The excise tax on alcoholic beverages and tobacco, the personal income tax, and the social insurance fee will be increased from January 2018 as part of the International Monetary Fund (IMF) agreement.

Earlier this year, Parliament decided to raise seven taxes following Mongolia’s enrollment into the IMF’s extended fund facility. The first round of tax boost came into effect on May 1, mandating a savings interest tax, and increasing excise on tobacco and automobiles. The second round of tax increase on fuel, social insurance fee, and electric, hybrid and low-emission vehicles became effective on July 1.

 Excise tax on alcohol and tobacco

Excise taxes on alcoholic products and tobacco will be added by 10 percent in 2018, five percent in 2019 and another five percent by 2020.

The customs tax will increase by an average of 1,450 MNT per liter of spirit, 3,190 MNT per liter of eight to 25 percent alcohol, 6,380 MNT per liter of 26 to 40 percent alcohol, and 14,355 MNT per liter of alcohol with more than 40 percent alcohol content. In other words, the tax on alcoholic beverages will upsurge by an average of 320 MNT to 19,140 MNT per liter.

As for tobacco, the current excise tax on tobacco is five percent. It will be gradually topped to 30 percent as it is lower than limits set by the World Trade Organization, according to the Ministry of Finance.

The excise tax on tobacco will be raised to 20 percent starting from January 1, 2018 and to 26 percent in 2019.

Personal income tax and social insurance premium rate

 

 

 

 

 

The employee and employer social health insurance (SHI) contributions will be increased by one percent next year.

As part of the IMF agreement, the employee and employer SHI contributions will be raised by 0.5 percent in 2019 and 2.5 percent in 2020, and voluntary contributions by 2.5 percent by 2020.

The Mongolian government and IMF believe that these changes could significantly increase the cost of employing individuals in Mongolia.

It was estimated that SHI contributions will generate 117.1 billion MNT to 293.6 billion MNT from 2018 to 2021.

Employer contribution rates currently vary from 11 percent to 13 percent depending on the industry as shown in the table below.  There is no capping of the employer contribution.

Current From January 1, 2018 From January 1, 2019 From January 1, 2020
11 to 13 percent  (not capped) Two percent increase: 13 to 15 percent (not capped) One percent increase:  14 to 16 percent (not capped) Two percent increase: 16 to 18 percent (not capped)

Employee contribution rates will increase as detailed below.

Current From January 1, 2018 From January 1, 2019 From January 1, 2020
10 percent (capped) 12 percent 13 percent 15 percent

On the other hand, a tax burden of up to 25 percent will be imposed on the personal income tax or any other type of personal income from January 1, 2018. To be more specific, people classified as having a “high-income” will see the most increases in their taxes. People earning a monthly salary of up to 1.5 million MNT will pay the regular 10 percent income tax, those earning 1.5 million MNT to 2.5 million MNT will pay 15 percent income tax, those with monthly salary ranging between 2.5 million MNT and 3.5 million MNT will pay 20 percent income tax, and those earning higher than 3.5 million MNT a month will pay 25 percent income tax.

At present, Mongolia has around 900,000 registered taxpayers, 95 percent of which will pay less than 10 percent in income tax and the rest higher than 10 percent starting next year.

 Below is the tax rate on annual personal income tax.

Annual taxable income Personal income tax rate
Up to 18 million MNT 10 percent
18 million MNT to 30 million MNT 1.8 million MNT + 15 percent of earnings exceeding 18 million MNT
30 million MNT to 42 million MNT 3.6 million MNT + 20 percent of earnings exceeding 30 million MNT
42 million MNT and above Six million MNT + 25 percent of earnings exceeding 42 million MNT

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