MINISTRY OF FINANCEMONGOLIATO ENHANCE COOPERATION IN
TAX MATTERSBETWEEN JAPAN AND MONGOLIAFOCUSMINISTRY OF FINANCEMONGOLIAWHAT ARE THE GENERAL SOCIOECONOMIC CIRCUMSTANCES?
HOW CAN WE SUPPORT THE BUSINESSACTIVITY AS GOVERNMENTS?
WHAT ARE KEY AREAS IN THE FIELD OF
TAXATION?
WHAT GOOD POLICIES COULDMONGOLIA LEARN FROM JAPAN?
WHAT ARE THE NEXT STEPS?

BASICSMINISTRY OF FINANCEMONGOLIAJAPAN‣Land area ~ 377.9 thousandsquare kilometers‣Population ~ 125.8x3
7
millionx300‣the GDP ~ 5.09 trillion
x7
USD‣the GDP per capita ~ 33.9
thousand USD*Source: 2023 estimation, World BankMONGOLIA‣Land area ~ 377.9 thousandx300
square kilometers‣Population ~ 3.4 million‣the GDP ~ 15.15 billion
USD‣the GDP per capita ~ 4.5
thousand USD

SOCIO-ECONOMIC SITUATIONMINISTRY OF FINANCEMONGOLIA

20
15
10

JAPAN

ECONOMIC GROWTH

HIGH SPEEDGROWTH ERA/10% average
growth/MEDIUM SPEED GROWTH
ERA/5% average growth/

5

LOW-SPEED GROWTH
ERA/5% average growth/

Recent years

0

COVID-19
-5

1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023

-10

*Source: Ministry of Economy, Trade and Industry Japan

SOCIO-ECONOMIC SITUATIONMINISTRY OF FINANCEMONGOLIA

JAPAN

driven by thefollowing sectors:

Tertiary
69% of GDP/wholesale and retail trade,transportation, finance,
healthcare, and education/

Secondary
29% of GDP/manufacturing, construction,and utilities/

Primary
1% of GDP/agriculture, forestry, andfishing/*Source: 2022 data, Cabinet Office of Japan

Automotive: Mitsubishi Motors, Suzuki Motor Corporation,
Subaru, Daihatsu
Electronics: Sony, Panasonic, Toshiba, Hitachi, Fujitsu, NEC,
Sharp, Canon, Nikon
Machinery: Hitachi Construction Machinery, Mitsubishi Heavy
Industries, IHI Corporation, Kawasaki Heavy Industries
Chemicals: Toray, Asahi Kasei, Sumitomo
Mitsubishi Chemical Holdings, Showa Denko

Chemical,Pharmaceuticals: Takeda Pharmaceutical, Astellas Pharma,
Daiichi Sankyo, Eisai, Shionogi & Co.
Food and beverage: Kirin Holdings, Asahi Group Holdings,
Suntory Holdings, Sapporo Holdings, Ajinomoto
Retail: Seven & i Holdings, Aeon, Ito-Yokado, Takashimaya,
MatsuyaBanks: Mitsubishi UFJ Financial Group, Sumitomo Mitsui
Financial Group, Resona Holdings, Sompo Holdings
Trading companies: Mitsubishi Corporation, Mitsui & Co.,
Sumitomo Corporation, Marubeni Corporation, Itochu
Corporation

SOCIO-ECONOMIC SITUATIONMINISTRY OF FINANCEMONGOLIABUDGET DEFICIT

JAPAN

120
100
80

NATIONAL
DEBT

60
40

261%

20

Of GDP/2022/

0

Revenue (trillion yen)*Source: Ministry of Finance, Japan

Expenditure (trillion yen)Japan has been running a budget deficit for many years.
This is due to:• the aging population• the rising cost of social security• slow economic growth.

SOCIO-ECONOMIC SITUATIONMINISTRY OF FINANCEMONGOLIAECONOMIC GROWTH
20

15

CENTRALIZED ECONOMIC ERA/5% average growth/

TRANSITION ERA/3% average growth/

MONGOLIASTRONG GROWTHBASED ON MINING
SECTOR
/6.5% average growth/

10

5

0

COVID-19

-5
-4.6
-10

1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021

-15

*Source: National statistics office, Mongolia

SOCIO-ECONOMIC SITUATIONMINISTRY OF FINANCEMONGOLIAMONGOLIA
Mongolian economy
is driven by thefollowing sectors:

23% of GDP
13% of GDP
9% of GDP
7% of GDP
*Source: National Statistics office, Mongolia

Mining: Oyu Tolgoi LLC, Erdenet , Erdenes Tavan Tolgoi,
Energy Resource, "Mongolian Gold MAK" LLC, "COAL"
LLC
Banks: TDBM, Khaan Bank, Has Bank, State Bank,
Golomt Bank
Retail: Nomin, Tavan bogd group, Global Electronics,
Bodi Electronics, MCS Electronics
Food and beverage: UFC group, Talkh Chikher LLC,
Apu Company
Airlines: MIAT Mongolian Airlines, Aero Mongolia, Eznis
Airways,Communications:
UnitelCompany,
MobicomCompany, Ondo LLC, Skytel LLC, G-Mobile LLC
Manufacturing: Gobi Cashmere, Gumuda, Buyan,
Michel & Amazonka, Henry PhamPetrolium companies: Shunkhlai"Sodmongol Group" LLC, MT LLC

LLC,

NIC

LLC,

SOCIO-ECONOMIC SITUATIONMINISTRY OF FINANCEMONGOLIAMONGOLIABUDGET DEFICIT
20,00015,00010,0005,000

NATIONAL
DEBT

0

~40%

Of GDP/2022/
Revenue

Revenue

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

-5,0004.1 Billion USD

Deficit

Mongolia has started to have deficits. This is due to:• Increase in budget expenditure /infrastructure development/• Unstable economic conditions /commodity prices & volume,
exchange rate/*Source: Ministry of Finance, Mongolia

RECENT ECONOMIC POLICYMINISTRY OF FINANCEMONGOLIAJAPANEXPANSIONARYMONETARY POLICYINVESTING IN
INFRASTRUCTURE
REFORMING THE LABORMARKETPROMOTING INNOVATIONREDUCING INEQUALITYMONGOLIA
INDUSTRIALIZATIONINFRASTRUCTURE
DEVELOPMENTDECENTRALIZATIONDIGITAL
TRANSFORMATIONPROMOTION OF TOURISMREVIEW OF SOCIO-ECONOMIC SITUATIONMINISTRY OF FINANCEMONGOLIAFOREIGN DIRECT INVESTMENT TO MONGOLIA/MILLION USD/

7000

10.0%

8.9%

6000

9.0%
8.0%

5000

7.0%

6.6%

6.3%

6.0%

4000

4.4%

3000

3.0%

2000

1000

0.9%

2.4%

4.4%

5.0%

3.9% 3.9%

4.0%

2.7%
2.2%

0

3.0%
2.0%
1.0%
0.0%

2011

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
OthersJapan
Percentage

 Japan on
averageinvests ~110
million USD
1. Canada
2. US
3. China
4. Singapore
5. JapanREVIEW OF SOCIO-ECONOMIC SITUATIONMINISTRY OF FINANCEMONGOLIA

JAPAN INVESTMENTMONGOLIAN GROWING SECTORSINVESTMENT OUTSIDE OF JAPANReal growth average/last 10 years/

IT

Mining

3.1%

MANUFACTURING

Agriculture

8.5%

Manufacturing

6.5%

Construction

8.3%

Information
technology

7.8%¥3.2 trillion (US$27 billion), accounting for 14.3% of total
investment.
/semiconductors,
telecommunications
equipment, and software/¥2.8 trillion (US$23 billion), 12.7% of total investment.
/automobiles, electrical machinery, and machinery/

FINANCE AND INSURANCE¥2.7 trillion (US$22 billion), accounting for 12.2% of total
investment.
/banking, securities, and insurance/

LOGISTICS AND TRANSPORTATION¥2.2 trillion (US$18 billion), accounting for 10.1% of total
investment.
/transportation equipment, logistics, and warehousing./

REAL ESTATE¥1.8 trillion (US$15 billion), accounting for 8.5% of total
investment.
/office buildings, hotels, and retail properties /Finance /Banking/ 16.4%

MINISTRY OF FINANCEMONGOLIAWHAT CAN WE DO AS
GOVERNMENTS TO PROMOTEECONOMIC ACTIVITY?

GOVERNMENT AGREEMENTSMINISTRY OF FINANCEMONGOLIAWHAT BILATERAL AGREEMENTS DO GOVERNMENTS ESTABLISH TO PROMOTE ECONOMIC COOPERATION?

Bilateral(BIT)

Investment

TreatyEconomic Partnership
Agreement (EPA)

Double Taxation Avoidance
Agreement (DTAA)

Bilateral Currency Swap
Agreement

Free Trade Agreement(FTA)

Mutual Recognition
Agreement

Preferential Trade Agreement

Air Services Agreement

Customs Union AGREEMENTIntellectual Property Rights
Agreement

GOVERNMENT AGREEMENTSMINISTRY OF FINANCEMONGOLIA

LIST OF BILATERAL AGREEMENTS BETWEEN JAPAN AND MONGOLIA
‣
‣
‣
‣
‣
‣
‣
‣
‣
‣
‣
‣
‣
‣

Establishment of diplomatic relations /1972/
Agreement on establishing cultural relations /1974/
Agreement on economic cooperation /1977/
Intergovernmental Trade Agreement /1990/
Intergovernmental Agreement on the Acceptance of Volunteers
Overseas in Japan /1991/
Agreement on air communication /1993/
Intergovernmental Protocol on the reception of Japanese veteranvolunteers /1993/
Agreement on mutual protection and promotion of investments/2001/
Agreement on technical cooperation /2003/
Memorandum of defense cooperation /2012/
Medium-term program of strategic partnership (2013-2017) /2013/
Inter-Governmental Agreement on Cooperation in the Implementationof Training in the Field of Humanitarian Aid /2015/
Economic Partnership Agreement /2015/
Medium-term Program of Strategic Partnership (2017-2021) /2017/

MINISTRY OF FINANCEMONGOLIAWHAT ABOUT TAX?

GENERAL TAXMINISTRY OF FINANCEMONGOLIAJAPANTAX REVENUE /65.6 TRILLION YEN/

MONGOLIATAX REVENUE /12 TRILLION MNT~ 480 BILLION YEN /Royalties
14.0%*Source: 2022 data, MOF JAPAN & MOF MONGOLIAINCOME TAXMINISTRY OF FINANCEMONGOLIA

JAPAN
LAWS

 Income tax law
 Corporation tax law
 Act on special measures on
concerning taxation

KEY FEATURESMONGOLIA
LAWS Entity income tax law
 Individual income tax law
 General tax law
KEY FEATURES

 Income classification
 Income classification and Different rates for residence vstaxation basis for individuals are
Non residence /10, 20%/
similar Various sector-based tax
 No income classification for
incentives
corporate
 Simple anti-avoidance rules
 Unformal rates
 Tax incentives for innovationetc
employment,
Focus: International
taxation aspects of income taxationMINISTRY OF FINANCEMONGOLIATAKEAWAY FROM JAPANESE EXPERIENCEDOMESTIC INCOME TAX ISSUESGROUP TAX REGIME: MINIMIZE TAX IMPACT ON BUSINESS DECISIONS REDUCE COMPLIANCE BURDEN FOR MAJOR GROUPS

R&D INCENTIVE:
TAX POLICY ITEMS PROMOTE INNOVATION KEEP PATENTS & OTHER INTANGIBLES INSIDE JAPANCLEAR GUIDELINES FOR TAX FILING & POLICY CHANGES: USEFUL MATERIALS FOR COMPLICATED RULES
 CERTAINTY FOR INVESTORSADMINISTRATIONNATIONAL TAX COLLEGE: USEFUL MATERIALS FOR COMPLICATED RULES
 CERTAINTY FOR INVESTORSJAPAN: RECENT TAX REFORMSMINISTRY OF FINANCEMONGOLIA

2021
THEME:ECONOMICREVITALIZATION/POST COVID-19/• DIGITAL
TRANSFORMATION (DX)

• REFORM OF R&D
TAX CREDIT• WAGE HIKE
• DEDUCTION LIMIT FOR
LOSS CARRYFORWARDS• TAX MEASURES FORGLOBAL FINANCIAL
CENTER

2022
THEME: INCREASEINVESTMENT AND
PROMOTEINNOVATION• TO PROMOTE WAGE
INCREASES• TO PROMOTEOPEN‐INNOVATIONACTIVITIES• TO PROMOTE 5G
NETWORKTECHNOLOGY• TAX CREDIT FOR
HOUSING LOANS

2023
THEME:
INTERNATIONALTAXATION AND
BUSINESS ACTIVITY• EXPAND NISA
• THE STARTUPECOSYSTEM• VEHICLE TAXATION• R&D TAX CREDIT• INTERNATIONALTAXATION/IMPLEMENTATION OF
IIR/• STRENGTHENING
DEFENSE CAPABILITIESMONGOLIA: RECENT TAX REFORMSMINISTRY OF FINANCEMONGOLIA

THE RAPIDLY SHIFTING ECONOMIC CONDITIONS IN MONGOLIA
MADE IT IMPERATIVE TO REFORM THE TAX SYSTEM
Covered tax laws:

GENERAL TAX LAWCORPORATE INCOME
TAX LAWPERSONAL INCOME
TAX LAWApproved: 22 March 2019
Effective from: 01 January 2020

Delay in theimplementation of the tax
reform due to COVID-19
pandemic and lockdowns.

MAIN PURPOSE
CREATING FAVORABLETAX ENVIRONMENT FORSMESDIGITALIZATION OF TAXSERVICES
IMPLEMENTATION OF
INTERNATIONAL BESTPRACTICES AGAINST TAXAVOIDANCETRADE FACILITATIONMONGOLIA: RECENT TAX REFORMSMINISTRY OF FINANCEMONGOLIACREATING FAVORABLE TAX ENVIRONMENT FOR SMES ANDSIMPLIFYING TAX SERVICES TO REDUCE TAX COMPLIANCE BURDEN
REDUCED TAX RATES, SIMPLIFIED TAXRETURNANNUALTOTAL
INCOME:<50 mil
MNT<300 mil
MNT<1.5 bil MNT

1%

1 time

1%

2
time
Tax
2file
time

10%
(90% tax
refund)Tax file

Tax file

PROMOTION OF INVESTMENT
DEPRECIATION FOR FIXED ASSETSLOSS CARRY FORWARD
TRANSFER OF MINING
LICENSE OR LAND RIGHTS

45

2
years
30%
years

25

years
4 years

10%

TO ACTIVATE THE FINANCIAL MARKET

10%

5%

Income of bonds or other financial instruments bydomestic banks
Tax on dividends and interest income of theinvestors /shares traded at foreign or domestic
stock market/

OTHER BENEFITSTAX GRACE PERIODSTATUTE OF
LIMITATION

24

2 months
5 years

MORE TAX DEDUCTIBLES1ABILITY TO CORRECT TAX RETURNS

year

years
years

MINISTRY OF FINANCEMONGOLIAMONGOLIA: RECENT TAX REFORMSACTIONS IMPLEMENTED THROUGH DOMESTIC TAX LAWSACTION 3 - Controlled foreign company
ACTION 4 - Limitation on Interest deduction
ACTION 5 - Harmful tax practices
ACTION 8-10 - Transfer pricing
ACTION 13 - Country by country Reporting

ACTIONS RELATED TO TAX TREATYACTION 6 - Prevention of tax treaty abuse
ACTION 7 - Permanent establishment status
ACTION 14 - Mutual Agreement procedure
ACTION 15 - Multilateral instrument /MLI/OTHER ACTIONSACTION 1 - Tax Challenges Arising from
Digitalization
ACTION 2 – Neutralizing the effect ofhybrid mismatch arrangements
ACTION 11 - BEPS data analysis
ACTION 12 - Mandatory Disclosure Rules

MONGOLIA: OTHER TAX CHANGES /2020-2023/

MINISTRY OF FINANCEMONGOLIATAX POLICY TO PROMOTE DECENTRALIZATION /2022/
BUSINESS INCOME TAX CREDITTAXPAYERS WHO HAVE HEADQUARTERS IN
REMOTE REGIONS AND OPERATE LOCALLY

500km away from capital – 50% ITC
1000km away from capital – 90% ITC

TO PROMOTE INFRASTRUCTURE
DEVELOPMENT:HEAT AND ENERGY
PROJECTS /after 2023/

First 3 years – 90%
Second 3 years – 50%

NEW CONSTRUCTION IN LOCAL AREA:EMPLOYMENT IN REMOTE REGIONS
Company operates its main businessactivities outside of the Ulaanbaatar
Employed local individual from Labor
Stock exchange
Mining sector excluded

SUPER
DEDUCTION
Salary of that particular
Employee can be
deducted at 120% fortax purposes

Non mining company

Linear depreciation for 15
years for fixed assets

MOVING OPERATIONS TO LOCAL AREA:
NON-MINING COMPANY

MOVING COST
SUPERDEDUCTED AT 50%

MINISTRY OF FINANCEMONGOLIAINTERNATIONAL TAXATIONISSUES WHEN DOING BUSINESSINTERNATIONAL TAXATION ISSUESMINISTRY OF FINANCEMONGOLIAMONGOLIAJAPANTAX TREATY

•
•
•
•
•

TRANSFER PRICINGCFC
DOMESTIC ANTI-AVOIDANCE RULESSIMPLIFICATION OF TAX FILINGRISK ANALYSISEXCHANGE OFINFORMATION

•
•
•
•

IMPLEMENTATION OF IIRREVISED CFC RULESTP RULES ON INTANGIBLESPILLAR 1 (tbd)

MUTUAL AGREEMENTPROCEDUREASSISTANCE ON
COLLECTION OF TAXESMINISTRY OF FINANCEMONGOLIATAX TREATYMINISTRY OF FINANCEMONGOLIA

Treaty network

JAPAN TAX TREATY NETWORKKEY FEATURES• Follows OECD model
convention /favors
residence taxation/• Different withholding rates• In line with BEPS ACTIONS
/MLI/
FACTS

• 72 conventions/applicable to 79
jurisdictions/ as of
October 1, 2023
• Mongolia is one ofthe priority countries

MONGOLIA TAX TREATY NETWORKMINISTRY OF FINANCEMONGOLIA

1. TREATY NETWORK
RussiaUK

TurkeyFranceGermany

BelgiumIndonesiaЧех

KuwaitSwitzerland

India

Malaysia

Vietnam

PolandKazakhstan

Kirgizia

1994

1995

1996
1997
1998
1999
2000
- Unilaterally terminated tax treaties

MAJOR
DEVELOPMENTS• Mongolia has
extensive tax treaty
network incomparison to its
size• 4 tax treaties
were unilaterally
terminatedby Mongolia• Negotiation of new
tax treaties has
been halted

China

South Korea

1991

1992

1993

THROUGH
JOININGTHE MLI, MONGOLIAWOULD COMPLY WITH
ACTION 6 AND 14 WITH
MOST OF ITS TAXTREATIES (18)Netherlands

Luxembourg

UkraineBulgaria

CanadaItaly

North Korea

UAE

Singapore

BelarusAustria

2001

2002

2003

2004

• Mongolia has become the 100th country
to join the MLI in October 2022 during
14th BEPS annual meeting• Ratification of the MLI by the Parliamentis expected to occur by the end of 2023

TAX TREATYMINISTRY OF FINANCEMONGOLIA

Japan and Mongolia
Foreign tax credit
Double tax treaties (DTTs):• Eliminate double taxation• Enhances tax cooperation• Exchange of information• Mutual Agreement
procedure• Assistance on collection oftaxes

CAPITAL FLOW IS UNEVEN
Source rule VS Residence rule

TAX COLLABORATION
Improve administrative cooperation

TO FIND A COMMON GROUND AND MUTUAL UNDERSTANDING

MINISTRY OF FINANCEMONGOLIA

TRANSFER PRICINGJAPANESE EXPERIENCEMINISTRY OF FINANCEMONGOLIA

Transfer pricing rules
introduced in April 1986

wereFirst to introduce the advanced
pricing agreements in 1987
Amended in 2005 to include
consolidated companies
Amended in 2019 to align with
the OECD TP Guidelines.

LEGISLATION The Act on Special Measures concerning
Taxation (ASMT) (Article 66-4~)
 Order for Enforcement of ASMT (Article 3912~)
 Regulation for Enforcement of ASMT(Article 22-10~)
OTHERS
 Commissioner’s Directive on Interpretationof the ASMT Commissioner’s Directive on the Operationof Transfer Pricing (Administrative
Guidelines)

MINISTRY OF FINANCEMONGOLIA

JAPANESE EXPERIENCE

THE JAPANESE TRANSFER PRICING GUIDELINES ARE GENERALLY ALIGNED WITH THE
OECD TRANSFER PRICING GUIDELINESREQUIRE TAXPAYERS TO CONSIDER THE FUNCTIONS PERFORMED, ASSETS USED, AND
RISKS ASSUMED BY EACH PARTY TO A CONTROLLED TRANSACTION WHEN
DETERMINING THE ARM'S LENGTH PRICETO USE THE MOST APPROPRIATE TRANSFER PRICING METHOD, TAKING INTO ACCOUNTALL OF THE RELEVANT FACTS AND CIRCUMSTANCESTHE JAPANESE GUIDELINES ALLOW TAXPAYERS TO USE THE PROFIT SPLIT METHOD IN
CERTAIN CIRCUMSTANCES, EVEN IF THE CONTROLLED TRANSACTION DOES NOTINVOLVE THE TRANSFER OF ALL OR SUBSTANTIALLY ALL OF THE RISKS AND
REWARDS OF THE BUSINESS ACTIVITYMINISTRY OF FINANCEMONGOLIA

JAPAN: TRANSFER PRICING STATISTICSMINISTRY OF FINANCEMONGOLIAMONGOLIAN EXPERIENCE: TRANSFER PRICING

1. POLICY• Article 37–39 of the general tax law• TP guideline /Minister’s order/• TP documentation guideline /Generalcommissioner’s order/
Key issues:

1.Broad definition of related party:• one person or more persons and entities may
directly or indirectly participate in the assets,
supervision and management of 2 or morelegal entities to influence the terms andeconomic results of the transactions
2.Related party transactions are subject toarms lengths principle:• Domestic transfer pricing guideline /Minister’sorder, General commissioner’s order/• OECD transfer pricing guideline may apply if
domestic guideline is insufficient
3.Transfer pricing documentation:• Annual TP report• Local file
• Master file
• CbC report for qualifying MNEs

2. IMPLEMENTATION• TP audits require extensive capacity building within
the tax authority• MTA estimates over 400 million USD in tax
revenue increase since the introduction of TP in 2020

3. STATISTICS

2020

2021

2022

Local file

5,268

5,487

5,291

Master file

5,185

5,443

5,241

Annual TP report 54,763

54,69065,166

Total tax
returns file65,231

131,338

75,698

2020

2021

2022

0

$288 M$2.4 M

4. TP AUDIT
Concluded
Pending>$200 M

MINISTRY OF FINANCEMONGOLIATAKEAWAY FROM JAPANESE EXPERIENCELESSONS TO BE LEARNEDTHE IMPORTANCE OF DOCUMENTATION:
 Strict documentation requirements
CREATING ACCEPTABLE ARMS-LENGTH RANGES: Certainty for taxpayers
TRANSFER PRICING RISK ANAYLYSIS: Certainty for taxpayers
THE IMPORTANCE OF ADVANCE PRICING AGREEMENTS(APAS):
 Certainty for taxpayers
THE NEED FOR COOPERATION BETWEEN TAX AUTHORITIES: Exchange of information
 Mutual agreement procedureMINISTRY OF FINANCEMONGOLIACONTROLLED FOREIGNCOMPANY RULESJAPAN:CFC

MINISTRY OF FINANCEMONGOLIA

GENERAL OUTLINEKEY FEATURES• Basic rules are same as
Mongolia• Various tests forcomprehensive classification
JAPANESE EXPERIENCE• important for Japan asbusinesses make massive
investments outside JAPAN• ~10 thousand CFCs
registered in Japan as ofMarch 2023.
• the total profits of CFCs
registered in Japan was¥1.5 trillion (US$13 billion).

MONGOLIAN EXPERIENCE: CFC

MINISTRY OF FINANCEMONGOLIA

2. IMPLEMENTATION

1. POLICY
Related provisions:• Article 31 of corporate income tax law• Provision 5.4 of corporate income tax law• Procedure on CFC tax issues /General commissioner’sorder/Key issues:
1.CFC is a foreign entity that satisfies 3 or more of thefollowing conditions:• Over 50% of the shareholders of the company are based in
Mongolia• Over 50% of shareholders’ meetings are held in Mongolia• Accounting books and financial documents are kept inMongolia• More than 25% of the Board Directors or those who
perform their Directors’ rights are a resident of Mongolia• At least 60% of the total revenue is earned from a source inMongolia

2.CFC will be deemed as a Mongolian resident andpassive income will be taxed in Mongolia• Dividends, interest, royalties, etc.
3.Beneficial owner of the CFC /company orindividual/ residing in Mongolia will file the tax return.

••

No CFCs have been registered or filed a tax return
Exchange of information would be essential for the
next stages in registration of taxpayers and expanding
the base

3. STATISTICS
2020

2021

2022

Total registeredtaxpayers000

Total tax returns filed

0

0

0

Tax authority has identified 58 potential CFCs
from ORBIS database and are notifying
the beneficial owners in Mongolia to register:• Mostly companies managing mining operations in Mongolia• Foreign entities in Singapore, Luxembourg, Switzerland, andHong Kong

MINISTRY OF FINANCEMONGOLIAEXCHANGE OFINFORMATIONJAPAN:EXCHANGE OF INFORMATIONMINISTRY OF FINANCEMONGOLIA

GENERAL OUTLINELEGAL FRAMEWORK• Convention on Mutual
Administrative
Assistance in Tax• Matters
BILATERALAGREEMENTS/11 conventions applicable
to 11/
JAPANESE EXPERIENCE
EOIR

2019

2020

2021

SEOI

2019

2020

2021

Request

613

638

639

Receipt

394

351

448

Requested

233

251

128

Provision

106

106

73

AEOI

2019

2020

2021

Receipt

2,216(K)2,019(K)2,600(K)Provision

1,345(K)1,338(K)1,419(K)THE IMPLEMENTATION OF THE CONVENTION IN MONGOLIAMINISTRY OF FINANCEMONGOLIARATIFICATION OF THE
CONVENTION ON MUTUALADMINISTRATIVEASSISTANCE IN TAX
MATTERS1EXCHANGE OF INFORMATION ON REQUESTSPONTANEOUS EXCHANGE OF INFORMATION/January 3, 2020/
MONGOLIA WHEN
DEPOSITING ITS INSTRUMENT
OF RATIFICATION OF THE
CONVENTION, DECLAREDTHAT IT RESERVES NOT TO
IMPLEMENT SOMEELEMENTS OF IT

AUTOMATIC EXCHANGE OF INFORMATIONSIMLTANEOUS TAX EXAMINATIONSTAX EXAMINATIONS ABROAD

2ASSISTANCE IN RECOVERYRECOVERY OF TAX CLAIMSRESULT

1 Exchange of information for tax
purposes
2 Joint tax examinations with foreign
tax authorities
3 Ensure transparency

EXCHANGE OF INFORMATION FOR TAX PURPOSES

3SERVICE OF DOCUMENTSSERVICE OF DOCUMENTS

THE IMPLEMENTATION OF EOIR IN MONGOLIAMINISTRY OF FINANCEMONGOLIA

Requests received

Requests sent
30

27

25

25
20
15

2
1

5

5

0

0
2020

$2.5m
73
5

3

3

16

10

4

2021

2022

2023

PARTNERSHIPS
Taxes recovered

Total requests
sent
Total requests
received

1

1

0
2020

2021

2022

2023

COOPERATION WITH JAPAN

2
1

Requests sent to Japan (2022 &2023)
Withdrawn request (2023)

AEOI IMPLEMENTATIONMINISTRY OF FINANCEMONGOLIA

112
2020

JURISDICTIONSIMPLEMENTED THE
AEOI STANDARDKAZAKHSTAN

2021

ALBANIA2023

THAILANDMALDIVESECUADORMONGOLIA IS PREPARING TO
INITIATE ITS FIRST AEOICOMPLIANT EXCHANGESMONTENEGROCONCLUSIONMINISTRY OF FINANCEMONGOLIAGREAT POTENTIAL FOR INCREASING
ECONOMIC ACTIVITYESTABLISHING TAX TREATY IS THE
NEXT BIG STEPMONGOLIA SHOULD KEEP
IMPROVING ITS TAX SYSTEMENHANCE GOVERNMENTCOLLABORATION ON TAX MATTERSMINISTRY OF FINANCEMONGOLIATHANK YOU FOR YOUR
KIND ATTENTION