Overview of the corporate tax system
In Mongolia, people who pay taxes are divided into two separate characterizations that are resident and non-resident taxpayers. The tax rate depends on the revenue streams and whether the tax payer is the entity residing in Mongolia.
- The entity that is residing permanently in Mongolia is considered as resident taxpayer and consists of entities set up under the jurisdiction of Mongolia and international entities that have their head offices located in the territory of Mongolia.
- The entities that have business operations in Mongolia via permanent establishment or foreign entities that earn income in Mongolia is considered as non-resident taxpayer.
The tax rates for taxpayers who are considered to be tax residents of Mongolia are shown below. Depending on the income type, the date for tax payment are different. To ensure the various payment date requirements are met, you need to seek local advice.
The tax rate for non-resident taxpayers earning income in Mongolia is 20%. From the following page you can see some examples of non-resident income. In the case of a double taxation agreement (DTA) has been concluded between Mongolia and home country of the non-resident tax payer, the reduction for tax rate for non-residents might be applied. Moreover, unless otherwise provided in the applicable DTA, if a business is established by the non-residents, they are required to register for tax purposes within 30 days of starting operations in Mongolia.
Taxable income
The income that is taxable in Mongolia is calculated by determining gross taxable income from which deductible expenditure and tax exempt income is deducted.
Income earned from business operations, property (dividends and royalties), and sale of property are considered as gross taxable income.
Following is the example of deductible expenses are allowed only by the resident taxpayer.
Certain income is considered tax exempt for resident taxpayers under the Tax Law. For non-resident taxpayers certain income may be tax exempt if it is derived from a product-sharing contract in the oil industry.
Losses
Losses can, generally, be deducted from taxable income up to 2 years after the tax year in which the losses are incurred. In the tax year, the yearly loss amount that is carried towards shall not surpass 50 percent of the taxable income for the tax year.
Depending on the size of investment and government regulations, infrastructure and mining industries are permitted to carry forward their losses against 100 percent of their taxable income for up to 4-8 subsequent years.
