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UPDATE STATUS

Corporate, withholding tax and VAT rates are updated on a real-time basis. Other developments, whether proposed or enacted, are monitored on a continuous basis and displayed in the Recent Developments section in the beginning of the chapter, as well as in the relevant section of the chapter.

A review of the chapter, including the incorporation of developments enacted since the preceding review, is made on a biannual basis.

NOTE: TAX REFORM PROJECT

Mongolia is embarking on a far-reaching tax reform project. A draft version of the reform was presented to parliament in April 2018, but the final outcome reform is as yet unknown. Proposals include the following:

Corporate Taxation Proposals

  • Increase in the threshold for the higher corporate tax rate from MNT 3 billion to MNT 6 billion (see Sec. 8);
  • Introducing a simplified tax regime consisting of 1% on turnover for taxpayers with turnover not exceeding MNT 50 million;
  • Changing the way current tax incentive schemes operate from outright exemption or relief to post-fact refund after filing and payment of taxes otherwise due;
  • Extension of the loss carry-forward period to 5 years for all taxpayers irrespective of economic sector (see Sec. 7);
  • Reduction of the depreciation period for buildings from 40 years to 25 years;
  • Reduction of the non-resident withholding tax generally from 20% to 15% (See Sec. 8.2);
  • Reduction of the withholding tax from 20% to 5% with respect of dividends paid out by quoted companies to non-residents and from 10% to 5% with respect to debt instruments issued by local commercial banks (see Sec. 8.2);
  • Reduction of the tax rate on income from the sale of rights from 30% to 10% (see Secs. 6.4. and 8.);
  • Introducing a fixed-amount tax on idle companies in order to cover administrative costs;
  • Broadening the definition of Mongolian-source income;
  • Introducing a clear definition of permanent establishment (see Sec. 4);
  • Allowing for a foreign tax credit (see Sec. 8);
  • Broadening the definition of related party for transfer pricing purposes;
  • Introducing GAAR, CFC legislation and earnings-stripping rules (see Sec. 13.); and
  • Taking all measures necessary to comply with the OECD BEPS and Global Forum on Transparency and Exchange of Tax Information frameworks.

Tax Compliance Proposals

  • Improving the procedures for issuing tax rulings and guidance to taxpayers;
  • Introducing a risk management system to support risk-based auditing;
  • Extending period for voluntary correction of filled tax returns to 1 year;
  • Elimination of statute of limitation in case of tax fraud;
  • Requiring payment of 10% of disputed tax before filing a claim before Tax Dispute Committee;
  • Increasing penalties in case of tax evasion and fraud; and
  • Eliminating the tax interest penalty cap.