Who registers for VAT?

A trader is generally required to register for VAT for making supplies of goods and/or services, subject to his or her turnover exceeding certain thresholds. The most common are ₮4,000,000 for the supply of services, and ₮4,000,000 for the supply of goods. Some traders are generally not required to register for VAT, although they may choose to do so. These include traders whose turnover does not exceed the thresholds above, and also farmers. Traders engaged in exempt activities are not permitted to charge VAT. However, they may, in common with farmers, Government Departments and other bodies be required to register for VAT, in order to account for VAT on services or goods received from suppliers outside Mongolia.

 Tax System

The National Tax Administration is comprised of the state administrative body (General Department of Taxation) which is in charge of tax agencies and offices of capital city, province, district; and tax branches of soum and state tax inspectors.

Direct and Indirect Tax Burden 

All taxes are subdivided into direct and indirect taxes. Value added tax (VAT) and excise tax are recognized as indirect taxes.  

 Principal Taxes 

  • Corporate Income Tax, including branch profits tax, withholding tax and capital gains tax (CIT);
  • Personal Income Tax (PIT);
  • Social Insurance Tax;
  • Value added Tax; 
  • Customs and Excise Duties;
  • Immovable Property Tax;
  •  Mining Tax (license fees and mineral royalties);
  • Excise tax;
  • Royalties on oil and gas products.

 Legislative Framework

According to the law, taxes and levies, as well as penalties for non-compliance, may only be established by laws enacted by the Parliament. 

Strictly speaking, the General Department of Taxation does not have power to amend the law. However, in practice, the General Department of Taxation may issue tax rulings that are not always consistent with the law; although this could be a reflection of ambiguities in the law itself as much as anything else.

In addition to specific tax laws, tax legislation also includes laws governing specific types of activities such as the Investment Law, Law on Minerals.

Despite several rounds of amendments to various legislations over the past few years, the legislation remains in its infancy and complicated issues are not dealt with clarity.

Therefore, it is imperative to obtain advice on the interpretation, implementation and practice adopted by the tax authorities as well as ensuring that the most recent legislation is being considered.