Running Payroll in Mongolia: Employment Taxes & Setup

Payroll in Mongolia centers on four main obligations: personal income tax withholding, social insurance contributions, other statutory employer charges, and periodic payroll reporting to the General Authority for Taxation and the Social Insurance General Office. You need to calculate and withhold employee taxes, add employer contributions on top of gross salaries, and submit both accurate reports and timely payments in Mongolian tugrik (MNT). Requirements can differ by income level, contract type, and whether you operate as a small or large employer, so your internal payroll rules must reflect these distinctions.

Non-compliance can trigger penalties, late-payment interest, and audits, and it can also delay employee benefits and damage trust if net pay or contributions are wrong. This guide walks you through how to structure payroll calculations, apply the correct rates, meet filing and payment deadlines, and choose the right setup whether you have a local entity or use an Employer of Record. By the end, you will understand the practical steps to run compliant payroll cycles in Mongolia in 2026.

In Mongolia, payroll taxes are built around flat personal income tax, mandatory social insurance, and a small set of additional employer-paid statutory charges. You must withhold employee portions from gross pay, add employer contributions, and remit everything together on a monthly basis while filing the required returns.

Personal Income Tax (Salary Tax)

Personal income tax on employment income is levied at a flat 10% rate on the employee’s taxable earnings, after any allowable deductions. Employers withhold this 10% from each payroll run and remit it to the General Authority for Taxation, typically on a monthly basis together with the salary tax return.

If you under-withhold or pay late, the tax authority can assess the unpaid tax, impose late-payment interest, and apply administrative fines. Because the tax is flat, the main compliance risks are incorrect taxable base calculations, missed deadlines, and failing to reconcile annual totals with monthly filings.

Social Insurance Contributions

Social insurance in Mongolia covers pensions, health, unemployment, industrial accidents, and benefits such as maternity, and it is funded by both employer and employee contributions. In 2026, employees typically contribute around 11.5% of gross salary, while employers contribute roughly 12.5%–14.5% depending on the risk category for occupational accidents and diseases.

Contributions are calculated on employment income up to the statutory ceiling set annually and are reported and paid monthly to the Social Insurance General Office. Late or missing payments can lead to penalties, interest, and gaps in employees’ benefit records, which can create disputes and reputational issues for your company.

Occupational Accident And Other Employer Statutory Charges

On top of core social insurance, employers must pay an occupational accident and disease insurance contribution, which usually ranges from about 1% to 3% of payroll depending on the assessed risk level of your industry. This contribution is part of the broader social insurance framework and is fully employer-funded, so it increases your total payroll cost beyond the employee’s gross salary.

These contributions are declared and paid together with other social insurance amounts on a monthly basis. Under-reporting payroll or misclassifying your risk category can result in back assessments, higher future rates, and fines, so you should confirm your correct rate with the Social Insurance General Office and review it whenever your business activities change.

Most employers in Mongolia pay salaries by bank transfer in Mongolian tugrik (MNT), using local commercial banks or integrated payroll platforms. While cash payments are not prohibited, they are less common for formal employment because they complicate record-keeping and statutory reporting.

Salaries are typically paid monthly, and employment contracts should clearly state the regular payday, which is often at month-end or within the first days of the following month. If you do not have a Mongolian entity, you will usually rely on an Employer of Record or a global payroll partner that can handle local payments, tax withholding, and filings on your behalf.

Payslips should show at least the pay period, gross salary, itemised allowances and overtime, employee social insurance and income tax deductions, employer contributions, and net pay. Providing payslips in Mongolian, or bilingually, helps employees understand their entitlements and supports you in case of inspections by the Labour and Social Welfare authorities.

• Payment Method: Use local bank transfers in MNT through a Mongolian bank account or a payroll provider connected to the local banking system.
• Pay Frequency: Set a consistent monthly pay date in employment contracts and align it with your internal payroll cut-off and approval processes.
• No-Entity Hiring: Engage an Employer of Record to employ staff locally, manage payroll, and handle tax and social insurance with the authorities.
• Payslip Content: Include gross pay, all taxable and non-taxable items, statutory deductions, employer contributions, and final net pay for the period.
• Data Required: Collect each employee’s registration number, bank details, tax residency status, and social insurance registration before first payroll.
• Record Retention: Store payroll records, payslips, and filings for the minimum statutory period so you can respond to audits or employee queries.
• Exchange Rate Management: If you budget in a foreign currency, fix an internal exchange policy but always pay employees in MNT unless a lawful exception applies.

Getting payroll set up correctly in Mongolia determines how smoothly you can hire, pay, and stay compliant with the General Authority for Taxation and the Social Insurance General Office. The steps differ depending on whether you register your own legal entity or operate through an Employer of Record, but in both cases you must ensure accurate calculations, timely filings, and clear documentation.

With a local entity, you handle registrations, bank accounts, and direct filings yourself, while a no-entity model shifts those obligations to a licensed local employer that runs payroll on your behalf. Understanding this split helps you decide how much control and administrative responsibility your team wants to retain.

• Incorporation Or EOR Decision: Decide whether to establish a Mongolian legal entity or use an Employer of Record for faster market entry.
• Tax Registration: Obtain a corporate tax registration and employer tax ID with the General Authority for Taxation for salary tax withholding.
• Social Insurance Registration: Register as an employer with the Social Insurance General Office and confirm your applicable contribution and accident insurance rates.
• Local Bank Account: Open a Mongolian MNT bank account dedicated to payroll payments and statutory remittances.
• Employment Contracts: Draft Mongolian-compliant employment contracts specifying salary, pay frequency, working hours, and benefits.
• Payroll Policies: Define internal rules for overtime, bonuses, allowances, and leave so they can be consistently reflected in payroll.
• Payroll System Setup: Configure payroll software or your provider’s system with Mongolian tax and social insurance rates, ceilings, and reporting formats.
• Onboarding Data Collection: Collect employee identification numbers, addresses, bank details, and social insurance registration before first payday.
• Compliance Calendar: Build a monthly calendar for salary tax and social insurance filing and payment deadlines, plus annual reconciliations.
• Internal Controls: Implement approval workflows and reconciliations to catch errors before filings and payments are submitted.

Example Of Salary Tax Calculation

Assume an employee earns a monthly gross salary of 2,500,000 MNT in 2026, within the social insurance ceiling. You will calculate employee social insurance contributions, withhold 10% personal income tax on the remaining taxable base, and then add employer social insurance and accident insurance on top to understand your total cost.

The process is to determine the contribution base, apply the correct percentages for both employer and employee, and verify that the totals reconcile with your payroll ledger and statutory reports. This structured approach helps you avoid underpayments and ensures that both net pay and employer costs are transparent.

• Step 1 – Determine Gross Pay: Confirm the monthly gross salary of 2,500,000 MNT including fixed allowances that are subject to contributions.
• Step 2 – Calculate Employee Social Insurance: Apply the combined employee rate of about 11.5% to 2,500,000 MNT to get the employee contribution to withhold.
• Step 3 – Calculate Income Tax: Subtract employee social insurance from gross, then apply the 10% personal income tax rate to the resulting taxable income.
• Step 4 – Calculate Employer Contributions: Apply the employer social insurance and accident insurance rate (for example, around 13.5%–15.5% total) to the same contribution base to find your additional cost.
• Step 5 – Derive Net Pay And Total Cost: Net pay equals gross minus employee social insurance and income tax, while total employer cost equals gross plus employer contributions.

Submitting Employee Tax In Mongolia

Employers submit salary tax and social insurance in Mongolia mainly through the electronic portals of the General Authority for Taxation and the Social Insurance General Office, supported by bank transfers from a local account. To complete submissions, you need your employer tax ID, social insurance registration number, payroll period details, and the breakdown of contributions and tax withheld for each employee.

• Tax Portal Filing: Log into the General Authority for Taxation e-filing system to submit monthly salary tax returns and confirm the payable amount.
• Social Insurance Portal: Use the Social Insurance General Office online system to file contribution reports and generate payment references.
• Bank Transfer Payments: Pay assessed amounts via bank transfer from your Mongolian account, quoting the correct reference and period.
• Payroll Software Integration: Where available, connect your payroll system to export or upload standard files directly into the tax and social insurance portals.
• Third-Party Provider: If you use an Employer of Record or payroll provider, review their monthly reports and confirmations of filings and payments for your records.

Payroll Tax Due Dates In Mongolia

Understanding the tax obligations for both employers and employees is crucial when operating in Mongolia's business landscape. This section explains how taxes and statutory fees affect payroll and individual earnings in Mongolia.

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 12.5%–14.5% on top of the employee salary in Mongolia. These contributions cover pension, health, unemployment, and occupational accident insurance, and they are calculated on employment income up to the annual ceiling set by the Social Insurance General Office.

Employee Payroll Tax Contributions

In Mongolia, the typical estimation for employee payroll contributions cost is around 11.5%.

Individual Income Tax Contributions

Individual income tax in Mongolia is generally applied at a flat 10% rate on employment income, after deducting mandatory employee social insurance contributions and any allowable reliefs. Employers act as withholding agents, so employees usually settle their income tax through payroll rather than direct payments.

Pension in Mongolia

Pension contributions in Mongolia are funded jointly by employers and employees through the social insurance system, with both sides paying a percentage of salary up to an annual ceiling. These contributions build entitlement to state pension benefits, so accurate and timely reporting is essential to protect employees’ future retirement income.