Personal Income Tax
Scope
PIT tests residency, taxable income, deductions, rates, withholding and non-resident treatment.
Core rules
- An individual is resident if present in Mongolia for 183 days or more in a tax year; residents are taxed on worldwide income.
- The PIT rate is 10%.
- Taxable employment income is gross salary less employee social insurance and the monthly personal deduction (MNT 120,000).
- Employers must withhold PIT monthly and remit it.
- Non-residents are taxed on Mongolian-source income, often by withholding.
- Certain income (e.g., rental, capital gains) has specific rules.
Worked example
An employee earns MNT 2,000,000 per month. Employee social insurance at 10% = 200,000. Personal deduction = 120,000. Taxable income = 1,680,000. PIT at 10% = 168,000. Net pay = 2,000,000 - 200,000 - 168,000 = 1,632,000. If the employer forgets the social insurance deduction, tax would be overstated by 20,000.
Traps
- Counting days incorrectly for residency.
- Forgetting the personal deduction.
- Treating benefits in kind as tax-free.
- Applying resident rules to a non-resident.