Taxes on Natural Resources and Mining
Scope
Tests royalty, mineral resource payments, strategic deposits and land/subsoil payments.
Core rules
- Mineral royalty is generally 5% of the sales value of minerals; gold is often at 2.5%.
- Royalty is based on sales value, not profit; deductions are limited.
- Strategic deposits may pay a special royalty or additional payments under their investment agreement.
- Subsoil use fees and land payments are separate from royalty.
- Mining companies also face CIT at 25% on mining income.
- Returns and payments follow the mineral and tax laws, with monthly/quarterly obligations.
Worked example
A coal mine sells MNT 1,000,000,000 of coal. Royalty at 5% = 50,000,000. If the company mistakenly deducts MNT 200,000,000 of operating costs before applying royalty, it would pay 40,000,000 and underpay 10,000,000. For gold sales of 1,000,000,000, royalty at 2.5% = 25,000,000.
Traps
- Applying royalty to net profit.
- Using the wrong commodity rate.
- Forgetting special payments for strategic deposits.
- Mixing land tax with mineral royalty.