Transfer Pricing in Mongolia

The legal framework

Mongolia's transfer pricing regime is young, prescriptive and — for a jurisdiction the OECD has never profiled — unusually detailed. The rules sit in Chapter Eight of the General Taxation Law of 22 March 2019, in force from 1 January 2020: Article 37 states the principle, Article 38 the reporting duties, Article 39 adjustments and Article 40 methodology, with related parties defined in Article 27 and country-by-country reporting carried in Article 27 of the Economic Entity Income Tax Law. Two subordinate instruments carry the operational weight: Minister of Finance Order No. 308 of 31 December 2019 on selecting the most appropriate method, and Order No. A/133 of 3 September 2020 of the head of the General Department of Taxation, whose eleven annexes approve forms ҮШТ-01 to ҮШТ-04 and their instructions.

Administration sits with the General Department of Taxation (Татварын ерөнхий газар), in English the Mongolian Tax Administration, a Ministry of Finance agency with a Large Taxpayer Office and, since September 2025, a Transfer Pricing Division.

Three features repay early attention. The arm's length standard is one-directional: Article 37.1 increases the tax base by any shortfall and Article 37.2 provides that the base of a controlled transaction shall not be less than that of comparable uncontrolled transactions. Recharacterisation is built into the primary rule: Articles 37.3 and 37.4 test whether there was a genuine business reason and whether the parties actually performed, and require the base to follow actual conduct. And the OECD Guidelines are persuasive only: Article 40.5 admits them where a matter is unregulated by Mongolian legislation or Order 308 and where they do not conflict with the Law. Related-party status turns on a 20% threshold, with indirect holdings multiplied through the chain and any direct holding above 50% counted as 100%. Domestic dealings are fully in scope.

Methods, comparables and benchmarking

Article 40.1 prescribes five methods — comparable uncontrolled price, resale price, cost plus, transactional net margin and transactional profit split — plus a residual category for other methods consistent with Article 37, which Order 308 confirms includes market, cost and income valuation techniques. Methods may be combined, the most appropriate turning on the specifics of the transaction and the degree of comparability.

What distinguishes Mongolia is how much of that choice is taken away. For mining products CUP is mandated, and absent a comparable transaction the price is derived from the sources published under Article 47.14 of the Minerals Law, with grade established from the certificate of origin and an accredited or Customs Central Laboratory assay. Technical, management and consulting services within Article 8.1.3 of the corporate income tax law must be priced on cost plus. Where the legal owner of an intangible does not perform the development, enhancement, maintenance, protection and exploitation functions, profit split becomes the most appropriate method, and an income-based approach is prescribed where comparable data on asset transfers is thin.

Benchmarking mechanics are equally directive. The range is built by the interquartile method and, where the tested result falls outside it, the adjustment runs to the median rather than the nearer edge. Controlled and comparable transactions must relate to the same reporting year, ruling out the multi-year averaging most regional studies use. The tested party may sit outside Mongolia and no local-comparables rule exists, but a foreign tested party must be fully documented and the taxpayer bears the authority's cost of replicating the search.

Documentation: what the Mongolian Tax Administration expects

Reporting is four-tier, not three. Article 38.1 splits transfer pricing reports into the annual transactions report (form ҮШТ-01), the local file, the master file and the country-by-country report — the OECD triptych plus a Mongolian related-party schedule.

The annual report has no monetary threshold: every taxpayer with controlled transactions files it with the year-end return. It is no cover sheet, capturing counterparty registrations, resident and non-resident purchases and sales, loan balances and interest rates, barter and free-of-charge transactions, cost contributions and intangibles.

The local and master files are due where prior-year sales revenue reached MNT 6 billion, where the group's consolidated revenue did, or — the limb that catches most inbound structures — where the taxpayer has foreign investment. That third limb carries no monetary floor, so a small foreign-owned subsidiary with any controlled transaction is a full documentation taxpayer.

Within the local file, a transaction is significant if it equals or exceeds the highest of 1% of prior-year revenue, 1% of prior-year expenses, 1% of additional paid-in capital from internal sources, or MNT 50 million; all financial and intangibles transactions are significant regardless. Part C requires audited financial statements, a reconciliation of the financial data used, and translated copies of any foreign advance pricing agreement covering a counterparty. A group OECD-format master file may be filed in substitution, with missing items supplied by annex.

Everything goes in Mongolian, with the English original filed alongside its translation, in pdf, docx or xlsx through the e-tax system with the annual return — on the GDT instructions, by 10 February. Country-by-country reporting follows Article 27 of the corporate income tax law: an EUR 750 million equivalent threshold since 12 December 2024, filing within twelve months of the group's year end, and notification of reporting-entity status by the return due date.

Audits, penalties and the enforcement climate

The penalty architecture is the regime's most aggressive element, and the most often understated. Article 11.19(11) of the Law on Violations fines late or missing transfer pricing reports at a percentage of the total value of related-party transactions: 4% for the country-by-country report, 3% for the master or local file, 2% for the annual report. Because Article 3.4(6) disapplies the general fine bands to percentage-based fines, there is no monetary ceiling — and the 10% cap in the explanatory note to Article 11.19 reaches only the part 1 fine for failing to pay tax, not late reports. On MNT 100 billion of intra-group flows, a missed local file is a MNT 3 billion exposure before any tax is assessed.

Adjustments carry separate penalties: 30% of the reassessed tax where liability was understated by up to half, 40% where by half or more, and 50% on repeat violations. There is no documentation defence and no safe harbour; the MTA says only that penalties will have regard to the quality of documentation kept. Order 308 expects the taxpayer to self-adjust in the reporting period, and Article 39.2 then makes a secondary adjustment mandatory, deeming the price difference a dividend with withholding under domestic law and treaty.

Evidentiary powers are correspondingly wide. Where functions, assets and risks are not documented, the authority may run the functional analysis from its own database and, failing that, treat the Mongolian party as having performed all functions and borne all risks. Article 40.6 permits secret comparables, and incomplete reporting sends the assessment into the reference-price procedure of Order No. 294. The four-year limitation period is suspended while a request to a foreign tax administration is outstanding.

Enforcement is no longer theoretical. The first transfer pricing audit produced a MNT 649 billion assessment, roughly USD 228 million, at the end of 2020 and denied about USD 1.5 billion of carried-forward losses. By September 2025 the MTA had trained more than fifty officials under the Tax Inspectors Without Borders programme, naming its priorities as mineral valuation, financial transactions, intra-group services, management fees and licence transfers.

Dispute resolution and advance certainty

There is no advance pricing agreement programme: neither tax law contains an APA article, and the only statutory mention is the master file disclosure of agreements concluded with other administrations. The ruling route offers nothing either. Article 78.3, read with Article 78.3.7, lets the General State Tax Inspector refuse a request for guidance concerning identification of related parties, transfer pricing adjustments or transfer pricing reports, and Article 78.6 provides that guidance cannot in any event be used as a basis for validating a transaction, a return amount or an assessment. Certainty in Mongolia is documentary, not negotiated.

Domestically, an assessment may be challenged before the Tax Dispute Resolution Council within 30 days of receipt, but the taxpayer must first pay 10% of the disputed amount, capped at MNT 100 million, and filing does not suspend collection. Council decisions go on appeal to the courts.

Mutual agreement runs under Article 17 and Minister of Finance Order No. 293 of 27 December 2019, the competent authority being the finance minister or his representative. A request must be made within three years of the taxpayer knowing of treaty-inconsistent taxation and must attach the transfer pricing documentation; further information is due within 30 days on pain of refusal; agreement is to be sought within 24 months, with arbitration only where the treaty provides. Two constraints govern sequencing: MAP does not defer Mongolian tax, and it will not be opened while a complaint on the same issue sits with the Council, a court or law enforcement. Going domestic first parks the treaty route.

Corresponding adjustments run only through MAP; outside that channel the authority makes no adjustment reducing the tax base. The leading dispute remains Oyu Tolgoi: three earlier assessments went to LCIA arbitration in 2020, and a further USD 440 million act for 2021 and 2022 issued on 11 February 2026 saw the company pay MNT 1.6 trillion on 10 March 2026 and complain to the Council the next day.

Pillar Two and what changes in 2026

No GloBE legislation has been enacted. As at August 2026 the corporate income tax law contains no income inclusion rule, no undertaxed profits rule and no domestic minimum top-up tax. Mongolia has been an Inclusive Framework member since 2018, but its work has run through Action 13, the MLI (hundredth signatory in October 2022, covering 26 treaties) and exchange of information, with the country-by-country and common reporting standard competent authority agreements signed on 6 March 2025. That signature matters, because secondary local country-by-country filing switches on only once Mongolia can exchange automatically. Amount B is likewise unimplemented, and the mandated methods run the other way.

The 2026 tax package — submitted on 30 December 2025, withdrawn, and re-submitted on 7 May 2026 for effect from 1 January 2027 — is a rate-and-base reform, not a transfer pricing one: as reported it cuts the corporate rate to 15% for turnover between MNT 6 and 10 billion, lifts the simplified regime threshold to MNT 2.5 billion, removes VAT deduction restrictions and exempts personal income up to MNT 500,000 a month. Articles 37 to 40 were untouched. Watch the filing deadline nonetheless: the consolidated text now reads 5 March, while 10 February remains operative for the current season.

How practitioners should respond

Test the foreign-investment limb before assuming a documentation exemption: revenue thresholds are irrelevant once there is foreign capital in the structure. Build the local file in Mongolian from the outset rather than translating a regional file in January, since the translation is filed with the English original and discrepancies are the taxpayer's problem. Extractive groups should price to CUP and keep assay certificates and origin documents with the file, because the mandated method leaves no margin-based fallback. Self-adjust to the median where a result falls outside the range: the understatement penalty and the deemed-dividend withholding together make voluntary correction far cheaper. And decide the treaty route before filing with the Dispute Resolution Council, not after.

Because no OECD country profile exists for Mongolia — the OECD index, last updated 22 January 2026, lists 82 jurisdictions without it — the comparative shortcut most advisers rely on is unavailable. Positions should be checked against the consolidated Mongolian texts, and secondary summaries treated with suspicion: the MNT 1.7 trillion country-by-country threshold, for one, was superseded in December 2024.