The Mongolian Government has submitted a comprehensive package of tax law amendments to Parliament, including significant revisions to the VAT Law. The reforms are positioned as part of a broader effort to modernise tax administration, improve compliance, and ease administrative burdens for businesses.

1. Deductibility of reverse-charged VAT on foreign services
The amendments clarify that VAT reverse-charged on services received from non-residents will be deductible for Mongolian VAT-registered companies. This reduces potential cascading VAT costs and ensures neutrality where businesses procure cross-border services.

2. Deduction of Capital Expenditure VAT
One of the most material changes concerns capital expenditure. Under the current framework, input VAT on capital assets is deducted over a period of five to ten years. The proposed amendment would allow full and immediate deduction of input VAT on capital expenditure. This shift improves cash flow, reduces long-term tracking obligations, and aligns Mongolia more closely with international VAT best practice, where input tax recovery is typically immediate rather than spread.

3. Simplified VAT regime (MNT 400m Threshold)
The reform package introduces a simplified VAT regime for businesses with turnover below MNT 400 million. Eligible taxpayers would be permitted to apply a deemed purchase mechanism, allowing them to treat 90% of quarterly sales as deemed purchases. This effectively simplifies input VAT calculations and reduces documentary requirements.

4. VAT Payment Deferral for Compliant Taxpayers
To incentivise compliance, the government proposes allowing compliant taxpayers to defer monthly VAT payments — including import VAT — by one to two months. This measure acts as a liquidity support mechanism and introduces a behavioural compliance incentive into the VAT system. Import VAT deferral in particular may reduce cash flow pressure for trading businesses.

Mongolian VAT regime
Mongolia introduced Value Added Tax in 1998 and has undergone numerous modernisations. The highlights of the regime include:

 Single headline VAT rate (10%) on domestic supplies of goods and services and on imports.
VAT-registered businesses may recover input VAT against output VAT, with excess credits refundable subject to compliance conditions.
Reverse charge on imported services, requiring Mongolian recipients to self-account for VAT on services received from non-residents.
Import VAT collected at customs, forming part of the input credit chain for VAT-registered businesses.
Electronic reporting and invoice controls, with VAT administration increasingly digitised to strengthen compliance and audit capability.

Published Date:2026-02-11