The  Mongolian Parliament has begun accepting comments on draft amendments, changes, and revisions to tax laws to meet the goals set out in the "Alsyn Kharaa-2050" long-term development policy, approved by Order No. 52 of 2020. In this update include:

• General Tax Law;
• Corporate Income Tax Law;
• Personal Income Tax Law;
• Value Added Tax Law.

          In 2019, the Tax Package underwent reform with primary objectives including the promotion of entrepreneurship and small to medium-sized enterprises, digitization and simplification of tax procedures, enhancement of measures against tax evasion and avoidance, and facilitation of trade. To implement the required amendments to the Tax Laws, a comprehensive consultative process was conducted from January 27 to April 12, 2025, featuring 187 meetings and discussions and engaging over 11,000 taxpayers. The resulting draft incorporated approximately 176,000 comments received on previous versions.
       The draft laws are scheduled to be discussed in this fall session and, if approved, is expected to come into effect on January 1, 2027.

General Tax Law (GTL)

       The General Tax Law of Mongolia was first adopted in 1992 and were revised in 2008 and 2019. In terms of the current revisions:

• Expand the scope of tax advisory services and prevent taxpayers from tax related risks;
• Make the tax environment flexible and fully implement international standards;
• Improve the transparency, openness, and professionalism of the Dispute Resolution Board and improve dispute regulation processes;

Key changes

• There have been changes to the structure of the Dispute Resolution Board and the dispute resolution process. Significant attention has been devoted to ensuring the independence and qualifications of the Dispute Resolution Board members. Regulations have been established to govern the criteria for Board selection and to promote transparency and efficiency in the dispute resolution process.  Additionally, regulations were added to extend the deadline for submitting Internal Transfer Pricing and General Transfer Pricing reports to the tax authorities until June 30 of the following year.
• There has been a change in the grace period requirements. It is important to note that, under the current legislation, taxpayers may request an extension of the tax debt payment period only if their activities are terminated by decision of any party. However, the proposed amendment specifies that such extensions will be granted solely when operations are terminated "by decision of the competent authority." Additionally, while taxpayers who have incurred significant losses for three consecutive years currently qualify for a grace period, the amendment proposes reducing this requirement to two consecutive years. The criteria for determining the amount of loss will be further clarified in accordance with the Companies Act.
• In order to expand the scope of tax advisory services and prevent taxpayers from tax risks, new regulations have been developed regarding the level of tax compliance and tax advisory services provided to taxpayers.
• Recent penalty regulations provide additional details. The regulations specify when the penalty calculation period concludes and establish a maximum penalty amount. They also modify the liability and sanctions for individuals who violate tax laws, reducing their extent.

Law on Corporate Income Tax

          The Corporate Income Tax Law was first adopted in 1993 and revised in 2006 and 2019. The main goals of the 2019 reform were to support small and medium-sized businesses, digitize tax operations, and introduce innovative international tax principles into domestic legislation. Current changes include:

• Current changes include:
• Encourage enterprise activities;
• Facilitate sustainable business operations;
• Lower taxes for small and medium-sized enterprises;
• Establish a tax environment that supports business activity.

Key changes

• Revisions are planned for corporate income tax thresholds and brackets. Businesses with annual sales revenue between 1.5 and 2.5 billion tugriks will be subject to a 10 percent tax rate and will be eligible to receive a refund of 50 percent of the tax paid in the previous year in the following year. Additionally, proposals include expanding access for small and medium-sized enterprises to a simplified, lower-tax regime and raising the sales revenue threshold to 400 million tugriks.
• Depreciation and amortization charges for newly purchased assets are calculated from the date the asset is put into use, and the deadline for submitting tax returns has been extended.
• Businesses have been allowed to deduct expenses for goods, works, and services purchased for training, professional development, and professional development of their employees, as well as for employee supplies. In addition, expenses made in the form of non-cash payments related to the activities of taxpayers abroad will be deducted without requiring e-documents.
• Insurance compensation for damages from hazardous events can be tax-exempt, and legally accumulated government funds may qualify as deductible expenses. Regulations also clarify ambiguous tax law issues and ensure transparent, accessible information for taxpayers.

Law on Personal Income Tax

         The Personal Income Tax Law was first adopted in 1993 and revised in 2006 and 2019. The 2019 reform was developed and adopted with the main goal of supporting individuals and sole proprietors who earn income from micro-trade, work, and services, reducing their tax-related costs, and simplifying reporting.

The current amendments and changes aim to:

• Bring the income tax environment in line with the principles of fairness in the tax system;
• Bring it in line with common international standards;
• Direct economic growth to working citizens who create wealth;

Key changes

• Tax breaks will be extended to all citizens irrespective of income, including individuals with income from various activities. Along with an increase in the overall amount of tax breaks, a threshold has been established for tax breaks related to income that is equivalent to tuition fees.
• A hierarchical tax system or a system of increasing taxes based on income has been developed and introduced. The term “small business, work, or service provider” has also been removed from the law.
• The discount for first-time residential home purchases has been updated to provide up to 15 million tugriks, an increase from the previous maximum of 6 million tugriks. This adjustment aligns with regional development policies focused on decentralization, promoting energy-efficient and environmentally friendly buildings, and encouraging the adoption of renewable energy technology to reduce heat loss in ger areas.
• New regulations have been introduced concerning the electronic pre-processing and submission of tax returns, as well as simplified procedures for reporting and payment. These changes are intended to provide taxpayers with additional options for filing and paying taxes.

Law on Value Added Tax

             Mongolia first implemented value-added tax in 1998, and the tax law was revised in 2007 and 2015. It has been 10 years since the last revision.

          A revised draft of the law was developed due to the need to reduce the burden of value-added tax on citizens' consumption and to fully address the issues facing businesses.

The revisions aims to:

• Make tax policy more flexible and understandable;
• Create a uniform and fair tax system for all and support the activities of enterprises;
• Reduce the tax burden on citizens and households;
• Reduce income inequality and increase the rationality and accessibility of tax exemptions;
• Improve tax coverage;
• Reduce shadow economies;

Key changes

• The regulation includes a step-by-step increase in the value-added tax paid by citizens. For example, the amendment provides for a 100 percent refund of VAT paid for purchases up to 500,000 tugriks per month, a 50 percent refund of VAT paid for purchases between 500,000 and 1,000,000 tugriks, and a 20 percent refund for purchases above that amount.
• Under current law, individuals and legal entities involved in activities and earning income are designated as tax withholding agents if their sales revenue reaches 50 million tugriks or more. The amendment removes this requirement and stipulates that only individuals conducting specific activities will be considered tax withholding agents. Additionally, notary services are excluded from taxation.
• The range of products exempt from customs duties has been significantly narrowed, affecting items such as domestic agricultural goods, local meat and by-products, export cashmere, and domestic dairy products.
• Taxpayers with annual sales up to 400 million tugriks can use a simplified regime, featuring quarterly reporting and payment. Responsible taxpayers may defer domestic and import VAT payments for up to two months under new regulations.
• Restrictions on VAT deductions have been removed, and new regulations now permit the direct deduction of VAT paid on the acquisition of fixed assets as well as on goods and services obtained from non-residents. Additionally, provisions have been established to promote favorable tax conditions, including the option to incorporate VAT into the prices of non-cash transactions and to allow such amounts to be deducted from the total tax payable.

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