Corporate Income Tax
Scope
CIT tests taxable income, deductions, rates, losses, dividends and withholding.
Core rules
- Resident companies are taxed on worldwide income; non-residents on Mongolian-source income.
- Standard CIT rate is 10%; a 25% rate applies to income from mining and oil operations.
- Taxable income is accounting profit adjusted for non-deductible items, depreciation and tax incentives.
- Fines, penalties, excessive entertainment and non-arm's-length payments are generally non-deductible.
- Losses may be carried forward for 2 years, subject to anti-avoidance rules.
- Dividends paid are subject to 10% withholding tax unless a treaty reduces it.
Worked example
A trading company has accounting profit of MNT 500m. It adds back a MNT 10m fine and deducts a MNT 5m tax incentive, giving taxable income of 505m. CIT at 10% = 50.5m. A mining company with the same taxable income pays 25% = 126.25m. The rate difference matters: classify the activity correctly.
Traps
- Using accounting profit without add-backs.
- Applying 10% to mining income.
- Forgetting withholding on dividends.
- Claiming loss relief beyond the carryforward period.