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Personal Income Tax of Mongolia
2005-08-26 11:08:20      CRIENGLISH.com
Unofficial translation from Mongolian

Article 1. The Purpose of the Law
The purpose of the present Law is to impose taxes on personal income and to regulate relations arising from the payment of these taxes to the budget.

Article 2. Legislation of Personal Income Tax
The legislation of personal income tax comprises of the General Law of Taxation, the present Law and the other legislation.

Article 3. Taxpayer
1. A citizen of Mongolia and a foreign resident and a foreign person without citizenship of Mongolia shall be the Taxpayer.

2. A person staying in Mongolia for 183 days and more shall be considered to be a resident to Mongolia.

3. A resident taxpayer shall pay taxes on income from sources within and outside of Mongolia.

4. A non-resident shall pay taxes on income from sources within Mongolia.

5. A Taxpayer who has taxable income shall register with the State Tax Administration and to get the registration number.

Article 4. Taxable Income
1. The tax is imposed on the following annual income of taxpayer:

1) Wages and salaries, other incomes identical to them:

a/ Wages, salaries, bonuses, allowances and other income identical to them, earned in a form of main job at the economic entity and organization by a labor contract;

b/ Wages, salaries, bonuses, allowances and other income identical to them from the work and service rendered to economic entity, organization and individuals under contract outside the main job;

c/ Pension, additions to pension and allowances;

2) Income from self-employment;

3) Income from proprietorship;

4) Income from side business;

5) Capital gains and income from rights:

a/ Income from sale of dividend, securities, immovable property and other income identical to them;

b/ Dividend, income of a participant, interest on bank deposits, income from leasing assets and other income identical to them;

6) Author's awards;

7) Other income except exempted from taxes by this law.

Article 5. Definition of taxable income
The definition of taxable income is the following:

1) Salaries, wages and other income identical to them:

a) Taxable income is the total income indicated in subparagraph 1(a) of paragraph 1 in Article 4 of the present Law;

b) Taxable income is the total income indicated in subparagraph 1(b) of paragraph 1 in Article 4 of the present Law;

c) Taxable income is the total income of pension, additions to pension and allowances;

d) In the case of service and work done by a family or a group of people on a contract, taxable income is defined by themselves, if it is impossible to define for each individual involved;

2) Income of self-employed and proprietorship.

a) Taxable income of self-employed is defined by deduction of expenses confirmed by the documents from income as (raw material, basic or auxiliary materials, semi-processed products, steam, water, energy, fuel, petroleum, spare parts, package, wrapping material's expenses, payment for leasing and interest on bank loan, purchase price of goods, social insurance premiums);

b) Taxable income of proprietorship is defined by deduction of expenses confirmed by the documents from income as (raw materials, basic or auxiliary materials, semi-processed products, steam, water, energy, fuel, petroleum, spare parts, package, wrapping material's expenses, payment for leasing and interest on bank loan, payment for work and service done by the other, depreciation and social insurance premiums and business trip expenses), transport facilities and vehicles tax excise tax and payment for use of natural resource;

Wages distributed to a member of family are deducted according to the ratio of paid social insurance premiums as expenses.

In the case when self-employed person uses a position from his produced products and furnished service for his family needs, those products and service are not deducted as expenses;

c) Taxable income of private farms running pig, poultry, rabbit, and bees, other farms identical to them; agricultural and other private businesses, is defined in conformity with paragraph 2(a) and (b) of the present Article by themselves.

In the case when taxable income is impossible to be defined or was not defined by a taxpayer, the Tax Administration should define taxable income taking into consideration the natural, climatic and market conditions and the assessment of similar products;

3) Capital gains and income from rights:

a) Taxable income is defined by deduction of purchase price or cost of construction connected with, from income of sale of immovable property;

b) Taxable income is defined by deduction of initial purchase price of, from sale of shares;

c) Taxable income is defined by the total income from leasing property;

4) Taxable income is defined by the total income from dividend, the total income of a participant and the total income from interest on bank deposits;

Article 6. Definition of Taxable Income of a Private Cattle-breeder
Taxable income of a citizen from livestock production, who has private cattle's is defined by shifting herds of livestock to cattle herd.

A cow, a horse, a camel is each equal to a cattle herd; and 9 goats and 7 sheeps are equal to a cattle herd.

Article 7. Tax Rate
1. The taxes imposed on the total income indicated in subparagraph 1-4 and 7 of paragraph 1 in Article 4 of the present Law and the total income of leasing property at the following rates:

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Amount of annual

taxable income Tax rate

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24001-48000 2%

48001-96000 480 tgs plus 5% of the amount of income exceeding 48000 tgs

96001-192000 2880 tgs plus 15% of the amount of income exceeding 96000 tgs

192001--384000 17280 tgs plus 27% of the amount of income exceeding 192000 tgs

384001-768000 69120 tgs plus 40% of the amount of income exceeding 384000 tgs

768001 and above 222720 tgs plus 45% of the amount of income exceeding 768000 tgs

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2. The government shall change the amount of annual taxable income considering the growth of the price level.

3. The State Ih Hural shall define the amount of taxes imposed on taxable income of a citizen, who works abroad and gets salaries from the State, on the proposal of the Government.

Article 8. Special rates of taxes
The special rates of taxes are the following:

1) Remuneration for scientific, literary and art work, rights of patent and author, invention, innovation and design, estimated at up to 60000 tugriks, shall be taxed at the rate of 5%;

2) In the case when shares are sold through the Stock Exchange, tax on income is 10%; otherwise is 2% of the sale;

3) Tax on income from the sale of immovable property is defined at the following rates considering the period of the property used by its owner:

a) up to 2 years use - at 40%

b) 2-5 years use - at 30%

c) over 5 years use - at 20%

4) Tax on dividend from shares and income of a shareholder is 15%; and tax on income from interest on bank deposits is (?).

5) Tax on income from livestock production of a cattle-breeder, who has private cattle as defined in Article 6 of the present Law is 50 tugriks for a herd.

Article 9. Tax Exemption and Credit
1. The following income of taxpayer is exempted from taxes:

1) Salaries, wages, pension allowances and other income identical to them up to 24,000 tgs;

2) Allowances for temporary loss of working ability, except pregnancy and birth allowances, awards for the orders of "Hero Mother" I and II grade, pension for Veterans of the People's Revolution, allowances for participant of the Khalkhin Gol War in 1939 and Liberation War in 1949, allowances fro child support;

3) The State Prize and honorary prizes of Mongolia, an award for a people's and honor title owner, an award for innovation, subsidies for a blood donor and milk, expenses for business trip;

4) Pension and refund for damage of the insured;

5) Refund on the government loan and income on interest;

6) Prices for labor protection clothes, milk, and cost of uniform and other supply cost identical to them in conformity with the legislation, grants guaranteed to citizen by the Government and local government, Red Cross Society and foreign countries for an accident and an urgent condition;

7) 2 herds for a member of a family which has private livestock. In the case of loss of a number of taxable livestock in the tax year because of climate catastrophes, an accident and infectious diseases, the tax on them will be exempted on the basis of the appropriate documents;

8) Income from manufacturing artificial organs, prosthetic appliances and techniques for disabled persons by self-employed persons and proprietors.

2. Income of a self-employed person or a proprietor is credited against taxes at the following rates:

1) Income from manufacturing cereals, flour and bread is credited by 50%;

2) If disabled persons of group I and II for being deaf, blind and without leg who are employed in proprietorship, the tax on income is reduced by ratio of disabled persons in its working forces.

Article 10. Imposition and Payment of Tax
1. Economic entity and organization should impose taxes on income indicated in subparagraph 1, 6, 7 of paragraph 1 in Article 4 of this law at the rates defined in paragraph 1 in Article 7 and in paragraph 1 in Article 8 of the present Law.

Income indicated in subparagraph 1 "b" of paragraph 1 in Article 4 of the present Law will be withheld at the rate of 3.5%.

When economic entity and organization gives any income to a citizen, they will assess and withhold taxes on that income and will fix these taxes in the assessment list.

Each economic entity and organization will withhold taxes on income given to a citizen worked on a labor contract at the end of every month.

These taxes are assessed annually and fixed in the assessment list.

Withholding taxes imposed on income of a citizen by economic entity and organization should be transferred to the budget on or before the 10th of the next month.

If the amount of withheld taxes is less than 1,000 tgs, withheld taxes will shift to the next month payment.

2. When each commercial bank calculates interest on deposits of a citizen, it should withhold and transfer taxes to the budget at the rates indicated in paragraph 4, Article 8, of the present Law.

3. When each economic entity and organization gives dividends on shares and income of a participant, they shall withhold and transfer taxes to the budget at the rates indicated in paragraph 4, Article 8, of the present Law.

4. Stock exchange will withhold and transfer taxes on income from sale of shares traded through stock exchange to the budget at the rate indicated in paragraph 2, Article 8, of the present Law.

5. A taxpayer should assess his/her income and pay his/her taxes in the following terms:

1) A citizen, who has private livestock, pays taxes on or before the 25th of July and on or before the 15th of December (twice a year) dividing his/her taxes, to the budget. Tax Administration may come into an agreement with a taxpayer to pay his taxes in advance.

A citizen, who has private livestock, should pay his/her taxes to the budget of local government in the territory of which the cattle are located;

2) Within 10 days after the sale - taxes on income from sale of immovable property;

3) On or before the 15th of the first month of the next quarter - taxes on income from lease of property;

4) Within 10 days after the sale - taxes on income from sale of shares outside the Stock Exchange;

5) A self-employed person and a proprietor shall calculate taxes on their income each quarter at the rate indicated in paragraph 1 in Article 7 and pay their taxes to the budget;

6) If a citizen gets income from more than one economic entity and organization indicated in subparagraphs 1- 4 and 7, and in subparagraph 5 (b) of paragraph 1, Article 4, of the present Law, he/she will pay his/her taxes annually by self-assessment list based on his/her income.

Article 11. Term of Submitting Return
1. The tax return indicated in paragraphs 1, 2, 4 and subparagraphs 3, 5 of paragraph 5, Article 10, of the present Law should be submitted on or before the 10th of February of the next year and the tax return indicated in paragraph 3, Article 10, should be submitted on or before the 10th of April of the next year to the Tax Administration.

2. Tax return indicated in subparagraphs 2, 4 of paragraph 5, Article 10, should be submitted within 15 days after the tax payment.

3. Income and self-assessment list indicated in paragraph 6, Article 10, of the present Law should be paid and submitted on or before the 1st of February of the next year to the Tax Administration.

4. The Minister of Finance will approve forms for returns on income, taxes and self-assessment.

Article 12. Entry into Force
1. The present Law comes into force from January 1, 1993.

2. The provision for taxation of interest income on bank deposits shall come into force from January 1, 1995.

Chairman, State Ih Hural of Mongolia N. Bagagbandi
General Secretary, Office of the State Ih Hural of Mongolia N. Rinchindorj
November 23, 1992 Ulaanbaatar City

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(Source:www.indiana.edu)


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