Overview
A VAT withholding agent may be a foreign legal entity, individual, or permanent entity that sells goods, services, or work under the VAT. The payer of the VAT is the last user that is person/entity who is ultimately responsible for the VAT cost.
VAT is levied on goods imported and exported to Mongolia, and produced or sold goods or performed work or provided services in Mongolia. In Mongolia, the standard VAT rate is 10% of the taxable amount.
The imposition timing period shall be determined as follows:
- The day when the seller receives payment for selling goods, work or services;
- The day when the invoice is issued by the seller
- The day when the goods, work, or services are purchased by the buyer
The invoice amount issued by the seller is the taxable amount of VAT for goods produced and sold, work performed and services provided in the territory of Mongolia. However, in the case of not having an invoice issued not exist or tax officials see that the invoice amount has been altered either increased or lowered the market price, the fair market value may be imposed by the tax authority which could be used to set the amount of VAT.
Registration
Any of the following listed agents is the VAT withholding agent:
- An entity or individual that produces or sells goods, performs work or provides services in Mongolia
- An entity that imports or exports goods
- A foreign company with permanent establishment that has sales revenue (of goods sold, work performed or services provided) of 50 million MNT or more
50 million MNT is the registration threshold for VAT. When determining whether the threshold has been breached or not, revenue earned from sales of fixed assets should not be taken into account. This should assist to help with the reduction of the compliance obligations for some small organizations. If a business entity or individual exceeds the threshold (as stated in the income tax return), the application for registration to VAT registration must be submitted to the tax office within ten working days of exceeding the threshold amount, and the tax authority shall issue a VAT certificate to the organization or individual confirming its registration.
When sales revenue from primary production, work or provision of services that businesses and individuals exceeds 10 million MNT, they can register for VAT on volunteer basis. It is not allowed to have group VAT registration.
VAT returns and payment
Every month, VAT returns must be submitted to the tax authority and the VAT payer submits the tax report that is in compliance with the approved standard format. Due date for the payment is the same day as the VAT return.
Zero Rated VAT application
Following is the list of zero rated supplies: international transport services; exports of goods and services; services provided in a foreign country (including tax-exempt services); services related to international air travel; services provided to foreign citizen not residing in Mongolia during provision of services (including tax-exempt services); and exported final mining products. If entities or individuals are suggested to seek or refer to local advice to know which items will be subject to Zero rated VAT regime.
Exemptions
Sale of gold to BOM and commercial banks based on permission, certain locally produced food products, education services, health services and specific financial services are exempt from the VAT regime in Mongolia. Similar to previous advice, to know which items are exempted from VAT, please seek help and advice from local.
VAT on Fixed Assets
VAT levied on the purchase or import of fixed asset is not credited against VAT due. Before, it used to be credited and this change could incur significant additional costs. It is unclear whether VAT is included in the lease payments related to fixed assets.
VAT on Exploration
VAT incurred during the exploration stage is not creditable anymore which may represent a notable additional cost.
Integrated system
As stated in VAT law revised in 2016, an integrated electronic database system will be used to share VAT data centrally. All VAT withholding agents that are registered in the system will be assigned with user account that will be used to upload the information.
If the following listed criteria are met, the registered end-users can receive a 20% VAT refund:
- Goods, work or services are purchased from VAT withholding agents;
- Purchases are registered at the tax authorities;
- Purchased goods, work or services are taxed as specified in the tax laws and regulations;
- Purchases are registered with the registration device as part of the new integrated system
A reward is given to selected end users in lottery style at the end of the year.
