Mongolia Tax Newsletter | 10 January 2023

With the end of financial year, it seems like a good time to remind you of the latest announcements and provide you with vital updates. If you have any questions as to how these changes may impact your business, please get in touch.

The State Budget Law for the fiscal Year of 2023 was approved on 11 November 2022 and the several legislations are amended following the approval of Government budget including:

-      Corporate Income Tax law of Mongolia;

-      Personal Income Tax law of Mongolia;

-      General Tax Law of Mongolia;

-      Stamp Duty Law;

-      Amendments to the Mineral Resources Law;

-      Amendments to the Customs Duty Law;

-      The Law of Mongolia on Customs Duties Exemption;

-      The Law of Mongolia on Customs Duties Credit;

-      The Law of Mongolia on Exemption of the Value Added Tax;

-      Amendments to the Law on Workforce Mobility Law;

-      Amendments to the Law on Minimum Wage;

For more details of the changes, please review the quarterly newsletter.

The Parliament of Mongolia passed on the new legislation on licensing and permits on 17 June 2022, and this new Law on License and Permit came into force on 1 January 2023. Under the new legislation, all licenses and permissions shall be regulated in a single law as opposed to previously they were regulated under numerous different regulations.

License

-      Activities that may pose a risk to national security, public interest, public health, environment or financial stability.

-      Professional activities that require the special conditions and terms to meet

-      Activities that allowed with limited use of natural resources and public property for profit and industrial purposes.

Permit

-      One-off activity

-      Additional activities that require the basis of a license

-      Activities that allowed with limited use of natural resources and public property for household purposes.

Progressive tax rate for residents

A new progressive rate of PIT is coming into force at the start of the financial year 2023 that applies to employment and indirect income. Prior to this new progressive tax rate, employment income has been taxed at a flat 10% rate. The detailed changes and example calculation are available in the newsletter.

Annual tax filing

Under the PIT law, the following category of income requires the tax withholder (i.e. income provider) to withhold PIT and remit the withheld taxes to the relevant tax offices within 10th of the following month:

-      Employment and indirect income

-      Royalties and dividend

-      Interest

-      Income from sale of immovably property

-      Art or sport competition award, winning prize of festivals and other similar income

-      Income received as a winner of quiz, gambling and/or cash or prize lottery

-      Income provided to non-resident individual

Annual PIT return must be filed by individuals when they earn following type of income:

-      Operational income

-      Income from lease or use of a property

-      Income from sale/transfer of land possession or use rights, or other intangible assets

-      Income from sale of movable properties

-      Income from sale of stocks, securities and other financial instruments

Where employers or tax withholder have fulfilled their withholding obligation and the employee or income recipient has no other personal income to declare in addition to the income that was already taxed at source, annual PIT return filing is not legally required unless he/she is eligible for a tax credit to claim.

Starting in early 2022, the MTA has encouraged individuals to sign-up for their e-tax.mn system and lodge annual tax returns even if the individuals have only employment income and their tax obligation is fulfilled by the employer. Currently, it is unclear whether this annual filing requirement will be applicable to non-resident individuals. 

Lottery

The VAT lottery was suspended for a few months and it resumed with more innovative system update in October 2022. For English guide how to sign-up for ebarimt as an end-user to participate in the VAT refund, please read more from our website.

Foreign employee quota for 2023

In the previous years, the foreign workforce quotas were set with a percentage per organization, and generally 10%-60% of a company’s workforce was represented by foreign nationals, depending on the industry and sector in which companies operate. Whereas for the 2023 year, the total number of foreign workforces per annum is set for the entire economic sector rather than per organization. Please read more about the 2023 foreign worker quota from the newsletter.

Domestic Labour Market Testing

Effective from 1 July 2022, under the new Workforce Mobility Law, an employer is required to test the local market firstly by notifying skills in demand to the Labour and Welfare Offices (for positions other than Executives, Managers for International organizations, medical specialists, educational professionals etc). If the employer cannot find a satisfied candidate with the skills required within 14 business days from the position announcement with the Labour and Welfare Office, they are allowed to submit their request to invite a foreign national employee. At the time of writing this newsletter (January 2023), this local labour market testing requirement is not in force yet.

Visa exemption for 34 countries

In connection with the Government ‘s decision to declare 2023-2025 as the “Years to visit Mongolia”, the Cabinet has announced the temporary waiver of the visa requirements for the 34 countries. Nationals of the these countries can enter into Mongolia for tourism purposes up to 30 days and this temporary program will be effective until the end of 2025. The list for visa exempted countries are available in the newsletter.

Kindly note that E-balance platform is going to be changed as https://ebalance.mof.gov.mn/   for the 2023 Financial statements. The current system https://e-balance.mof.gov.mn/ shall be used for submission of the 2022 Financial statements