Upcoming modifications to Mongolian Double Tax Treaties

Mongolia • No.10 /2022 • November 2022

In brief

Multilateral Convention to Implement Tax Treaty Measures to Prevent Base Erosion and Profit Shifting, also known as the Multilateral Instrument (MLI), is a flexible instrument which modifies tax treaties according to a jurisdiction's policy preferences with respect to the implementation of the tax treaty-related BEPS measures.

On 6 October 2022, Mongolia become the 100th jurisdiction to join the BEPS Convention (by signing the MLI), which now covers around 1850 bilateral tax treaties worldwide.

As a result, the double tax treaties (DTTs) of Mongolia are expected to be modified from 1 January 2024 in the expectation that the MLI would be ratified by the Parliament in the 2023 spring session.

Takeaway and what we can offer:

Adoption of the MLI will impact significantly DTT rules. Specifically, the DTT benefits are not applicable if, having regard to all relevant facts and circumstances, obtaining that the DTT benefit was one of the principal purposes of any arrangement or transaction. Hence, considering the anticipated changes, taxpayers may need to review their international operational, financial and holding structures, arrangements and transactions in advance to get prepared for the introduction of new rules.

We are happy to assist you in assessing the impact of the MLI on your businesses.