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Payroll & Tax in Mongolia

Mongolia payroll & taxation

There are specific rules for payroll and taxation in Mongolia, depending upon whether your employees are foreign nationals or local Mongolians who require Mongolia payroll.  The primary concerns for a foreign company that needs to comply with tax laws in Mongolia are: Individual income tax (IIT) for employees in Mongolia, social security costs, fringe benefits tax, and value added tax.

Mongolia is known for its flexible policies surrounding employment of foreign workers and thus appropriate payroll is important for any companies wishing to employ in Mongolia.

Your Payroll Options in Mongolia

Remote Payroll

A remote payroll in Mongolia operates when a foreign company, i.e. a non-resident company, payrolls a resident employee in Mongolia. Under Mongolian law both Mongolian and foreign-owned entities are allowed to have employees based in Mongolia. This applies to both local and foreign employees. A good option, therefore, for a non-resident company to payroll its employees (local and foreign) in Mongolia is to use a fully outsourced service like a GEO or FESCO which will employ and payroll the staff on their behalf.

Local Payroll Administration

In some cases, a company will register their business in Mongolia under one of the forms available, (RO, WFOE or JV) but may prefer to have another company administer its payroll, which can be achieved through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.

Internal Payroll

Larger companies with a longstanding commitment to Mongolia may wish to run their own local payroll for all employees, foreign and local.  In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff.  There will be a need for in country human resources personnel who have the background needed to manage a Mongolian payroll, and can fulfill all tax, withholding, and payroll requirements.

 

This approach carries significant cost and requires some knowledge of local employment and payroll regulations.  The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Mongolian employment laws.

Fully Outsourced Payroll & Employment

Companies can outsource the employment and payroll of their staff in Mongolia to a GEO, like Shield GEO. This is possible for both foreign workers and Mongolian nationals. This is the easiest, fastest and safest way to payroll staff in Mongolia.

Shield GEO manages all aspects of payroll for workers in Mongolia, including taxes, withholding, social security payments and other statutory requirements. Shield GEO becomes the Employer of Record and employs the staff on behalf of the client.

Staff are paid monthly with tax and social security deducted at source and paid to local authorities. Shield GEO will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions) and a Management Fee. Shield GEO provides the employees with payslips.

Read more about outsourced payroll and employment through Shield GEO.

 

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Setting up payroll in Mongolia

Information Explanation
Currency ?

Mongolian tögrög (also stylised as Tughrik) (MNT) is the official currency.

Employee Information Required ?

To set up new employees for payroll purposes, the following must be included:

  • Employment contract
  • Passport or ID Card
  • Salary details
  • Account information
Tax Registration Requirements ?

The following documents need to be submitted to LERO in order to register for incorporation and obtain a state registration certificate:

  • Completed pro-forma application form
  • Bank account approval letter, and evidence of dormant account with some funds deposited
  • Company charter
  • Lease agreement with the company’s official address
  • Founding or shareholders’ resolution
  • Payment slip of the registration fee
  • Name reservation slip
  • Opening balance sheet
  • Copies of the shareholders’ passports (IDs).
Social Security Registration ?

Companies must register with relevant social insurance departments of the appropriate district. The registration needs to be completed in person, upon which a social insurance code will be assigned by the District Social Insurance Department. The service is free and it is no longer required that a paper copy of the certificate of social insurance registration be obtained.

Documentation Required for New Employees ?
  • Employment contract
  • Passport or ID Card
  • Salary details
  • Account information for payment

Tax Figures

Information Explanation
Corporate Income Tax ?

Up to MNT 3 billion, a marginal tax rate of 10% applies. Above this amount, the marginal rate is 25%.

Income Tax Rate ?
Grossed income Tax Rate (%)
All income 10%

Individuals are granted a standard personal tax credit of MNT 84,000 per annum individuals to deduct against the tax payable on
their annual income.

Payroll Tax ?

Not specified

Sales Tax ?

10% although some goods such as fruits & vegetables are exempt from VAT.

Withholding Tax ?

Dividends, interest and royalties are all taxed at 10%. A withholding tax of 20% is applicable to all foreign entities.

Income Tax (Personal Allowance) ?

There is no income bracket which is not taxed however a personal tax credit of MNT 84,000 per annum is provided for individuals to deduct against the tax payable on their annual income.

Employee Social Security (EE SS)

• Pensions: Employee contributes 7%
• Medical Insurance: Employee contributes 2%
• Benefit Insurance: No employee contribution
• Unemployment Insurance: Employee contributes 0.2%

Employer Social Security (ER SS)

• Pensions: Employer contributes 7% of salary
• Medical Insurance: Employer contributes 2% of salary
• Benefit Insurance: Employer contributes from 0.4-3% of employee’s salary
• Unemployment Insurance: Employer contributes 0.2% of salary

Payments

Information Explanation
Payment Mode ?

Pay cheque and direct bank transfer are both common. Note that employees are not required to have a Mongolian bank account.

Frequency of Salary Payment ?

Most workers in Mongolia are paid twice monthly although they often also elect to be paid monthly.

Invoice / Payslips required ?

Filing methods can be either by paper or online at the employer’s discretion.

Minimum Wage ?

The minimum wage is 192,000 MNT per month.

Employee Entitlements

Information Explanation
Working on Sundays ?

Permitted, at overtime pay. If the employee is required to work Saturday and Sunday with no other option, they are required to be given two days’ rest the following week.

Disclosure and Confidentiality of Personal Information ?

There is no such specification in the Labour Law, however there is a prohibition on asking questions related to private life, personal opinion, marital status, political party membership, religious beliefs, or pregnancy if irrelevant to the employment.

Employee Protection and Anti-discrimination Rights ?

The establishment of discrimination, limitation, or privilege based on nationality, race, sex, social origin or status, wealth, religion, or point of view is prohibited.

Time Off Work ?

Generally, the annual leave entitlement is 15 days, or 20 days if the employee is under 18 years of age. There may be additional leave days awarded on the basis of the tenure of employment ranging from 3 days to 14 days, depending on the length of employment.

Medical Leave ?

Employees are entitled to sick leave for the duration of their temporary inability.

Employment Termination

Information Explanation
Resignation / End of Service Payment ?

There is no specified resignation or end of service payment.

Severance / Redundancy Pay ?

The employer is entitled to pay an allowance equal to an average wage of one month or more.

Termination of Employment ?

30 days

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