Executive and immigration contacts
Khishignemekh Regzedmaa
+976 (11) 314-032
Fax: +976 (11) 312-042 Email: khishignemekh.regzedmaa@ mn.ey.com
Uyanga Mandal +976 (11) 314-032 Fax: +976 (11) 312-042 Email: uyanga.mandal@mn.ey.com
The exchange rate between the tugrik and the US dollar is MNT2,823.89.
A. Income tax
Who is liable. A resident taxpayer of Mongolia is taxable on his or her worldwide income. Nonresidents are subject to tax on their income earned in Mongolia or sourced from Mongolia.
Persons are considered tax residents of Mongolia if the following criteria are met:
• They reside in Mongolia for 183 or more days in a given con secutive 12-month period.
• Their income earned in Mongolia and/or their Mongolian source income is more than 50% of their worldwide income.
The first of the above criteria needs to be checked first.
The tax year in Mongolia is the calendar year.
Income subject to tax. The taxation of various types of income is described below.
Employment income. Taxable compensation under the Personal Income Tax Law of Mongolia includes wages, salaries, bonuses, incentive and similar employment income. Benefits and gifts provided to an employee and/or an employee’s family members are subject to employment tax to the employee. Awards and/or incentives received from foreign or local legal entities and from individuals also fall into this category. Remuneration received in the capacity as a supervisory board member or a committee member of a company is treated as employment income.
Investment income. Dividends, interest and royalties received by residents are subject to a 10% withholding tax on a gross basis.
Self-employment income and business income. Individuals under taking business activities independently (such as manufacturing, trade, rental and services, including professional services) with out establishing a legal entity are subject to income tax at a rate of 10% on net income (after allowable deductions). Professional
services include services provided by doctors, lawyers, advo cates, architects, accountants and teachers. Individual business persons are entitled to deduct business expenses in the same manner as corporate taxpayers. Commonly allowed deductible expenses include cost of goods sold, salaries and wages, depre ciation allowances, interest, rent, and advertisement expenses. However, if the expenses are not documented, are not related to the business activities or used for the personal use of the tax payer, the expenses are considered nondeductible expenses.
Income from non-regular business activities are also subject to income tax under these same rules.
Directors’ fees. Remuneration received by individuals in their capacity as supervisory board members or committee members of a company is treated as an employment income (see Employment income).
Other income. Income derived from the creation of scientific, literary, and artistic works and inventions, product designing, organizing and participating in sports competitions or art perfor mances and other similar income is taxed at flat 5% rate on a gross basis. Income derived from gambling, quizzes and lotteries is taxed at a rate of 40% of gross receipts.
Transfers of land possession and land-use rights are treated as sales of rights and are subject to a 10% tax on the gross transfer value (certain transfers between immediate family members are subject to exemptions).
Tax-exempt income. The following income received by individu als is exempt from income tax in Mongolia:
• Pensions, allowance, payments, discounts, reimbursements, benefits, compensation and one-time grants provided in accor dance with the legislation of Mongolia
• Income of an individual with disability
• Assistance provided by international organizations, foreign governments, legal entities and citizens to the government of Mongolia and local organizations, legal entities and citizens in the event of a disaster
• Income of herder households and persons with livestock, only per head of livestock
• Interest income on treasury bonds
• Transfer of land possession and usage certificates free of charge between certain family members
• Salary, benefit and income earned in a foreign country of a foreign citizen or his/her family member who is permanently residing in Mongolia and is assigned to a foreign diplomatic mission or consulate in Mongolia, the United Nations or its specialized branch
Other exemptions may apply.
Taxation of nonresidents. Nonresidents are subject to 20% tax on income earned in Mongolia or sourced from Mongolia on a gross basis.
Taxation of employer-provided stock options. Employer-provided stock options are taxed at the time of actual exercise and not at the time of grant. Share awards are taxable at the time of award
or, if a vesting period is imposed, at the time of vesting. The tax able amount is the generally the market value of the shares at the time of exercise, award or vesting. This income is included in the employee’s taxable income as part of ordinary employment income and taxed accordingly at 10%. Any gain from a subse quent disposal of shares or other instruments is taxable at 10% at the time of the disposal.
Capital gains and losses. Gains derived from the sale of shares, securities or movable properties are subject to tax at a rate of 10% on a net basis. The sale of immovable property by a tax resident is taxed at 2% on a gross basis.
Deductions. Statutory social and health insurance contributions paid by employees are the only tax deductions permitted in Mongolia and no other deductions are allowed for employment tax purposes. For details regarding statutory social and health insurance contributions, see Section C.
No deductions are allowed for personal expenses. For details regarding deductions for business expenses, see Self-employment income and business income.
Rates. Residents’ employment income is subject to a standard tax rate of 10%.
Other income, including business income, investment income and capital gains, is subject to a standard tax rate of 10%. A resident individual entrepreneur may elect a 1% gross tax instead of a 10% tax on the taxable income from business operations if annual turnover is under MNT50 million. See exceptions in Other income, Taxation of nonresidents and Capital gains and losses.
Credits. The following annual credit is provided to all resident taxpayers for employment income.
Annual employment income Exceeding Not exceeding Annual tax credit MNT MNT MNT
Relief for losses. No measures exist for the carryover of tax losses in Mongolia.
B. Other taxes
Wealth tax or net worth tax. No wealth or net worth tax is imposed in Mongolia.
Immovable property tax. Immovable property tax (capital duty) is imposed annually on the value of property at a rate ranging from 0.6% to 1%, depending on the location of property in Mongolia. No immovable property tax is imposed during the development process of a property. This tax is not imposed until the property certificate is issued by the government.
olia
The value of the immovable property is defined in accordance with the following sequence:
• The value of property that is registered with the property rights registration authority is the tax base.
• In the absence of a registered value, the insured value is the tax base.
• In the absence of an insured value, the value in the financial records is the tax base.
The owner of immovable property calculates the amount of tax due on the immovable property based on the valuation as of January of each year.
Inheritance and gift taxes. Mongolia does not impose tax on inheritances or gifts.
C. Social security
Contributions. In general, Mongolian citizens and foreign citizens employed on a contract basis by an economic entity undertaking activities in Mongolia are subject to a compulsory social and health insurance contribution that is required to be withheld by employers. This contribution is imposed at a flat rate of 11.5%. However, the employees’ portion of the obligation is capped at MNT483,000 per month. The rate for the employers’ portion of the contribution ranges from 12.5% to 14.5%, depending on the economic sector. No cap applies to employers. Social and health insurance covers pension insurance, unemployment insurance, health insurance, benefits insurance (provided if the employee loses his or her working capability for a short time period, goes on maternity leave or passes away), and industrial accident and occupational disease insurance.
Self-employed individuals may register as voluntary social and health insurance payers.
Totalization agreements. To provide relief from double social and health insurance and assure benefit coverage, Mongolia has entered into totalization agreements with a few countries, includ ing Korea (South) and the Russian Federation.
D. Tax filing and payment procedures
The tax year is the calendar year in Mongolia. Spouses are taxed separately, not jointly, on all types of income.
An employer (the withholder) is responsible for the filing and payment of personal income tax imposed on employment income. The withholder must file quarterly provisional withhold ing personal income tax returns by the 20th day of the month following the end of each quarter and an annual return by 10 February of the following year. The withholding tax payments are due by the 10th day of the following month.
Employees or other individuals are responsible for the filing and payment of the tax imposed on all income during the tax year. A tax return must be filed on an annual basis by 15 February of the following year. Tax withheld by the employer on employment income is available as a credit against the overall tax obligations.
Taxes on investment income (for example, dividends, interest and royalties) and certain other types of income are paid through a withholding system. Under this system, the payer is the withhold ing agent. Any other income not paid through the withholding agent must be included in the annual return and tax must be paid before the filing deadline.
Employers also must withhold monthly with respect to social and health insurance and submit a report by the fifth day of the fol lowing month on a monthly basis. Employers must transfer to the government each month the withheld amounts and their contribu tions.
E. Double tax relief and tax treaties
Mongolia has entered into double tax treaties with the following jurisdictions.
Austria Hungary Russian
Belarus India Federation
Belgium Indonesia Singapore
Bulgaria Kazakhstan Switzerland Canada Korea (North) Turkey
China Mainland Korea (South) Ukraine
Czech Republic Kyrgyzstan United Kingdom
France Malaysia Vietnam Germany Poland
F. Temporary visas
In general, 64 different types of Mongolian visas can be issued to foreign citizens by authorized Mongolian organizations. These visas enable such persons to enter Mongolia for different pur poses. In addition, since 1 June 2021, Mongolia is issuing online visas to visitors. A single-entry temporary visa for touristic and business purposes may be granted for up to 30 days for a fee that varies from jurisdiction to jurisdiction. Additional fees are charged for urgent visas.
Citizens of the following jurisdictions do not require a visa to enter Mongolia for the stated period:
• Argentina: 90 days for all types of passports
• Belarus: 90 days for all types of passports
• Brazil: 90 days for all types of passports
• Canada: 30 days for all types of passports
• Chile: 90 days for all types of passports
• Cuba: 30 days for all types of passports
• Ecuador: 90 days for all types of passports
• Germany: 30 days for all types of passports
• Hong Kong Special Administrative Region (SAR): 14 days for all types of passports
• Israel: 30 days for all types of passports
• Japan: 30 days for all types of passports
• Kazakhstan: 90 days for all types of passports
• Kyrgyzstan: 90 days for all types of passports
• Laos: 30 days for all types of passports
• Macau SAR: 90 days for all types of passports
• Malaysia: 30 days for all types of passports
• Philippines: 21 days for all types of passports
• Russian Federation: 30 days for all types of passports
• Serbia: 90 days for all types of passports
• Singapore: 30 days for all types of passports
• Thailand: 30 days for all types of passports
• Turkey: 30 days for all types of passports
• Ukraine: 90 days for all types of passports (with official invita tion)
• United States: 90 days for all types of passports
• Uruguay: 30 days for all types of passports
G. Work visas and residency visas (and/or permits)
Note: The information below is subject to further changes.
For traveling to Mongolia for the purpose of business, the following types of visas are available:
• B visa (investor visa)
• C visa (work visa)
The above visas should be obtained from a Mongolian embassy or consul before traveling to Mongolia.
Under the newly enacted regulation for granting a Mongolian visa, the investor and work visa types are classified into different purposes. There are 11 general different types of work visas depending on the field in which the visa applicant wishes to work. There are three types of investor visas that can be granted to the applicant. For example, a B1 visa can be issued to foreign investors while a B1-1 visa can be issued to a dependent person of the foreign investor of a foreign-invested legal entity. If the visa applicant is a representative of a foreign investor or execu tive management of the foreign-invested legal entity, the applicant can apply for a B2 visa.
Under the general framework of 11 types of work visas, there are 20 types of detailed work visas that can be issued to an applicant. An applicant who wishes to work in Mongolia can only work in a field in which the specific work visa type is granted. For example, if an applicant who obtains a C8 visa that is specified as “work in a health sector” works in the agriculture field, that will be considered a breach and subject to sanction. In addition to the C visa, a work permit from the Ministry of Labor and a long-term residency permit must be obtained to work in Mongolia. A single-entry C visa and a temporary work permit must be obtained before traveling to Mongolia.
A temporary visitor can stay in Mongolia up to 90 days. In addi tion, for the purpose of encouraging tourism, a daily tourism visa can be obtained at the border only for tourists who are in the border zone.
In summary, under the new regulation for Mongolian visas, the individual applies with respect to the dedicated field in which he or she wishes to work in Mongolia.
H. Family and personal considerations
Dependent person. Family members and other affiliated people may accompany an employee by obtaining dependent-person visas simultaneously with the main applicant. For investor and
work visas, there are specific types to be granted to a dependent of the main applicant. For example, if a dependent person of a foreign investor wishes to enter Mongolia, such dependent per son will apply for a B1-1 visa. According to a newly enacted amendment to the immigration law of Mongolia, a dependent person includes a foreign citizen’s husband, wife, partner, father, mother, grandparents and children.
Marital property regime. Mongolia has a community property regime, which applies only to the property of spouses acquired during the marriage. Property acquired before the marriage is considered the separate property of the respective spouse.
Driver’s permits. Foreign nationals may not legally drive in Mongolia using their home country driver’s licenses. However, such persons may convert their home country driver’s licenses to Mongolian licenses by applying to the road policy department.