Major Revisions to Law of Mongolia on Corporate Income Tax
30th January 2020, Ulaanbaatar city.
We hereby deliver you to some major amendments to Law of Mongolia Corporate Income Tax (hereinafter referred to as the “CIT”) which came into force from 1 January 2020.
Tax rate fluctuation
According to previous CIT became effective in 2007, 10 percent tax was imposed for a legal entity whose annual income equals up to 3 billion tugrugs and 25 percent tax was applied on income in the amount of excess of 3 billion tugrugs. Whereas, current CIT rate is 1 percent for legal entity with annual turnover below 30 million tugrugs, 10 percent for up to 6 billion tugrugs and 25 percent for excess of 6 billion tugrugs.
There were totally 36 expenses tax-deductible on previous CIT, while new CIT specified 14 and tax-deductible expenses with 12 criteria. Moreover, such tax-deductible expenses must be met the following conditions:
- paid for the reporting period;
- paid for the purpose of generating profit directly;
- recognized according to accounting laws with supporting documents;
- recorded in VAT system or customs clearance with some exceptions, if applicable; and
- expense is incurred or expected to be incurred by a taxpayer.
A legal entity whose income is under taxable 6 billion tugrugs in a year can file tax report twice, while legal entity with income excess of taxable 6 billion tugrugs to file a tax report four times per year. Small legal entity with less than taxable 50 million tugrugs opts for flat 1% gross tax or can file tax report one time in a year.
Mineral mining or exploration license holder shall file a tax report for its each license.
Pursuant to new CIT, a legal entity will need to prepare separate profit and loss statements for each mine or exploration areas possessed by such legal entity .
New CIT provides that a foreign legal entity can be consider as tax resident of Mongolia, in case three of following any criteria are met:
- More than 50% of shareholders or their authorized representative resides in Mongolia;
- More than 50% shareholder meetings has held in Mongolia during consecutive 4 years;
- Accounting or financial documents are maintained in Mongolia;
- More than 25% of board members or their nominees resides in Mongolia; and
- More than 60% of total income is originated from Mongolia.
The pre-court dispute resolution committee
The two-level appeal procedures have been eased and there will be only one level of pre-court dispute resolution committee. The committee may decide to suspend dispute resolution procedure and instruct relevant tax authority to re-audit the case if certain conditions are met.
Statute of Limitation
New CIT has shortened the statute of limitation on tax dispute from 5 years from 4 years.
Statute of Limitation
New CIT has shortened the statute of limitations on tax dispute from 5 years from 4 years.
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