Mongolian Personal Income Tax Law Comparison of Existing Law and Version Passed

Current Law

16 June 2006

Taxpayer

• Citizen or foreign citizen in Mongolia

 • Stateless person or non-resident with Mongolian source income

• Citizen or foreign citizen in Mongolia

• Stateless person or non-resident with Mongolian source income

Residency Effects

• Resident (183 + days in 12 months) with a fixed place of work in Mongolia, or an official of the Mongolian government posted overseas: All income regardless of source

• Non-resident: Mongolian source income only

• Resident (183 + days in 12 months or possesses permanent home in Mongolia) or an official of the Mongolian government posted overseas: All income regardless of source

 • Non-resident: Mongolian source income only

Gross Income

• Salaries, wages and similar income from primary and additional jobs

• Pensions and allowances

• Proprietorship income • Sale of inventories and raw materials

• Capital gains and income from rights

• Sales of immovable property and similar income

• Dividends and shareholder gains • Leases and similar income

• Copyrights, patents and similar income

• Interest on loans, bank savings and similar income

 • Scientific, literary, artistic, design activities and similar income

• Artistic and sports performances

• Gambling, quizzes, lotteries and similar income

• Other income not exempted by this law

• Salary, wages and other similar income:

    o Includes vacation, allowances and gifts paid to employee or family member,   rewards and bonuses from foreign and domestic corporate entities, organizations, individuals or other bodies

• Income from activities:

 o Professional services, production and trade income, and irregular business income • Property income: o Leasing, royalties, dividends, interest, rental, patent and similar income

 • Property sale: o Immovable and movable property, and shares and securities

• Indirect income, being goods and services paid by employer not having a direct connection with the performance of duties:

    o Transport either at no or discounted charge or cash allowance for same

    o Housing utilities, housing charges or fuel costs, or cash allowance for same

    o Cash allowances for meals or entertainment o Provision of domestic services, e.g. cleaner, driver, gardener

     o Repayment of debts owed o Loan interest if less than market rates o Other income similar to above

Related Party Transactions

Not defined

• Transactions between related parties shall be valued based on standards prices between non-related parties

• Related parties are father, mother, child, grandfather, grandmother, grandchildren, brother, sister, child, spouse, in- law or party having custody of above

Determination of Taxable Income

• Salary, wages and similar income from primary job is reduced by the amount of social and health insurance deducted from total income

• Salary, wages and other similar income from other jobs is taxable in total

• Proprietorship and farm income reduced by most associated business expenses if documented

• Private pensions and allowances in total

• Capital gains in total

• Other income in total

• Total salary, wages and similar income is reduced by the amount of social and health insurance deducted from total income

• Allowances, gifts, rewards and bonuses from foreign and domestic entities, and other remuneration are taxed in total

• Income from activities is reduced by most associated documented business activities

• Leasing income reduced by associated expenses

• Royalty, dividend, interest and rental income in total

• Sale of immovable property in total

• Sale of movable and other property reduced by documented purchase costs

• All other income in total

Exempt Income

• Pension, benefit, and other payments issued in accordance with legislation

• Payments associated with state medals and awards

• Blood donor subsidies

• Expenses for business trip

• Insurance proceeds

• Government interest income

• Safety clothing and supplies

• Foreign citizens and family members in missions and consulate offices

• Expense of building or buying residential dwelling

• Tuition at rate of domestic tuition fees

• Donations to education fund and NGOs

• 50% of the income from producing cereals, potatoes and vegetables

• Pension, benefit, and other payments issued in accordance with legislation

• Blood donor subsidies

• Per-diem

• Insurance proceeds

• Government interest income

• Safety clothing and supplies

• Emergency grants from others

• Foreign citizens and family members in missions and consulate offices

• Individuals having over 50 percent disability

• Payments associated with state medals and awards

• Cost of constructing or building first-time housing unit up to 30 million MNT

• Indirect income from employer:

      o In-house meals during working hours if provided to all employees

   o Lounges and other services at remote work sites o Transportation to/from remote work sites

      o Interest on housing loans at less than market rates o Medical treatment costs

Herding Income

• Calculated in accordance with number of livestock

• Tax rates vary by aimag and are applied to the number of sheep equivalents

    o Large animals at 5 sheep

    o Goats at 1.5 sheep

• Tax credit of twenty sheep per family member

• Documented cost of well built at herdsmans expense

• Calculated in accordance with number of livestock

• Tax rates vary by aimag and are applied to the number of sheep equivalents:

     o Large animals at 5 sheep

     o Goats at 1.5 sheep

• Tax credit of twenty sheep per family member

• Documented cost of well built at herdsmans expense

Tax Rates

• 10% to 2,400,000 MNT annually, 20% to 4,800,000, 30% of excess

• 20% for temporary or non-resident taxpayers

• 15% for dividends and interest

• 10% for gambling and similar income, artistic and sports performance, licensing

• 10% for income from provision of services performed overseas

• 3% of total sales of inventory other than raw wool, cashmere and hides

• 2% for sale of immovable property

• 5% for cultural, artistic, scientific or copyright income up to 5,000,000 MNT, 10% on excess

• 10% flat rate for earned income, income from activities and income from property

• 40% for gambling, quizzes and lotteries

• 2% for sale of immovable property

• 5% for artistic or sports performance

• 5% for scientific, literary, artistic, product design or invention and similar income

Tax Credits

• 48,000 MNT annually

• 50% of the income from producing cereals, potatoes, or vegetables

• 84,000 MNT annually

• Foreign tax credit in accordance with international treaties

• 50% of the income from producing cereals, potatoes, vegetables, fruit or fodder plants