Value Added Tax
Scope
VAT tests registration, taxable supplies, input credit, zero-rating, exemptions and filing.
Core rules
- Standard VAT rate is 10%.
- Registration is required when annual taxable turnover exceeds MNT 50 million.
- VAT is charged on domestic supplies and imports; exports are generally zero-rated.
- Exempt supplies (e.g., certain financial, education and health services) do not allow input VAT credit.
- Input VAT is credited against output VAT; excess credit may be carried forward or refunded under conditions.
- Monthly VAT returns are due by the 10th of the following month.
Worked example
A trader sells goods for MNT 10,000,000 plus 10% VAT = 1,000,000. Purchases are MNT 6,000,000 plus input VAT = 600,000. Net VAT payable = 1,000,000 - 600,000 = 400,000. If the purchases were exempt supplies, the 600,000 input VAT would not be creditable and the payable would be 1,000,000.
Traps
- Confusing zero-rated with exempt.
- Claiming input VAT on exempt or non-business expenses.
- Missing the registration threshold.
- Using the wrong tax point (invoice vs payment).