Taxes on Personal Income

A non-resident taxpayer of Mongolia is subject to a flat tax rate of 20% on income earned in or sourced from Mongolia. Annual taxable income from salaries, wages, similar employment income, and indirect income will be taxed at the following progressive rates:

Other Sources of Income

Residence

A resident taxpayer in Mongolia is defined as an individual who satisfies either of the following criteria:

• An individual who has resided in Mongolia for a duration of 183 days or more within a span of 12 consecutive months.
• An individual who has earned or derived 50% or more of their total taxable income from Mongolia.

A non-resident taxpayer of Mongolia is an individual who does not meet any of the above criteria.

Other Taxes

Social Insurance Taxes

Citizens of Mongolia, foreign citizens, and stateless persons employed under a contract are subject to compulsory social insurance taxes. The employer’s contribution varies from 12.5% to 14.5%, depending on the industry and job position. The employee’s contributions are taxed at a rate of 11.5%, capped at MNT 910,800 per month (exceptions apply).

Consumption Taxes (VAT)

A VAT at the rate of 10% is imposed on the supply of taxable goods and services in the territory of Mongolia and on imports. Certain international postal parcels are exempted from VAT and customs duty.

Property and Wealth Taxes

• Net wealth/worth taxes: There are no net wealth/worth taxes in Mongolia.
• Inheritances, estate, and gift taxes: There are no inheritance, estate, or gift taxes in Mongolia.
• Immovable property tax: An annual tax that varies from 0.6% to 2%, depending on location. Buildings in Free Trade Zones (FTZs) are fully exempted.

Customs and Stamp Duty

A flat customs tariff of 5% applies with respect to most goods imported into Mongolia, except for specific equipment and livestock which are zero-rated. Under the Law of Mongolia on State Stamp Duties, there are 44 types of activities subject to stamp duties.

Income Determination

• Employment income: Employee gross income consists of all direct and indirect income received through employment or related activities during a calendar year.
• Capital gains: Gross income from the sale of immovable property is taxed at 2%. Income from the sale of movable property, including securities, is taxed on a net basis at 10%.
• Dividend and interest income: Dividend and interest income earned by individuals is subject to withholding tax (WHT) at 10%. A special 5% rate applies on dividend and interest income of an investor who purchased certain traded debt instruments or shares.

Deductions and Tax Credits

Deductions

• Employment expenses: No business deductions allowed for employees, except for social insurance contributions.
• Personal deductions: No deductions for non-business expenses.
• Standard deductions: A general deduction of tax is available ranging from MNT 120,000 to MNT 240,000 annually based on income. Where income is above MNT 36 million annually, no PIT credit is available.
• Business deductions: An individual may claim business deductions if registered as an entrepreneur.

Other Tax Credits and Incentives

• Education: Tax credits are available for tuition payments for the first bachelor's degree or diploma for the taxpayer or their children studying in a local or foreign university/college/vocational school.
• Growing Certain Products: 50% tax credit for residents producing/growing cereals, potatoes, vegetables, fruits, fodder plants, and tree seedlings.
• First-time Home Buyers: Tax credit equal to the payment difference on discounted mortgage-backed loans. Alternatively, a tax credit up to MNT 6 million for constructing or purchasing a first home using taxed income or bank loans.
• Renewable Energy & Efficiency: Tax credits for purchasing solar, wind, geothermal equipment, insulation, and efficient heaters.
• Heritage Protection: Tax credit for donations made to protect and recover cultural heritage.

Foreign Tax Relief and Tax Treaties

A foreign tax credit is available for foreign taxes paid up to the amount of the Mongolian tax liability. Taxes paid in foreign countries that have exchange of information agreements can also be credited.

Mongolia has double tax treaties (DTT) with the following countries:

• Austria
• Belarus, Republic of
• Belgium
• Bulgaria
• Canada
• China
• Czech Republic
• France
• Germany
• Hungary
• India
• Indonesia
• Italy
• Kazakhstan
• Korea, Democratic People's Republic of
• Korea, Republic of
• Kyrgyzstan
• Malaysia
• Poland
• Russia
• Singapore
• Switzerland
• Turkey
• Ukraine
• United Kingdom
• Vietnam

Tax Administration

If an employee receives employment income from a Mongolian employer, the employer is responsible for reporting, withholding, and payment. For other income, or if there is no Mongolian employer, the employee handles it.

• Tax withholdings: The tax agent (employer) must transfer withheld tax to the budget by the 10th day of the following month.
• Employer reports: Quarter-to-date reports are due by the 20th day of the first month of the following quarter. Year-to-date reports are due by 15 February of the following year.
• Individual tax returns: Income should be reported on an individual tax form and submitted to the tax authority by 15 February of the following year.