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Mongolia – indirect tax guide

Mongolia – indirect tax guide

Explore the requirements and rules that apply to indirect taxes in Mongolia.

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General

Type of indirect tax:

VAT.

Standard rate:

10 percent.

What supplies are liable to the standard rate?

  • all types of goods, works and services sold in the territory of Mongolia
  • all types of goods, works and services imported from a foreign jurisdiction into Mongolia
  • other types of goods, works and services which supplies are not eligible for VAT zero-rating or exemption.

Are there any reduced rates, zero- rates or exemptions and if so, what do they apply to?

Zero-rated supplies include exports of goods and services; international transport services; services related to international air travel; services provided in a foreign jurisdiction (including tax-exempt services); services provided to foreign citizens not residing in Mongolia during the provision of services (including tax-exempt services); and final mineral products exported.

Exempt supplies include gold; certain agricultural products produced domestically; educational services; medical services; governmental organization’s services; public transport services; tour operator services; financial services; insurance services, small and medium manufacturing purpose equipment; civil aviation aircrafts and spare parts; renewable energy research and production equipment, its accessories and spare parts.

VAT/GST registration

Who is required to register and what is the threshold?

Any entity or individual with sales revenue subject to VAT that exceeds MNT50 million annually.

Is voluntary registration possible?

Yes, provided the entity’s sales revenue subject to VAT has reached MNT10 million annually.

Is voluntary registration available for an overseas company or a fiscal representative?

No.

VAT/GST compliance

What is the typical frequency of returns?

Monthly.

VAT/GST recovery

Are there any items that a registered business cannot recover VAT on?

Yes, registered entities cannot recover VAT paid during import or purchase of the following goods, work or services:

  • passenger cars, its components and spare parts
  • goods or services purchased for personal or employees’ needs
  • goods, work, services purchased or imported for the purpose of preparing or purchasing fixed assets/intangibles
  • goods, work, services imported or purchased for exploration or pre-mining activities
  • goods, works and services imported and purchased irrelevantly to those subject to VAT during the reporting period
  • primary raw materials imported, purchased or sold
  • goods, work, or services imported or purchased for the exempted goods and services.

Can an overseas company recover VAT if it is not registered?

No.

How long does it typically take to obtain a VAT refund following a return filing?

Under the VAT law, a refund should be obtained within 69 working days after submitting an application to the tax authority. In practice, however, it is often difficult to obtain a VAT refund for excess input tax credits.

Invoices

Are there specific requirements for the content of invoices to be considered valid for VAT purposes?

Yes, a VAT electronic invoice is only considered valid if it includes the following:

  • both parties’ names and registration numbers (if applicable)
  • date of issue of the document
  • name of goods, work and service and the corresponding code, measurement and quantity
  • unrepeatable payment number
  • total amount of goods, work and service, excluding VAT
  • VAT amount
  • the total amount, including VAT.

Special indirect tax rules

Does a reverse charge or indirect tax withholding mechanism apply?

Yes, when a person or legal entity of Mongolia purchases goods, work, or services not declared at the customs, from an entity that does not reside or stay in Mongolia, it shall impose and withhold VAT on the value of the goods, work, or services and make payment to the Authority. Therefore, a Mongolian resident buyer shall be obliged to withhold VAT of 10 percent on the service fee transferred to non-residents.

Please note the withholding VAT is not creditable for the Mongolian entity receiving service or goods, so this is a non-recoverable cost. While WHT VAT is often a tax cost to the non-resident entity, the withholder is ultimately responsible for this burden, and in the case of unpaid withholding taxes, the Mongolian Tax Administration (MTA) will seek recourse from the Mongolian buyer.

Rulings

Is it possible to apply for formal or informal advance rulings from the tax authority?

Yes, the MTA responds to requests for the clarification of uncertain tax treatments by a confirmation letter. However, such letter is not a binding of the authority.

Other indirect taxes

Are there any other indirect taxes that apply in the jurisdiction?

Other indirect taxes include the following:

  • customs duty
  • excise tax
  • capital city tax
  • stamp duty
  • tax on petroleum and diesel fuel
  • fees for mineral exploration and mining licenses
  • payments of oil and nonstandard oil exploration and mining licenses
  • payment on air pollution 
  • payment on water pollution
  • payment on usage of natural resources
  • payment on usage of oil
  • waste service fee
  • land fee.

Contacts

Enkhsaikhan D
KPMG in Mongolia
T: +97670128102
E: eenkhsaikhan@kpmg.com

Disclaimer

All information within this guide is provided by KPMG professionals in Mongolia and based on information available as of September 2019.

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