MongoliaTax Obligations Detailed

In Mongolia, employers face various tax obligations for themselves and their employees.

Employer Obligations

• Social Insurance Contributions: Employers contribute 12.5% to 14.5% of the employee's salary, depending on industry and job position. This covers pensions (8.5%), benefits (1%), health insurance (2%), unemployment insurance (0.2%), and industrial accident and occupational disease insurance (0.8% to 2.8%). These contributions are not capped and are deductible from taxable income.
• Personal Income Tax (PIT) Withholding: Employers withhold and remit employee PIT. Rates are progressive, from 10% to 20% for residents and a flat 20% for non-residents. PIT returns are filed quarterly and annually by specified deadlines.
• Corporate Income Tax (CIT): This applies to the employer's profits. Returns and payments are due quarterly, semi-annually, or annually, depending on income, with deadlines on the 20th day following the respective period. Annual filing is due by February 10th. Estimated CIT payments are due by the 25th of each month.
• Value Added Tax (VAT): Businesses with annual sales exceeding MNT 50 million must register and remit VAT at a rate of 10%. Voluntary registration is possible for sales above MNT 10 million.

Employee Obligations

• Social Insurance Contributions: Employees contribute 11.5% of their salary. This is capped at MNT 910,800 monthly for incomes exceeding MNT 7,920,000 after April 1, 2025.
• Personal Income Tax (PIT): Residents are taxed on worldwide income at progressive rates. Non-residents are taxed on Mongolian-sourced income at a flat 20% rate. Filing is generally handled by the employer through withholding. Individual annual filing is due by February 15th.

Important Dates and Considerations

• Tax Year: The tax year in Mongolia follows the calendar year (January 1st to December 31st).
• Tax Return Due Date: The annual tax return is due by February 15th of the following year for both individual taxpayers and annual employer reporting.

It's important to note that this information is current as of February 5, 2025, and might be subject to change. Consulting with a tax advisor or local expert is recommended for the most accurate and up-to-date information.

In Mongolia, employee tax deductions primarily involve social security contributions and a general tax deduction based on annual income. No deductions for non-business expenses are permitted.

Social Security Contributions

Employees contribute 11.5% of their salary to social security, capped at MNT 910,800 per month. This contribution covers pension, health, unemployment, and other insurances. The employer also contributes a percentage, ranging from 12.5% to 14.5% of the employee's salary, dependent on the industry and job position.

General Tax Deduction

A general deduction ranging from MNT 120,000 to MNT 240,000 annually is available, based on the employee's annual income. Individuals earning MNT 36 million or more annually are not eligible for this deduction. This deduction is applied directly to the tax owed, rather than the taxable income.

Tax Rates and Payments

As of 2023, Mongolia employs a progressive tax system for employment income:

• 10%: Incomes up to MNT 10 million per month.
• 15%: Incomes between MNT 10 million and MNT 15 million per month.
• 20%: Incomes above MNT 15 million per month.

Taxes are withheld monthly by the employer through the Pay-As-You-Earn (PAYE) system. Payment is due by the 10th of the following month.

Other Considerations

Certain income types, including some pensions, benefits, and payments for disabled individuals, are tax-exempt. No deductions for non-business expenses are permitted. Business deductions are available only for individuals registered as entrepreneurs. While a tax credit exists, it's applied based on income brackets and isn't a standard deduction. These details are current as of February 5, 2025, and might change due to legislative updates.

In Mongolia, the Value Added Tax (VAT) is a consumption tax levied on most goods and services sold, imported, or exported within the country.

VAT Rates and Thresholds

• Standard VAT Rate: 10% applies to most goods and services.
• Special VAT Rate: 0-10% applies to imported and domestically manufactured gasoline and diesel fuel. The exact rate within this range is determined by the government.
• Zero Rate (0%): Applies to specific goods and services, including exports, international transportation services as per Mongolia's international treaties, services rendered in foreign countries, and certain mining products.
• Exemptions: Certain goods and services are exempt, such as specific staple foods, educational services, medical services, financial services, and some goods imported for diplomatic missions.
• Mandatory Registration Threshold: Businesses with annual sales exceeding MNT 50 million.
• Voluntary Registration Threshold: Businesses with annual sales exceeding MNT 10 million.

Filing and Payment

• Filing Frequency: Monthly.
• Deadline: VAT returns and payments are due by the 10th day of the following month.
• Reverse Charge Mechanism: Applies to services and works received from non-resident entities, regardless of where the services are provided. The recipient of the service is responsible for paying the VAT.

Specific Provisions and Recent Developments

• A draft bill proposing to reduce the standard VAT rate to 5% was introduced in January 2025, though its passage is not guaranteed.
• Tax-free shopping for tourists is available for purchases exceeding MNT 500,000 (excluding excise goods and some other items) as of January 2024. Refunds allow tourists a 2% return on VAT.
• Sale of fixed assets is excluded from VAT registration threshold calculations.

General Information about VAT

VAT is a common consumption tax used in many countries worldwide. It's designed to be a tax on the final consumer, but businesses act as collection agents throughout the supply chain. As of today, February 5, 2025, the information presented reflects the current understanding of Mongolian VAT regulations. However, tax laws are subject to change. It's crucial to stay updated on any potential amendments or revisions to the VAT law or related regulations. Always consult with a tax advisor for the most current information and personalized guidance.

Mongolia offers various tax incentives to stimulate economic growth and attract investment.

Corporate Income Tax (CIT) Incentives

• Reduced CIT Rate: Companies with taxable income up to MNT 300 million benefit from a 1% CIT rate. Those exceeding this threshold but under MNT 1.5 billion, excluding those in mining, petroleum, alcoholic beverages, and tobacco, may qualify for a 90% tax credit. The standard CIT rate is 10% on profits up to MNT 6 billion and 25% on profits exceeding that amount.
• Sector-Specific Incentives: Additional incentives exist for specific sectors such as renewable energy and power production commencing from January 1, 2023. These projects can receive a 90% tax credit for the first three years of profit and a 50% credit for the following three years.
• Incentives for Hiring Disabled Employees: Companies employing individuals with disabilities (loss of over 50% of working capacity) are eligible for a tax credit proportional to the percentage of disabled employees in their total workforce.
• Social Responsibility Investment Incentives (September 2024 - January 1, 2025): Investments and donations to unrelated parties for activities such as environmental protection, social care services, cultural heritage preservation, and public infrastructure development may qualify for a CIT credit, capped at 1% of taxable income.
• Investment Law Incentives: The Law on Investment provides several incentives, including tax exemptions, credits, accelerated depreciation, loss carryforward, and deductions for employee training costs. These apply to both foreign and domestic investors.

Personal Income Tax (PIT) Incentives

• General Deduction: An annual tax deduction ranging from MNT 120,000 to MNT 240,000 is available based on annual income.
• Tax Credit: A tax credit of up to MNT 240,000 can be deducted from the PIT of residents earning employment income, with reductions for each income bracket. Individuals earning MNT 36 million or more annually are ineligible.
• Exemptions: Certain income types are exempt from PIT, including some pensions and benefits, income earned by disabled persons, and government bond interest.
• First-Time Homebuyers' Tax Credit: First-time homebuyers constructing or purchasing a residential property using taxed income or loans can claim a tax credit up to MNT 6 million against the purchase/construction cost.
• Incentives for Growing Certain Products: A 50% tax credit applies to income earned from producing or growing specific agricultural products like cereals, vegetables, fruits, fodder plants, and tree seedlings.

Value Added Tax (VAT)

• VAT Refund for Foreign Travelers (Effective January 1, 2024): Foreign travelers staying less than 90 days can receive a VAT refund on purchases.

Other Tax Incentives and Developments

• Capital Gains Tax on Stocks and Securities (Effective July 1, 2024): A capital gains tax applies to the sale of stocks and securities, with rates of 10% for residents and 20% for non-residents. Tax credits are available for sales on the domestic market (90% between 2024 and 2026, 50% between 2027 and 2029).
• Import Duty and VAT Exemptions: The government may offer exemptions for essential fuel and food imports, and for specific sectors like agriculture and energy.

It's important to note that tax regulations are subject to change, and these incentives are current as of February 5, 2025. Consulting with a tax advisor or relevant Mongolian authorities is recommended for the most up-to-date information and to determine eligibility.