See Note on proposed tax reform at the beginning of this chapter for potential impact on incentives and special regimes.
Certain tax incentives are available to the developers of free-trade zones in Mongolia, subject to certain conditions, such as investment threshold, industry sectors etc. The incentives are as follows:
- Reduction of corporate tax (‘CIT’) liability to the extent of 50% of the investment amount, where investment is USD 500,000 or more in the FTZs operating to improve infrastructures (such as energy and heating sources, pipeline networks, clean water supplies, wastewater sewage, auto roads, railways, airports and basic communication lines)
- Reduction of CIT liability to the extent of 50% of the investment amount, where investment is USD 300,000 or more in building warehouses, loading and unloading facilities, hotels, tourist camps, or manufacturers of export and import-substituted goods in the FTZ
- Companies incurring losses in FTZ are allowed to carry forward the losses upto 5 years
- CIT exemption to the companies for the first 5 years of operations in the FTZs, provided the companies are using innovated and enhanced technology in their business
- No VAT, customs or excise tax on goods imported into or transferred from customs territory to FTZs
- Zero VAT rate on domestically produced goods to be transferred from the customs territory to the FTZs
- No VAT on goods and services manufactured and sold locally by registered businesses in the FTZs
- No custom or excise duty on goods exported from the FTZs
- No charges to be paid for land possession and usage rights for the first 5 years of operations and thereafter, 50% of the charges are payable for the next 3 years by the entities operating in trade, tourism, and hotel sectors in the FTZs.
- Businesses operating in the FTZs for improvement of infrastructures (such as energy and heating sources, pipeline networks, clean water supplies, wastewater sewage, auto roads, railways, airports, and basic communication lines) are exempt from land payment charges for the first 10 years of operation
- No property tax on registered buildings and facilities in the FTZs
Companies interested in investing in Mongolia can obtain a ‘Stabilization Certificate’ after satisfying the requirements specified in the ‘Law on Investment in Mongolia (2013)’. Stabilization certificate is issued by the ‘National Development Agency’ for the purposes of stabilizing tax rates for a specified period of time.
By obtaining a stabilization certificate, investors can stabilize the tax rates, namely CIT, customs duties, VAT and mineral royalties. Tax stabilization provisions are not applicable to the investments made in tobacco and alcohol related activities.
- The holder of a stabilization certificate can stabilize tax rates for a period from 5 to 18 years, depending on the amount of investment, industry sector and geographic location of the investment in Mongolia
- The holders of the stabilization certificate (investors) can also apply for standard CIT rates as per the tax laws of Mongolia, if such rates are more beneficial to the investors
- Extension of period of the stabilization certificate by 1.5 times for some projects may be granted, subject to certain conditions
- Custom duty exemption and zero VAT rate on imported equipment and machinery during the construction period of specific projects may be granted to the certificate holders
- A 50% tax credit is available to the taxpayers that generate income from the production and planting of the following items:
- Cereal, potatoes and vegetables
- Fruits and berries
- Fodder plants
- A tax credit of 90% is available to taxpayers, having annual taxable income not exceeding MNT 1.5 billion, in following sectors, till 1 January 2021:
- Agriculture, livestock production and related auxiliary activities
- Production of food products
- Manufacturing of garments and clothing
- Manufacturing of construction materials
- A tax credit of 50% or 90% is available to taxpayers / companies located in remote areas, subject to certain exceptions.
- Income earned from the sale of a technique or equipment that economises natural resources, reduces environmental contamination and is nature-oriented is exempt from CIT