1. 44 th SGATAR MEETING TOPIC 1 Addressing tax administration challenges posed by globalization and erosion of the tax base PREPARED BY MONGOLIA

2. Mongolian Tax Administration  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 Contents

3. Mongolian Tax Administration  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 BEPS related issues

4. Mongolian Tax Administration  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 BEPS related issues

5. Mongolian Tax Administration  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 Overview of legal framework of International taxation

6. Mongolian Tax Administration -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. Overview of legal framework of International taxation

7. Mongolian Tax Administration -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) Overview of legal framework of International taxation

8. Mongolian Tax Administration  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). Overview of legal framework of International taxation

9. Mongolian Tax Administration  Mongolian Government has signed DTAs with 27 countries, including the neighbors People’s Republic of China and Russian Federation. Double taxation agreements

10. Mongolian Tax Administration  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 Expectation on the BEPS work carried out in the OECD

11. Mongolian Tax Administration  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 Expectation on the BEPS work carried out in the OECD

12. Mongolian Tax Administration  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 Expectation on the BEPS work carried out in the OECD

13. Mongolian Tax Administration  International operation is the only way to tackle the challenge of tax avoidance.  Effective exchange of information could significantly reduce and deter tax evasion.  Share experiences between tax administrations on dealing with BEPS related issues International cooperation on managing BEPS risk

14. 44 th SGATAR MEETING Thank you for attention