Mongolia's government has introduced sweeping tax reforms following year-long consultations with 13,000 stakeholders, promising to cut taxes by MNT 2.7 trillion through progressive corporate rates, expanded SME support, enhanced VAT refunds for citizens, and a modernised compliance system that prioritises guidance over penalties—set to take effect in January 2027.
Mongolia’s government submitted a comprehensive tax reform package to Parliament on 30 December 2025, following extensive nationwide consultations with over 13,000 citizens and businesses throughout the year.
The proposed amendments to corporate income tax, personal income tax, value-added tax (VAT), and the General Tax Law are scheduled for implementation on 1 January 2027.
After organising 178 meetings and collecting approximately 176,000 comments from stakeholders across the country, officials from the Ministry of Finance and General Tax Administration presented the draft legislation, which aims to reduce the overall tax burden by MNT 2.7 trillion in stages—MNT 2 trillion for citizens and MNT 700 billion for businesses.
Progressive corporate tax rates and expanded support for enterprises
The reform introduces significant changes to the corporate taxation structure. Companies earning between MNT 6 billion and MNT 10 billion will face a reduced tax rate of 15%, down from the current 25%.
Only businesses with income exceeding MNT 10 billion will pay the 25% rate, as the threshold increases from MNT 6 billion.
Small and medium-sized enterprises will benefit from expanded simplified tax regimes. The threshold for the 1% tax rate increases from MNT 1.5 billion to MNT 2.5 billion, while businesses with income up to MNT 400 million can now access the simplified 1% regime.
Additionally, enterprises qualifying for a 90% tax refund will see their eligibility threshold raised to MNT 2.5 billion.
The package addresses longstanding VAT concerns by removing restrictions on deductions for business activities and allowing manufacturers to fully utilise e-receipts for raw material purchases. Businesses can now defer VAT payments at customs for up to two months, and the reporting period extends from one year to two years.
Relief for individual taxpayers and first-time homebuyers
Citizens will receive 100% tax exemption on their monthly income up to MNT 500,000. The VAT refund system offers tiered benefits: 100% refunds on purchases up to MNT 500,000 monthly, 50% for purchases between MNT 500,000 and MNT 1 million and 20% for amounts exceeding MNT 1 million.
First-time homebuyers in regional areas and those purchasing energy-efficient housing will qualify for tax breaks of up to MNT 15 million.
Enhanced tax administration and compliance framework
The reform shifts tax administration toward a more supportive approach, emphasising advice and assistance over penalties. Rather than completely freezing accounts of debtors, the new system allows 20% of future income to remain accessible, changing the withholding rate from 100% to 80% to enable businesses to continue operations while settling tax obligations.
The compliance points system introduces flexible payment terms and grants taxpayers the right to correct reports within two years, focusing on risk warnings rather than immediate fines and allowing self-correction of mistakes before penalties apply.
