TAX REFORMS INTRODUCED BY THE GOVERNMENT OF MONGOLIA IN 2018
Recently, the Government of Mongolia has introduced prospective tax reforms to the public. Under the framework of tax reform, current package of tax laws namely Law of Mongolia on General Taxation, Law of Mongolia on Personnel Income Tax and Law of Mongolia on Corporate Income Tax will be replaced by a brand new laws. The significance of proposed new tax law package is to clarify certain ambiguity provisions as set in existing tax laws and to avoid tax disputes arising out of such broadly written stipulations. Therefore, according to the Government, proposed tax law package has been drafted in compliance with those international standard including BEPS and is expected to attract international businesses, protect the interests of current business owners and create more jobs.
 
We highlight some of major changes as follows:
 
Proposed draft law on General Taxation:

- An extension date of tax debt payment will be set as up to 1 year.
-Procedural order/sequence for resolving a matter in relation to tax overpayment is determined.
-A status of limitation will be no longer applied to a tax evasion/avoidance tax in relation to tax fraud criminal act.
-Effective tax debt collection and management will be stipulated.  
-Tax risk management via pre-collection activities will be introduced and regulated.
 
Proposed draft law on Personnel Income Tax:


- Single scale 10 percent personnel income tax will be applied.  
-Withholding tax rate will be reduced to 15 percent for non-resident tax payer.
-One time tax exemption will be increased to MNT6 000 000 from current amount of MNT3 000 000 for those who purchased or built apartment or house first time for residential purpose.
-Complexity of tax authorities and its divisions will be eliminated when tax payers claim of tax overpayment.  
 
Proposed draft law on Corporate Income Tax:

-Current withholding tax in a 20 percent rate will be reduced to 5 percent on dividends paid by an economic entity registered and operating in Mongolia.
-Inactive companies will pay MNT 60 000 per quarter from the following year.
-Companies will prepare and report transfer pricing statements.
 
Proposed draft law on Value Added Tax:

-Indirect tax/VAT refund will be made per quarter.
-VAT, which was imposed and paid when importing or purchasing of goods and services for preparation of fixed assets will be deducted proportionally.  
 
In compliance with the proposed tax law packages, the following laws will be amended accordingly:

-The Law of Mongolia on Violations and its procedural law;
-The Law of Mongolia on Criminal Acts;
-The Law of Mongolia on Civil Acts; and
-The Law of Mongolia on Court Judgment Enforcement.
 
In order to furnish beneficial tax law environment for taxpayers, specifically legal entities and individuals, relevant officials of the Minister of Finance commenced a nation-wide campaign to collect and consider the taxpayers’ opinion, request and complaints in each provisions of the draft of tax law package. Currently, the Ministry of Finance is in process of collecting opinions from public via its online platform, therefore a poll will close on 29 March 2018.