Amendments to the Law on Personal income tax and changes to the monthly minimum wage

Mongolia • No.11 / 2022 • December 2022

The Parliament of Mongolia has approved the 2023 Budget Law and accompanying draft laws submitted by the Government on November 11, 2022, and we highlight the amendment made to the Law on Personal Income Tax.

Amendment to the Law on Personal Income Tax (“PIT Law”)

To align with the international tax practice and to reduce income inequality, the Parliament has approved introduction of a progressive PIT rate on salaries, wages, equivalent income and indirect income starting from 2023. According to the Ministry of Finance (“MOF”), the aforementioned reform will impact only 0.1 percent of taxpayers.

Scope of the amendment and effective date

This law amendment shall be effective from January 1, 2023.

A non-resident taxpayer of Mongolia is subject to a flat tax rate of 20% on income earned in or sourced from Mongolia.

Changes to the monthly minimum wage

In addition to the aforementioned amendment to the PIT Law, in accordance with Resolution No.10 dated May 4, 2022 issued by National Tripartite Committee on Labor and Social Consensus, the minimum wage will be changed to MNT 3,273.80 per hour or MNT 550,000 per month, effective from January 1, 2023.

As result of this change, the monthly cap of the employee’s social insurance contribution will be changed to MNT 632,500 starting from January 1, 2023. Currently, the minimum monthly wage is MNT 420,000 and the employee’s social insurance contribution is capped at MNT 483,000.