Employers in Mongolia have a legal obligation to make several social insurance contributions on behalf of their employees. These contributions are crucial for the funding of Mongolia's social welfare programs.

Social Security Contributions

Employers are required to contribute to several social security funds:

• Pension Fund: Employers contribute 8.5% of the employee's gross salary for pension benefits.
• Health Insurance Fund: Employers contribute 2% of the employee's gross salary toward health insurance.
• Employment Benefit Fund: Employers contribute 1% of the employee's gross salary toward various employment benefits programs.
• Unemployment Fund: Employers contribute 0.2% of the employee's gross salary for unemployment benefits.
• Industrial Accident and Occupational Disease Insurance Fund: The contribution to this fund varies depending on the industry's risk classification. Rates range from 0.8% to 2.8% of the employee's gross salary.

Total Employer Social Security Contributions

The total mandatory social security contribution from the employer ranges between 12.5% and 14.5% of an employee's gross salary, depending on the industry's risk classification.

Payment Procedures and Deadlines

Social security contributions must be paid on a monthly basis to the General Agency for Social Insurance. The deadline for payment is the 10th of the following month. Penalties and interest charges may be applied for failure to meet payment deadlines.

Importance of Compliance

The accurate and timely calculation and payment of social security contributions is the responsibility of employers. Non-compliance can lead to significant legal and financial consequences.

In Mongolia, a progressive personal income tax (PIT) system is used. All taxpayers benefit from a standard deduction applied to their gross income before their taxable income is calculated.

Employee Social Security Contributions

Employees in Mongolia are required to contribute to various social insurance funds:

• Pension Fund: Employees contribute 8.5% of their gross salary.
• Health Insurance Fund: Employees contribute 2% of their gross salary.
• Employment Benefit Fund: Employees contribute 1% of their gross salary.
• Unemployment Fund: Employees contribute 0.2% of their gross salary.

The total mandatory social security contributions for employees in Mongolia add up to 11.7% of their gross salary.

Other Potential Deductions

Employees may have an additional deduction of 1% of their salary towards a mandatory health insurance scheme.

Important Considerations

Employees are typically responsible for filing their own tax returns, however, an employer may assist with calculation and withholding of PIT. It's important to keep yourself updated on any changes to income tax brackets and rates, as these can be adjusted periodically.

In Mongolia, a Value-Added Tax (VAT) is imposed on the supply of most goods and services within the country. It's crucial for businesses operating in Mongolia to understand how VAT applies to services.

Standard VAT Rate

The standard VAT rate in Mongolia is currently 10%. This rate applies to most taxable services.

Zero-Rated Services

Certain services qualify for a zero-rated VAT, meaning no VAT is charged on those services. These include:

• Exported services
• International transportation services
• Services related to international air travel
• Services provided to non-residents who don't reside in Mongolia

VAT Exemptions

Specific services are exempt from VAT in Mongolia. Some key exemptions include:

• Financial services
• Insurance services
• Medical and healthcare services
• Educational services
• Social care services

VAT Registration

Businesses providing taxable services must register for VAT if their annual turnover exceeds a specific threshold.

Reverse Charge VAT

Services received from non-resident businesses that are used in Mongolia are generally subject to VAT under a reverse charge system. This means the Mongolian business receiving the service is responsible for calculating and paying VAT.

Compliance and Reporting

VAT-registered businesses must file regular VAT returns, typically monthly or quarterly. Timely filing and accurate record-keeping are essential to avoid penalties.

Tax incentives in Mongolia are designed to encourage business growth and investment in specific sectors. Companies with an annual taxable income under MNT 1.5 billion can qualify for a reduced Corporate Income Tax (CIT) rate of 10%, compared to the standard 25%. Additionally, businesses engaged in sectors such as agriculture, manufacturing, and food production may be eligible for tax credits of up to 90% of their tax liability.

Reduced Corporate Income Tax (CIT) Rate

Companies with annual taxable income under MNT 1.5 billion qualify for a reduced CIT rate of 10%. The standard CIT rate in Mongolia is 25%.

Tax Credits

Businesses engaged in designated sectors, such as agriculture, manufacturing, and food production may be eligible for tax credits of up to 90% of their tax liability.

Investment Deductions

Businesses undertaking qualifying investments may be able to deduct a percentage of the investment amount from their taxable income.

Free Trade Zones (FTZs)

FTZs offer businesses various tax benefits. Companies operating within FTZs can benefit from CIT exemptions for a specified period. Importation of raw materials, machinery, and equipment into FTZs may be exempt from customs duties.

Technology Parks

Businesses operating in designated technology parks can access incentives such as reduced CIT rates and tax holidays for a prescribed period.

Industry-Specific Incentives

Incentives are available for businesses investing in renewable energy projects, including tax breaks, and expedited licensing procedures. Businesses operating in agriculture and livestock production may qualify for tax exemptions and reduced tax rates. Tax incentives are also available for businesses investing in the tourism sector.

Important Considerations

Tax incentives in Mongolia often have specific eligibility criteria and conditions. It's essential to determine if your business qualifies before making investment decisions. Tax incentives can be subject to revision, so always consult up-to-date sources of information.