BANKING, FOREIGN EXCHANGE AND
VAT
1. The Banking System
The banking system has improved efficiency and reliability.
Prior to 1991, no western-style commercial or central banking system existed
in Mongolia. The State Bank was the only bank in Mongolia. In October
1990, the Mongolian Government, in line with free market economic
reforms, dissolved the State Bank. In 1991, Mongolia enacted a new banking
law to create a western-style banking system. The law re-organized the
banking system into a two-tier structure. The Bank of Mongolia or Mongol
Bank acts as the central bank, implementing monetary policy. Other private
and public banks provide commercial services.
The Trade and Development Bank (TDB) is the largest of
the thirteen commercial banks spun
from the former State Bank. In 2002, TDB bank was privatized to an American-Swiss
consortium. TDB is a commercial bank with headquarters in Ulaanbaatar
and branches in several provinces. TDB is the principal bank dealing with
foreign exchange and one of the largest commercial banks in international
transaction volume. Its clients include state enterprises, joint ventures,
diplomatic missions, multi-lateral organizations, and private companies.
Until recently, TDB serviced all foreign-entity accounts in Mongolia.
Now private
banks such as Golomt and Anod also serve the foreign community. Agriculture
Bank, another
State Bank’s spin-off, was also recently privatized to Japanese securities
company. Although the Japanese company plans to expand the bank to Japan,
Agriculture Bank has historically provided services to rural domestic
clients. The Bank of Mongolia and commercial banks, including Golomt Bank
and Erel Bank, are licensed for international transactions and provide
some exchange services.
A foreign company or organization (such as a joint venture
or wholly owned firm) may open an account by presenting the following
information to their bank:
1. Registration by the Foreign Investment and Foreign Trade Agency (FIFTA).
2. Authorization from the Ministry of Finance.
3. A letter requesting the account.
A private foreign individual may open an account upon written request.
Banks usually have
forms that serve as written requests. A passport is required.
BANKS
Mongol Bank
O. Chuluunbat, Governor
Tel: (976-11) 322-169
Fax: (976-11) 311-471
Trade and Development Bank
Mr. S. Munkhbat, Executive Director
Tel: (976-11) 327-020, 321-171
Fax: (976-11) 325-449
Agricultural Bank
Peter Morrow, Executive Director
Debra Boyer, Deputy Director
Tel: (976-11) 457-880, 458-096
Golomt Bank
Mr. Bayasgalan, President & CEO
Tel: (976-11) 311-530, 311-971
Savings Bank
Mr. Tseren-Purev, Director
Tel: (976-11) 312-043
2. Exchange Services
The tugrik (MNT) is the national currency of Mongolia
and the only legal currency. Since July 1996, all cash payments are made
in tugriks. Mongolia maintains a floating exchange rate policy. Over the
past several years, the exchange rate has been relatively stable. In April
2003, the rate was approximately $1 = 1,135 MNT. Individuals may exchange
money at authorized currency exchange points, as well as at banks and
hotels. English language newspapers regularly report exchange rates.
Transfers and Withdrawals
Most of the large banks can make international money
transfers. The Trade and Development
Bank has correspondent relations with several foreign banks and maintains
accounts in major
world currencies with several of them. Clients may transfer money into
and out of Trade and
Development Bank accounts. There are no set limits on the amount that
may be withdrawn from an account. The bank charges a small commission
on cash withdrawals in hard currency. There is no commission on cash withdrawals
in tugriks at the day's buying rate. The bank charges a commission on
all transfers of hard currency within Mongolia and to other banks abroad.
Travelers' Checks, Credit Cards, and ATMs
The Trade and Development Bank is one of the main banks
that cashes and sells American Express, Thomas Cook, Visa, and MasterCard
U.S. dollar-denominated travelers' checks. The bank sells travelers' checks
for U.S. dollars without commission. There is a commission on drawing
travelers' checks from an account. The checks may be cashed for tugriks
with no commission charge. If cashed for hard currencies or deposited
into an account, the client pays a small commission. Major hotels accept
American Express, Visa, Master Card, and JCB credit cards. An increasing
number of major stores, restaurants, and travel agencies also accept credit
cards. The Trade and Development Bank offers cash advances on American
Express and JCB cards. It also maintains several ATMs that allow cash
withdrawals through international networks.
International Service Banks in Mongolia
Trade and Development Bank
Tel: (976-11) 321-171, 327-020, 312-362
Fax: (976-11) 325-449, 325-685
Email: tdbmts@magicnet.mn
Mongol Post Bank
Tel/Fax: (976-11) 310-103
Fax: 328-501
Email: post_bank@mongol.net
Website: www.postbank.mn
Golomt Bank
Tel: (976-11) 311-971
Fax: (976-11) 312-307, 311-958
Email: mail@golomtbank.com
Agricultural Bank of Mongolia
Tel: (976-11) 457-880
Fax: (976-11) 457-880
Email: haanbank@magicnet.mn
Capitron Bank
Tel: (976-11) 327-550
Fax: (976-11) 314-111
Email: info@capitronbank.mn
Savings Bank
Tel/Fax: (976-11) 318-724
Email: savbank@magicnet.mn
3. TAXES
Value-Added Tax
The Value-Added Tax (VAT) Law came into force July 1,
1998. The Tax Authority of Mongolia administers VAT. The current rate
of VAT is 15 percent for most goods and services. There is currently an
import tax of 5 to 7 percent, while certain items, like beer and medical
equipment, have special taxes - or are free of tax.
1. Taxable transactions:
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Sale of goods within the territory of Mongolia.
-
Sale of goods (other than gold) exported from the territory of
Mongolia (zero-rated) for the use or consumption outside the territory
of Mongolia.
-
Gold refined within the territory of Mongolia.
-
Sale of services performed within the territory of Mongolia.
-
Import of goods for sale or consumption within the territory of
Mongolia.
2. Who is VAT taxable?
-
All physical and legal persons engaged in the importation or sale
of goods and rendering of services within the territory of Mongolia
are liable for VAT registration if the annual revenues generated
from such activities exceed 10 million tugrik annually ($10,000).
3. Exemptions from VAT:
The VAT law exempts a number of goods, services, and organizations. Among
the most significant are:
-
Financial and insurance services.
-
Leases and rent of accommodation.
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Goods imported for diplomatic and international missions.
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Grants provided by foreign governments and non-governmental organizations.
-
Agricultural, forestry, and primary raw materials produced within
the territory of
Mongolia.
-
Technological equipment and machinery imported as part of the
registered capital of
legal persons operating under the Law of Foreign Investment.
-
-
Government administrative organizations.
-
Public transportation services.
-
VAT: A Straightforward Concept
VAT is straightforward. Businesses pay VAT on the acquisition
of assets, materials, supplies and expenses incorporated into salable
products. Businesses then charge VAT on the sales price of the product
and obtain credits of the VAT paid at the time of purchase. The net VAT
that is remitted to the Government is the tax on the "value added"
by the business. This process is repeated at each stage of extraction,
manufacture, wholesale or retail for the product. At the conclusion of
the VAT process for a product, the final consumer pays the VAT when buying
the product. Companies collect VAT on sales to their customers. They obtain
credits of the VAT on purchases, so the company effectively pays no tax
on the total transaction. The final consumers bear the cost of VAT.
Zero-rated Products
The Vat law uses the concept of zero-rating. Goods and services exported
from Mongolia for sale are subject to VAT but are zero-rated. VAT is indicated
on the invoice, but the rate is zero. The Customs Administration must
verify the export of the goods. This regulation means that exporters will
not charge VAT on the sales invoice for exports, but they will recover
the VAT paid on goods ultimately intended for export.
Time of Imposition
VAT is imposed at the earliest of the following actions:
-
The day when the seller issues an invoice.
-
The day when the seller receives payment for the sale of goods,
jobs, and services.
-
The day of purchase of goods jobs and services.
What this means is that the Government can collect VAT, even if the seller
has received no money for the product. Consequently, sellers are motivated
to collect on accounts receivable as soon as possible. For imported goods,
VAT is payable by the importer on the day the goods enter Mongolia. The
law allows payment within three days after the assessment of the tax.
VAT is in addition to any customs duties.
VAT Returns
The Tax Administration requires VAT payers to file a
monthly return by the 15th of the month. The return should show the tax
charged on sales, less the tax paid on purchases for the preceding month.
Payers must maintain records indicating the VAT incurred on purchases
by suppliers’invoices, as well as the VAT charged on sales invoices.
Other Documents
The following documents are available from the Tax Administration
that will assist the taxpayer:
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Value-added Tax Regulations
-
Guide for VAT Payer Registration
-
A Guide for VAT Registered Businesses
-
A Guide to Keeping Records and Accounts by Registered VAT Payer.
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