|Statute of limitation
||The statute of limitations for the MTA to assess taxes on a taxpayer expires five (5) years from the due date of the return.
||The new law has reduced the statute of limitation to four (4) years.
|Pre-court dispute resolution mechanism
Currently, there are two layers of Tax Dispute Settlement Council (Councils) in Mongolia being a) Capital City [Ulaanbaatar] Council (or Municipal Council) and the Council under General Department of Taxation (GDT) which is the highest level of Council whose decision is final decision at all taxing authority level. Following is the appeal procedures:
- Taxpayers firstly submit complaints to its corresponding Municipal or Capital City Council if the corresponding tax authority (of the taxpayer who submits complaints) is district tax office or municipal tax office.
- If the taxpayer disagrees the decision made by Capital City Council (or Municipal Council), taxpayer has the rights to appeal to Council under GDT whose decision shall be final at pre-court level.
The two-level appeal procedures have been eased and there will be only one level of Council at MTA level for tax dispute cases as pre-court dispute resolution requirements.
Under the new rules, the Council may decide to suspend the case and instruct MTA to re-audit the case if certain conditions are met. Such re-audit shall be conducted by higher level of tax authority and shall not last more than 3 months. In case new assessment act is released, the original assessment act shall be cancelled.
A 10% cash deposit is required by taxpayer to proceed with a dispute case and such deposit shall be capped at MNT100 million.
|Tax payment extension
||Taxpayers may request extension for the payment of taxes up to 60 days under current rules.
||Taxpayers may request extension for the payment of taxes and MTA may allow extension up to two years period. In case of extensions, a security or guarantee arrangement may b required.
|Tax collection and enforcement
||Please refer to new changes on the right.
New law has introduced a rule whereby tax debt shall be firstly collected over any other debts of taxpayers.
Secondary tax obligation. In cases where a taxpayer (who has outstanding tax debt) has transferred its assets to others free of charge or below market value or cancelled a receivable due from others, the asset receiver or the person whose debt is forgiven shall be obliged to pay the transferor’s tax obligations.
A tax debt shall be collected immediately from a taxpayer if it is considered that such tax debt is at risk. MTA shall be entitled to start operations to collect these tax from the taxpayer via special procedures.
- MTA shall be permitted to collect tax debts by expropriating the properties of the taxpayers and disposing them via auctions for cash. MTA can freeze bank accounts and instruct banks to transfer funds for the tax debt collection. MTA may instruct third party a tax payment on behalf of the taxpayer in the event the taxpayer has outstanding tax due and receivable from the third party. Various legal procedures are available for MTA to enforce tax collection.
- MTA may put restriction on taxpayer’s auto vehicle as an initial reminder of paying tax debt. MTA also may request immigration office to put a ban on the taxpayer (non-Mongolian) if the amount of tax debt is more than MNT20 million and he or she has no assets to cover his or her tax debts.
|Sanction on tax non-compliance
||The law imposes a 30% automatic base penalty for non-reported taxes as a general rule. In addition to that, a daily interest is charged.
||A 30%-50% penalty shall be imposed on tax non-compliances for failure of tax obligations or tax withholding obligations in addition to due taxes.
|General Anti-Avoidance Rule (GAAR)
||No formal GAAR in the tax laws
||New GTL has introduced a general anti-avoidance rule (GAAR) which is a set of broad principles-based rules within a country’s tax code designed to counteract the perceived avoidance of tax. GAAR is a concept within law that provides the taxing authority a mechanism to deny the tax benefits of transactions or arrangements believed not to have any commercial substance or purpose other than to generate the tax benefit(s) obtained.
|Base Erosion and Profit Shifting (BEPS) related changes
||Mongolia has not yet addressed BEPS related changes.
||New tax laws have introduced various changes related to OECD’s BEPS project reflecting recent global tax developments. EY will issue separate alerts on these changes.