Operating a business in Mongolia requires accurate reporting of income and expenses and timely payment of taxes — a constitutional duty as well as standard commercial practice. Businesses are subject to several taxes, including Corporate Income Tax, Value-Added Tax (VAT), Personal Income Tax withholding, and property and vehicle taxes. Company management may face criminal or administrative liability for tax evasion when they attempt to reduce these obligations through misreporting or non-payment.
Criminal Liability and Administrative Sanctions
Article 18.3 of the Criminal Code of Mongolia establishes criminal liability for tax evasion by natural persons acting as company officers. Penalties range from a fine of 450 to 5,400 units to community service or restriction of the right to travel. A "substantial amount" for these purposes is defined as MNT 50 million or more, and liability requires intentional conduct such as false reporting or concealment of income. Lesser violations — such as missed filing deadlines or non-compliance with an audit — are addressed under the Administrative Misdemeanor Law rather than the Criminal Code.
Court Case Examples
In one case, a company director arranged false VAT receipts totalling MNT 618 million in order to reduce the company's tax liability by MNT 61.8 million. The court convicted the director and imposed a six-month travel restriction together with an order for restitution. In another case, a director falsely recorded purchases to reduce VAT payable by MNT 100 million; the appellate court remitted the case for further investigation into whether the director had acted with genuine intent to evade tax.
Recommendations for Management
Engaging legal counsel to review and structure transactions helps company management avoid both intentional tax evasion and inadvertent violations arising from a misunderstanding of the law. Alison & Kate Partners advises clients on tax compliance and represents clients in tax disputes and criminal tax proceedings. Contact us at contact@akp.mn for a consultation.