia – 10% – 10% – 10%

Poland – 10% – 10% – 5%

Republic of Belarus – 10% – 10% – 10%

Republic of Korea – 5% – 5% – 10%

Russia – 10% – 10% – In accordance with laws of Mongolia

Singapore – 5%/10%(10) – 5%/10%(11) – 5%

Switzerland – 5%/15%(12) – 10% – 5%

Turkey – 10% – 10% – 10% Ukraine – 10% – 10% – 10%

United Kingdom – 5%/15%(13) – 7%/10%(14) – 5%

Vietnam – 10% – 10% – 10% Notes:

(1) 5% if the recipient is a company and directly owns at least 10% of the capital of the company paying dividends; 10% if the recipient is the beneficial owner of the dividends.

(2) 10% if the recipient is the beneficial owner of royalties in the meaning of fees for use and usage rights of literary, artistic and scientific works, including copyright of films; 5% in all other cases.

(3) 5% if the beneficial owner is a company and directly or indirectly owns at least 10% of the capital of the company paying dividends; 15% in all other cases.

(4) 5% if the beneficial owner is a company and directly or indirectly owns at least 10% of the capital of the company paying dividends; 15% in all other cases. (

5) 5% if the recipient is the beneficial owner of the royalties in the meaning of copyright royalties and other payments for production or reproduction of any literary, dramatic, musical and other artistic works, or royalties for the use of, or the right to use, computer software or any patent, or for information concerning industrial, commercial or scientific research and experiments; 10% in all other cases. (

6) 5% if the beneficial owner is a company and directly or indirectly owns at least 10% of the capital of the company paying dividends; 15% in all other cases.

(7) 5% if the beneficial owner is a company (excluding partnerhips) and directly owns at least 10% of the capital of the company paying dividends; 10% in all other cases.

(8) 5% if the beneficial owner is a company and directly owns at least 25% of the capital of the company paying dividends; 15% in all other cases.

(9) 5% if the beneficial owner is a company (excluding partnerships) and owns at least 10% of the capital of the company paying dividends or owned this capital 12 months prior to the determination of the dividends; 15% in all other cases.

(10) 5% if the beneficial owner is a company and directly owns at least 25% of the capital of the company paying dividends; 10% in all other cases.

(11) 5% if interest is received by a bank or a similar financial institution; 10% in all other cases.

(12) 5% if the beneficial owner is a company (excluding partnerships) and directly owns at least 25% of the capital of the company paying dividends; 15% in all other cases.

(13) 5% if the beneficial owner is a company that directly or indirectly controls at least 10% of the voting power in the company paying dividends; 15% in all other cases.

(14) 7% if interest is received by a bank that is the beneficial owner of the interest and carrying out the activities of a bona fide banking business; 10% in all other cases.

(15) Certain types of interest income are exempt under some of the treaties. Please refer to each of the treaties through the above link for further detailed information.