When affiliated parties make transactions, fair value must be set for tax purposes. If the tax administration considers that the transaction was not made at fair value, the tax administration shall have the right to determine the appropriate fair value using the methodology of actual pricing that sough the approval of the Government.
According to the Tax Law of Mongolia, “Related Parties” means a business entity that has the right to directly or indirectly participate in the management, control and property rights of any foreign or Mongolian legal entity. If any of the following criteria is met, for tax purposes, businesses are considered to be “related parties”.
- An entity that owns at least 20 percent of the common stock of another entity
- An entity that is entitled to receive at least 20 percent of the dividends or distributions from the other entity
An entity that is entitled to appoint at least 20% of the management or otherwise determine the policies of other entity
