Excise Tax and Customs-Related Taxes
Scope
Excise and customs tests goods coverage, excise base, customs value, import VAT and calculation order.
Core rules
- Excise applies to alcohol, tobacco, petroleum products and passenger cars, often at specific rates per unit or engine size.
- Customs duty is charged on the customs value of imported goods at rates in the Customs Tariff.
- For imports, VAT is calculated on customs value + customs duty + excise.
- Excise on domestic production is paid by the producer; on imports, by the importer.
- Exemptions and preferential rates require documentary proof.
Worked example
A car has customs value MNT 20,000,000. Customs duty at 5% = 1,000,000. Excise based on engine size = 1,000,000. VAT base = 20,000,000 + 1,000,000 + 1,000,000 = 22,000,000. VAT at 10% = 2,200,000. Total import taxes = 1,000,000 + 1,000,000 + 2,200,000 = 4,200,000. Calculating VAT only on customs value would understate tax by 200,000.
Traps
- Using the wrong base for import VAT.
- Applying ad valorem excise where a specific rate applies.
- Ignoring excise on goods produced for own use.
- Assuming a customs exemption also exempts VAT.