Responsibility for Taxation
Tax administration is the responsibility of the General Department of National Taxation (GDNT) which was established as a separate government agency in 1992, under the supervision of the Ministry of Finance. The GDNT has jurisdiction over 21 aimag offices. There are 9 district tax offices under the supervision of the capital city office and 360 districts under the supervision of the aimag offices and other cities. The GDNT currently employs over 100 staff at its Ulaanbaatar Headquarters. The aimag offices have been between 10 and 20 staff members each while the district offices in Ulaanbaatar have approximately 280 staff. Offices in each of the soums have 1-5 tax inspectors.
The current tax system consists of taxes, fees and payments. Taxes are imposed at both state and local level. The tax administration is responsible for administrating 19 state taxes and 4 local taxes while the custom administration is responsible for the application of import duties, excise taxes and value-added taxes (the former sales tax) on imported goods and for the application of export taxes on certain exported goods.
Bilateral foreign tax credits are only available to residents of Mongolia. To avoid double taxation, Mongolia uses the ‘tax sparing method’. In this case, the amount of foreign tax paid is allowed as a credit against the Mongolian tax payable on the same income or capital. However, the amount of such tax credits should not exceed the amount of tax payable on the same amount of income in Mongolia.
Mongolia has negotiated double-taxation agreements with China, France, Germany, India, the Republic of Korea, the Russian Federation and the United Kingdom, but not with the United States or Japan. Absence of a comprehensive bilateral tax treaty could subject foreign investors to the risk of double taxation where the investors’ home countries subject them to world-wide income taxation, but do not provide a full credit for taxes imposed by Mongolia.
Entry filed under: Responsibility for Taxation.