Overview
The purpose of the Mongolian General Tax Law (the Tax Law) is to:
- Establish legal grounds for the introduction, establishment, imposition, reporting, payment, control and collection of taxes in Mongolia
- Define the rights, duties and liabilities of taxpayers and tax authorities
- Regulate relations arising between taxpayers and tax authorities
All other laws and regulations relating to taxation in Mongolia should be read in conjunction with the Tax Law.
The tax system in Mongolia includes taxes, fees and payments which are divided into either state or local taxes. There are 12 kinds that is regulated by the government and 14 kinds of local taxes that is regulated by regional government.
| General Tax Law | |
| State taxes | Local taxes |
| Corporate income tax | Individual income tax |
| Customs duty | Income tax on individuals engaged in work and services, income which cannot be immediately determined |
| Value-added tax (VAT) | Immovable property tax |
| Excise tax | State stamp duty (Others) |
| Tax on petroleum and diesel fuel | Tax on auto and self-propelling vehicles |
| Royalty | Payment on permit to use natural resources other than minerals |
| Fees for mineral exploration and mining licenses | Fees on use of commonly occurring minerals |
| Air pollution payment | Land fees |
| Stamp duty (Article 11.2 of the Stamp Duty Law of Mongolia) | Gun duty |
| Water pollution payment | Capital city tax |
| Tax on petroleum oil reserve usage | Tax on dogs |
| Fees for petroleum oil exploration and licenses | Tax on inheritance and gifts |
| Payment on waste services | |
| Fees for usage of natural resources |
Rights and duties – taxpayers and tax authorities
The Tax Law sets out the responsibilities of taxpayers which include:
- Registration with the tax authority
- Providing required information and documentation to the tax authority
- Accurately maintaining records
- Withhold taxes
- Timely payments and filings
Descent Mongolian accountant needs to recognize certain number of specific requirements in addition to the above, such as the need to use a cash register which fulfills specific standards.
The tax law also gives taxpayers the freedom to perform their operations and to protect their confidentiality without undue intervention by the authorities. In relation to taxpayers who had become tax evaders, breached or are being sought after, in the light of these offenses, the details may be released by the tax authority. Further, taxpayers have the right to:
- Obtain information and advice from the tax authority
- Demand refunds or deductions on overpaid taxes
- Make complaints and obtain explanations from the authorities
- Demand compliance from the authorities
- Obtain advice and assistance from legal tax consultants
Under the Tax Law, tax authorities and state tax inspectors are expected to support taxpayers’ duties through the provision of public records, guidance and training. The tax office shall have a five-year time limit for taxation in arrears, fines and penalties. (This however, depends on the kind of taxes and on the date of due payment).
Tax reporting and payments
The fiscal year is defined as between 1st of January to 31st of December. The deadlines for reporting corporate income tax are outlined in Figure 8. In accordance with quarter-to-date and year-to-day tax returns prepared on accrual accounts, a taxpayer shall properly determine and self-assess his income and tax payable to the Mongolian Tax Authority (MTA)
Specific reporting and payment conditions for taxes other than corporate tax are established in the applicable tax form legislation.
Tax audits
Upon submission of tax returns to the taxing authority, such factors as internal consistency, estimate mistakes, timely payments and enforcement are checked. For checking accuracy and completeness of the reporting, the tax authority conducts audits. Auditing should be notified a minimum of ten days prior.
During these audits, taxpayers shall grant full access to tax inspectors. The property owner is required to be present or represented during the process.
Debt collection
Tax registration and settlement, tax collection and non-compliance penalties are mandated by the tax law. In essence, all revenues and refunds due are registered by the tax authority. Late tax payments, penalties and fines shall be classified as “tax debts” (to be paid in a specific order). Late tax payments and overpayments made due to taxation authorities are subject to fines. The Government of Mongolia approves the fine rate annually.
The taxing authority can recover the amount due from the bank account, or revenue of the taxpayer or sell its assets (and use it as a collateral) for the purposes of settlement of ‘tax debts.’ Ultimately, the tax authority may submit a claim to the courts. The late payment penalty is 0.1% of the balance remaining per day. The Government of Mongolia approves compensation for losses on late payment every year. Where criminal charges are not brought, the punishment for concealing taxable incomes by negligence or fraud is 30 percent of the tax payable.
