Mongolian Economic Entity Income Tax Law Comparison of Existing Law and Version Passed 29 June 2006

Transcription

1 Taxpayers Cmpanies, cperatives, partnerships, freign cmpanies and jint ventures in Mnglia Freign cmpany representative ffice Banks, credit r insurance cmpanies and similar entities Nn-gvernmental rganizatins Religius rganizatins State and municipal legal entities Nn-resident legal entities Any legal entity ther than thse described abve Dmestic and freign cmpanies, partnerships, and cperatives Enterprises with state and lcal prperty registered with the state register that cnduct business activities Resident Nt defined Ecnmic entity frmed within the laws f Mnglia Freign ecnmic entity with headquarters in Mnglia Nn-resident Freign ecnmic entity cnducting activities via a representative ffice: Permanent lcatin thrugh which the taxpayer carries ut cmmercial activities Cnstructin site, installatin prject r related supervisin activities Equipment, machinery r cnstructin r related supervisin activities fr the purpse f searching fr natural resurces Lcatin fr cmmerce r service activities Freign ecnmic entity cnducting activities via a representative ffice: Branch Plant Trade/service prvider Oil well, gas well, mine Freign ecnmic entity therwise earning incme in Mnglia Residency Effects Representative ffice incme is taxed nly n incme earned in the territry f Mnglia Freign incme f ther taxpayers nt specifically discussed Resident taxpayers are taxed n dmestic and freign incme Nn-resident taxpayers are taxed nly n incme earned in the territry f Mnglia Related Parties Nt discussed, althugh there is a general prvisin fr revaluing transactins priced at belw market value Related parties are thse: Hlding 20+% f cmmn stck; r With right t receive 20+% f dividends; r With right t appint 20+% f management r therwise able t determine plicies CIT Cmparisn Matrix ENG.dc - 1 -

2 Transactins valued based n similar transactins between nn-related parties (benchmark prices) Methdlgy fr establishing benchmark prices apprved by Ministry f Finance Grss Taxable Incme Deductible Expenses Incme frm: Main and auxiliary manufacturing, wrk r services Cmmercial banks and credit transactins Insurance activities Brkerage and stck exchange activities Pawnshp Dispsal f immvable prperty Dispsal f mvable prperty Ryalties Sharehlder dividends Lan interest Prperty leases Cmmissins and gains frm intermediary activities Ltteries, quizzes and games Interest n bank depsits r accunt balances Freign currency exchange Other grss taxable incme Salaries, wages, additinal wages All types f inventries Scial and health insurance premiums Amrtizatin and depreciatin Regular maintenance Bnus allcated fr cnstructin budgets Freign currency exchange lsses Incme frm activities: Prductin/sale f wrk and services Sale f rights Sale f shares and securities Quizzes, gambling and ltteries Sale /rental f ertic materials Ertic perfrmances Incme in kind Sale f intangible assets Technical, management, cnsulting r ther services Interest and penalties fr nnperfrmance and cmpensatin fr damages Realized freign currency exchange rate gain Other similar incme Incme frm prperty: Leases f mvable and immvable prperty Ryalties Dividends Interest Incme frm sale f mvable and immvable prperty All types f inventries Salaries, wages and additinal wages n which scial and health insurance premiums and persnal incme tax are impsed Scial and health insurance premiums Emplyee bnuses, incentives and allwances fr husing, transprt, meal and fuel CIT Cmparisn Matrix ENG.dc - 2 -

3 Wrk and services perfrmed by thers Rents Interest expense frm lans Administrative expenses fixed and set by wners Taxes: Excise Immvable prperty Transprt vehicles Land and natural resurce fees and payments Lss reserve funds f financial institutins Mandatry insurance premiums Depreciatin/amrtizatin f nn-current assets Regular maintenance Lan interest if lan brrwed t carry ut primary and auxiliary prductin, wrk and services Realized freign currency exchange lsses Wrk and services perfrmed by thers Lease payments Interest prtin f finance lease payments Subscriptins t prfessinal publicatins Mandatry/vluntary insurance premiums Taxes: Excise Immvable prperty Windfall prfits Custms duties Transprt vehicles Land and natural resurce fees and payments Accumulated lan risk funds f savings/lan cperatives, ther cperatives, banks and nnbanking financial institutins Advertising Emplyee training and retraining Seed, fertilizer, livestck and animal fdder Transprtatin Shrt-lived and lw-value assets Labr safety expenses Cmmunicatin, statinery, cleaning and security Mitigatin f disaster damages in cmpliance with Disaster Management Law Nrmal wear and tear f inventry Envirnmental rehabilitatin funds established in accrdance with Minerals Law Limited Marketing and training t 10% f net taxable incme Immvable asset maintenance t 2% f bk value CIT Cmparisn Matrix ENG.dc - 3 -

4 Deductible Expenses Interest payments t related parties if exceeding 30% f creditr capital Mvable asset maintenance t 5% f bk value Vluntary insurance premiums t 15% f taxable incme Per diem t twice the civil servant nrm Interest n investr s debt exceeding three times investment Nn-deductible Expenses Depreciatin and Amrtizatin Undcumented expenses Investment Capital repair expenses (capitalize and amrtize) Bnuses, allwances Gifts and dnatins Receptin expenses Subscriptins t peridicals Husing, transprtatin, meals and fuel allwances Nrmal wear and tear n inventries Interest n verdue lans Fines and cmpensatin fr damages t thers Interest paid t interdependent legal entities Straight-line methd in accrdance with schedule Buildings: 40 years Machinery and equipment: 10 years Special purpse machinery and equipment, including mining equipment: 5 years Other assets: 10 years Land and inventries nt depreciable Fr all taxpayers: Expenses incurred in cnnectin with exempt incme Undcumented expenses Expenses subject t withhlding when tax was nt withheld Finance lease payments Fines and penalties Interest payments t cntrlling resident individual Fr nn-resident taxpayers: Expenses incurred ut f Mnglia Management/administrative expenses nt related t prducing incme Straight-line methd in accrdance with schedule Buildings: 40 years Machinery and equipment: 10 years Cmputers and sftware: 3 years Other assets: 10 years Intangible assets: 10 years r useful life Depreciable value includes balance f maintenance expense ver limitatins Mining prductin and scial infrastructure assets ver useful life Unused assets are assumed sld Includes assets under financial lease Interest during cnstructin is capitalized CIT Cmparisn Matrix ENG.dc - 4 -

5 Land and inventries nt depreciable Rates 15% n first 100 millin MNT/ 30% n balance Dividends 15% Ryalties 10% Ltteries, quizzes and games 40% Vide/audi rental and sale 40% Dispsal f immvable prperty 2% f grss Bank depsit interest 15% Nn-resident legal entity s Mnglia surce incme 20% Dividends Lan interest and fees Ryalties, rents Technical and ther services Freign entity s incme transferred abrad 20% Religius rganizatins 20% Exempt Incme Gvernment bnd interest Member/supprter dues and dnatins t NGOs. Scial insurance and care funds Incme f the Bank f Mnglia Incme f public benefit NGOs Expenses f business entities fr cnstructin r maintenance f rads Freign il cmpanies with prductin-sharing cntracts Freign investr s reinvested dividends Tax Credits Prductin f cereals, ptates and vegetables 50% exempt Prprtinate credit based n the percentage f disabled emplyees t ttal number f emplyees 10% n first 3 billin MNT/ 25% n balance Dividends 10% Ryalties 10% Quizzes, gambling and ltteries 40% Sale /rental f ertic materials 40% Ertic perfrmances 40% Gift r dispsal f immvable prperty 2% f grss Interest 10% Sale f rights 30% Freign entity s incme transferred abrad 20% Nn-resident Mnglian incme 20%, including: Dividends Interest Ryalties, rents, leases Payment fr management and administrative expenses Gds and services sld in Mnglia Gvernment bnd interest Oil prductin-sharing incme fr nn-resident taxpayers Cperative incme fr intermediary services Prductin f cereals, ptates and vegetables, milk, fruits and berries and fdder plants 50% exempt 10% Investment tax credit with 3 year carryfrward prvided investment is: Nn-current asset CIT Cmparisn Matrix ENG.dc - 5 -

6 Fr purpse f starting new prductin r expanding r renvating existing prductin in pririty sectrs Made subsequent t 1 January 2007 Prprtinate credit based n the percentage f disabled emplyees t ttal number f emplyees Freign tax paid if cuntry is party t a duble taxatin treaty with Mnglia Lss Carryfrward Nt discussed Tax statement lss carried frward t tw subsequent years: Annual amunt used may nt exceed 50% f taxable incme in the tax year Lst must be incurred subsequent t 1 January 2007 Tax Hlidays: 10 Freign invested cmpanies: years 100%, 5 Pwer and thermal plants Transmissin netwrks Airway and engineering cnstructins Telecmmunicatins netwrks Cnstructin f energy surces and netwrks Renvatin f technlgy Incme t the extent f entity s investment in: Energy surces and netwrks Technlgy renvatin Tax Hlidays: 5 Freign invested cmpanies: years 100%, 5 Oil and cal Metallurgy Chemical prductin Machinery Electrnics Gas fuel activities Tax Hlidays: 3 Entity with freign investment that exprts mre than CIT Cmparisn Matrix ENG.dc - 6 -

7 50% f prductin years 100%, 3 Tax Hlidays: 1 Applicable t specified aimag develpment activities year 100%, 2 Tax Hlidays: 1 Applicable t specified aimag develpment activities year 100%, 2 years 75% Tax Hlidays: 2 Applicable t specified aimag develpment activities year 100%, 1 General Taxes due mnthly in advance by the 25 th Quarterly tax statements due by the 20 th f fllwing mnth Annual tax statements due 10 February Tax statements must be prepared n accrual basis Taxes due mnthly in advance by the 25 th Quarterly tax statements due by the 20 th f fllwing mnth Annual tax statements due 10 February CIT Cmparisn Matrix ENG.dc - 7 -