MAJOR AMENDMENTS AND CHANGES TO TAX LAWS

MAJOR AMENDMENTS AND CHANGES TO TAX LAWS

On June 18, 2026, the State Great Khural (Parliament) passed draft laws to amend the General Tax Law, the Corporate Income Tax Law, and the Value Added Tax Law. Below is an overview of the key changes.

Key Changes:

• CIT (Corporate Income Tax) converted to a 3-tier progressive scale.
• VAT withholding threshold increased to 400 million MNT.
• "Tax Compliance Rating" system introduced.
• Option to defer import VAT at the border introduced.
• CIT reporting deadline changed to the last day of the given month.
• Effective CIT rate for SMEs with income up to 2.5 billion MNT reduced down to 1%.

1. Key Amendments to the General Tax Law

• A "Tax Compliance Rating" has been introduced to assess the extent to which a taxpayer complies with tax legislation. This rating is expressed as a numerical score up to 100 and is classified as "Excellent," "Good," "Average," or "Poor" based on the evaluation. This rating will be utilized for deferring Value Added Tax payments and providing tax advisory services. For instance, a tax withholding agent evaluated as "Good" or higher may, upon request, exercise the right to defer VAT payments for a period of one month.
• After the enforcement of tax debt, the amount of tax debt to be collected directly without dispute from the funds entering the taxpayer’s bank account in the future has been capped so as not to exceed 80 percent of the respective income.
• Penalties and late payment interest specified in a reassessment act currently under dispute resolution by the Dispute Resolution Council or the court shall not be claimed from the taxpayer until the complaint is finalized.
• No late payment interest shall be calculated on unpaid taxes during the period between the issuance of an audit order/assignment and the final decision.
• The total amount of late payment interest has been capped so as not to exceed 50 percent of the overdue tax or the tax illegally collected by the tax authority.

2. Key Amendments to the Corporate Income Tax Law

The tax rates, which previously consisted of 2 tiers, have been expanded to 3 progressive tiers. These tiers apply an incremental rate structure to taxable income exceeding each threshold as follows:

Annual Taxable Income

Rate

0 – 6 billion MNT

10%

6 – 10 billion MNT

15% (applied to income between 6–10 billion, added on top of 600 million MNT)

Over 10 billion MNT

25% (applied to income above 10 billion, added on top of 1.2 billion MNT)

In other words, when applying a 15% tax rate to income between 6 billion and 10 billion MNT, the 600 million MNT tax for the first 6 billion MNT is added, and 15% tax is levied on the portion exceeding 6 billion MNT.

• Legal entities operating in sectors other than: exploration, extraction, utilization, transportation, and sale of minerals and radioactive minerals; cultivation of tobacco plants, production, and import of alcohol and tobacco; and production of petroleum products and import of all types of fuel, having an annual sales revenue of up to 2.5 billion MNT, shall be taxed at 10%, and 90% of the tax assessed and paid under the final tax return shall be discounted and refunded by law. This effectively reduces the actual tax burden down to 1%.
• Taxable income of legal entities registered in the virtual zone under the Law on Supporting Information Technology Industry shall be 100% (fully) exempt from income tax.
• The useful life of servers, high-performance specialized processors, and supercomputers designed for high-speed storage and automated processing of large volumes of data shall be depreciated over a 3-year period.
• Amendments were made to monthly, quarterly, and annual tax reporting deadlines, changing the deadline to the last day of the respective reporting month.

3. Key Amendments to the Value Added Tax Law

The threshold for a VAT withholding agent, previously set at 50 million MNT, has been increased to 400 million MNT.

Deduction Rights:

• If a non-resident taxpayer in Mongolia is paid for work or services via non-cash methods (bank transfer), the paid VAT shall be deducted from the VAT payable to the state budget based on payment receipts and contracts.
• When deducting VAT paid for purchases related to official ceremonies/hospitality, employee training, professional development, specialization, and employee benefits from the tax payable, a restriction clause was added limiting the deduction to a maximum of 15% of the average monthly salary expense over the preceding continuous 12 months for employees under employment contracts or special-condition employment contracts as defined by the Labor Law. (Note: Under the CIT Law, hospitality and ceremonial expenses are separately capped at not exceeding 5% of the total amount).

Deferral of Tax Payments Based on Compliance Rating:

• If a tax withholding agent evaluated as "Good" or higher in tax compliance rating submits a request, the VAT payment deadline may be deferred by one month. If fully paid afterwards, the taxpayer may pay the remaining tax in equal monthly installments over an additional two months. The same principle applies to import taxes.
• If the deferred tax is not paid in full within the timeframe, if the compliance rating drops, or if e-receipts are found to be unissued, the deferral decision shall be automatically invalidated without dispute, resulting in a tax debt. In such cases, the tax withholding agent shall lose the right to request another deferral for a period of one quarter.
• Requests to defer tax payment deadlines shall be reviewed and resolved within five business days after receipt by the relevant tax or customs authority.

Option to Defer VAT on Goods Imported Across the Border:

• The VAT Law introduces the possibility of deferring VAT on goods entering through the border. An import declarant evaluated as "Good" or higher in tax compliance rating may, upon request, defer import VAT by one month. After fully paying the deferred tax, a subsequent request allows the remaining VAT to be split and paid in equal monthly installments over two months. However, the amount of tax eligible for deferral shall not exceed the monthly average of VAT paid by the importer for similar goods in the previous quarter. If not paid in full within the deadline, the deferral decision becomes void, resulting in tax debt. The request shall be resolved by the relevant customs authority within five business days.

Simplified Tax Regime:

A tax withholding agent with sales revenue of up to 400 million MNT over 12 consecutive months, or a newly established entity not involved in restricted activities, may voluntarily opt into the simplified tax regime. If sales revenue reaches 400 million MNT during the tax year, the taxpayer will transition to the standard regime starting the following month and will not be eligible to apply for the simplified regime for the next 12 months.

Implementation Date: The above amendments shall enter into force and be complied with starting January 1, 2027.