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CUSTOMS TARIFF AND NON-TARIFF REGULATIONS

CUSTOMS DUTIES

The term “Customs duty” means an amount of tax levied on, collected from or paid for goods entering or leaving the Customs territory, based on the Customs tariff. The Customs duties shall be of the following types:

• ad valorem;
• specific;
• combination of the two above;
• any of the first two above which entails higher amount of duty.

The most of imported goods are subject to 5% ad valorem Customs duty while some others are subject to seasonal duties. Certain goods for export are subject to specific Customs duties. Any person (physical or legal) engaged in foreign trade is liable to paying Customs duties as well as some other taxes and fees upon importation or exportation of goods.

THE VALUE ADDED TAX

According the Value Added Tax (VAT) Law, the VAT is levied and collected by or paid to the Customs offices.

The VAT rate on imported goods is 10 percent of the tax base value since 1 January 2007. The VAT base value is a value determined in accordance with the Law on the Customs Tariffs and Customs Duties (the Customs Value) plus additions of Customs duty, excise duty and other tax amounts. For goods sold for export from Mongolia and declared to the Customs, the zero amount should be added. The amounts payable thus vary depending on the Customs value and quantity of goods, kinds or types of duties and taxes as well as tariffs (the duty and tax rates).

The following is a formula used for calculation of the VAT:

VAT=(CV+CD+ED+OT)xR3
VAT Value Added Tax Amount Payable;
CV - Customs Value;
CD - Customs Duty;
ED - Excise Duty;
OT - other taxes;
R3 - VAT Rate.

THE EXCISE DUTIES

/From the Law of 26 June 2006/

Imported vodka, wine, beer, tobacco products, vehicle gasoline and diesel oil as well as cars, etc. are subject to the excise duties.

 

The ranges of goods subject to the excise duties and the tax base units of measure:

The Ranges of Goods Subject to the Excise Duty The Tax Base Units of Measure
1. All kinds of alcoholic beverages 1 liter
2. Cigarettes and Other Similar Items 100 pieces
3. Pipe and Bulk Tobaccos and Similar Items (such as Rolling Tobacco, etc.) 1 kilogram
4. Vehicle Gasoline and Diesel Oils 1 ton
5. Cars 1 unit

The Excise Duties Imposed on Imported Cars:

Vehicle Engine (Cylinder) Capacity /in Cubic Centimeters or cc/ The Excise Duty /in USD/
manufactured year
0-3 years 4-6 years

7-9 years

10 years and over
1. 1500 or under 500 1000 2000 6000
2. 1501-2500 1500 2000 3000 7000
3. 2501-3500 2000 2500 4000 8000
4. 3501-4500 4500 5000 6500 10500
5. 4501 and over 7000 7500 9000 13000

CALCULATIONS OF DUTIES AND TAXES

METHODOLOGIES

Calculations of duties and taxes are made in the following two ways depending on the types of duties or taxes:

1. Where there is an ad valorem duty:

The following formula is used:

CD=CVхR1, where:
CD – Customs Duty Amount Payable;
CV – Customs Value;
R1 - Ad valorem Customs Duty Rate.

2. Where there is a specific duty:

The following formula is used:

CD=UMхR2, where:
CD – Customs Duty Amount Payable;
UM – Unit of Measure (in certain piece(s), weight or volume, etc.) set as a tax base for calculation of Customs Duty;
R2 – Specific Customs Duty Rate.

For determination of Customs value, the following formula is used:

CV=TV+(T+CB+A+RL+P)–D, where:
- CV – Customs Value;
- TV – Transaction Value or a Value Actually Paid or Payable for the Imported Goods;
- Т – Transportation Costs, etc.;
- CB – Commissions and Brokerage, etc.;
- A – Assists;
- RL – Royalties and License Fees;
- P – Proceeds;
- – Deductions.

The above mentioned adjustments should be understood in the following ways:

1.T or the transportation costs, etc. include charges for transportation of goods until a border post of Mongolia, loading or unloading costs, costs and fees for completion of transportation documents, insurance costs and handling charges, i.e. charges for heating, humidification, ventilation or freezing of goods in order to maintain their safety and quality as well as costs of feeding or treatment (medical care) of live animals in the course of their transportation.
2.CB or the commissions and brokerages, etc. include those commissions and brokerages (except buying commissions) incurred by the buyer in connection with the sale, costs of containers which are treated as one with the imported goods and costs of packing.
3.A or the assists include the cost or value, apportioned as appropriate of certain goods and services supplied directly or indirectly by the buyer free of charge or at reduced cost for use in connection with the production and sale for export to Mongolia of the imported good.
4.RL or the royalties and license fees may include payments directly or indirectly made or to be made by the buyer in respect to, among other things, patents, trademarks and copyrights as a condition of the sale.
5.P or the proceeds include the value of any part of the proceeds of any subsequent resale, disposal or use of the imported goods that accrues directly or indirectly to the seller (i.e. any payments which, by contractual agreement, are paid by the buyer from such proceeds either directly or indirectly back to the seller of the goods being valued) excluding those relating to patents, trademarks or copyright
6.D or the deductions include the charges for construction, erection, assembly, maintenance or technical assistance undertaken after importation, on imported goods such as industrial plant, machinery or equipment as well as the related training costs paid to the seller; the transportation costs after importation and the duties and taxes paid in the country of importation, etc. EXAMPLES OF CALCULATIONS OF DUTIES AND TAXES

EXAMPLE 1: /Goods Subject to the Excise Duties/

An importer has imported from Japan into Mongolia a car of a model Mark-II. The car was manufactured in 2001 and its engine (cylinder) capacity is 2000 cubic centimeters. The price of the car itself is 2100 USD. The transportation of the car from Japan to Mongolia and other related services in the course of the transportation cost 1400 USD. 1USD = 1180₮. The Customs (ad valorem) duty (CD) rate (R1) is 5% and the VAT rate (R3) is 10% while the excise duty (ED) rate (R3) is specific. There are no other taxes (OT) payable, i.e. the OT is O. Below are the calculations of the duties and taxes payable.

CD=CVxR1=(2100+1400)x1180x0.05=4130000x0.05=206500₮
CD=CVxR1=(2100+1400)x1180x0.05=4130000x0.05=206500₮

According to its year of manufacture and engine capacity as set in the 2006 Law on the Excise Duties, the car is subject to the (specific) excise duty of 2000 USD.

VAT=(CV+CD+ED+OT)xR3=(4130000+206500+(2000x1180)+0)x0.10=669650₮

The total amount (TA) of duties and taxes payable for the imported car is:
TA=CD+ED+VAT=206500+2360000+669650= 3236150₮.

EXAMPLE 2: /Goods Not Subject to the Excise Duties/

An importer has concluded a sales contract to buy 60 tons of sugar from Finland for 325 USD per ton on a commercial term CIF Tyanjin (China). The transportation cost from Tyanjin to Ulaanbaatar (Mongolia) is 1850 USD and the insurance cost is 250 USD. 1USD = 1180₮. The Customs (ad valorem) duty (CD) rate (R1) is 5% and the VAT rate (R3) is 10% while there are no excise duties (ED) and other taxes (OT) payable, i.e. the ED and OT are O. Below are the calculations of the duties and taxes payable.

CD=CVxR1=(325x60+1850+250)x1180x0.05=1274400₮
VAT=(CV+CD+ED+OT)xR3=(25488000+1274400+0+0)x 0.10=25615440₮

The total amount (TA) of duties and taxes payable for the imported sugar is:
TA=CD+VAT=1274400+25615440 =26889840₮.

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