44th SGATAR MEETING
TOPIC 1
Addressing tax administration
challenges posed by globalization
and erosion of the tax base
PREPARED BY MONGOLIA
Contents
 BEPS related issues
 Overview of legal framework of International taxation
 Double taxation agreements
 Expectation on the BEPS work carried out in the OECD
 International cooperation on managing BEPS risk
Mongolian Tax Administration
BEPS related issues
 E commerce
- Lack of methodology
- Documentation obstacles
 Transfer pricing
- Related party definition needs to be broadened
redrafting provisions on TP in the legislation
- Regulation on ALP – more detailed approach
 Exchange of information
- No agreements on exchange of information with other
countries except with Russian Federation.
- Double taxation agreements containing a provision to
exchange information
Mongolian Tax Administration
BEPS related issues
 PE
- determination of PE existence and PE profit attribution
needs to be renewed
 Double taxation agreements
- No rules to prevent the abuse on double taxation
agreement in tax legislation
 Capacity building of the tax administration
Mongolian Tax Administration
Overview of legal framework of
International taxation
 General taxation law, 2008
- Article 48
 48.1. Tax assessment by using “indirect method”
 48.1.1. Use of Arm’s length price (ALP)
 48.1.2. Use of Comparable Uncontrolled Price (CUP)
 Corporate income tax law, 2006
- Article 6. Related party
- Article 11. Determining taxable income from goods, work
and services provided among related parties
Mongolian Tax Administration
Overview of legal framework of
International taxation
- Article 7. Gross taxable income
7.5. Determining gross taxable income in case of the
exchange of goods, works, and services sold among
related parties.
 Regulation on ALP. The main Transfer pricing guidelines
is Finance Minister’s decree #86, 2007.
- Application and methodology for transfer pricing work.
- Tax authority may use OECD TP Guidelines in calculating
the ALP.
Mongolian Tax Administration
Overview of legal framework of
International taxation
- Approved three methods for the determining ALP:
1) Comparable Uncontrolled Price (CUP) method
2) Resale Price (RP) method
3) Cost Plus (CP) method
 List of the sources for “Price information” and types of
transactions between related parties, subject to TP.
Commissioner’s decree, 2007
- List of the price information sources transactions subject
to transfer pricing.
 List of market price information sources of main export
products (Government decrees)
Mongolian Tax Administration
Overview of legal framework of
International taxation
 MAP regulation. Finance Minister’s decree, 2013
 Reappointment of Competent Authority of Mongolia.
Finance Minister’s decree, 2013
 Thin capitalization rules
Article 14. Loan interest to be deemed as deductible
expense from gross taxable income
(amended in Corporate Income tax law in February 20,
2009).
Mongolian Tax Administration
Double taxation agreements
 Mongolian Government has signed DTAs with 27
countries, including the neighbors People’s Republic of
China and Russian Federation.
Mongolian Tax Administration
Expectation on the BEPS work carried out
in the OECD
 BEPS Action Plan deliverables:
 Best practices and model domestic rules with respect
to domestic law measures
 Changes to the OECD Model Tax Convention and
internationally agreed guidance on implementation
 Other reports
Mongolian Tax Administration
Expectation on the BEPS work carried out
in the OECD
 The following measures are expected according to
new rules and guidelines to be produced as a
result of BEPS work
- Update on the existing legislation and rules
- Change to Mongolian Double taxation agreement
model
- New directions of identifying international tax
avoidance
Mongolian Tax Administration
Expectation on the BEPS work carried out
in the OECD
 The actions we give priorities:
- Prevent treaty abuse (Action 6)
- Prevent the artificial avoidance of PE status
(Action 7)
- Transfer pricing documentation (Action 13)
Country-by-Country Reporting
Mongolian Tax Administration
International cooperation on managing
BEPS risk
 International operation is the only way to tackle
the challenge of tax avoidance.
 Effective
exchange
of
information
significantly reduce and deter tax evasion.
could
 Share experiences between tax administrations
on dealing with BEPS related issues
Mongolian Tax Administration
44th SGATAR MEETING
Thank you for attention