Mongolia's Parliament has approved a package of tax reforms that will significantly reduce the personal income tax burden for low- and middle-income earners over the next two years.

The legislation, submitted by the government in May, includes amendments to the Personal Income Tax Law and introduces new tax brackets aimed at providing greater tax relief for individuals with lower incomes.

Under the current system, employment income is generally taxed at rates ranging from 10 to 20 percent. The newly approved law changes this structure by introducing a tax-free income threshold and a reduced tax rate for lower-income earners.

Beginning January 1, 2027, the first MNT 792,000 (approximately USD 230) of a person's monthly income will be exempt from personal income tax.

From January 1, 2028, income between MNT 792,000 and MNT 2 million (approximately USD 580) will be taxed at 1 percent, replacing the much higher effective tax burden under the current system.

For example, an employee earning MNT 2 million per month currently pays around MNT 200,000 in personal income tax. Under the new rules, that amount will fall to MNT 12,000.

Likewise, a person earning MNT 3 million per month currently pays MNT 300,000 in personal income tax. Once the reform is fully implemented, their tax payment will decrease to MNT 112,000.

The reform will be introduced in two phases. The tax exemption for income up to MNT 792,000 will take effect in 2027, while the new one-percent tax bracket for income up to MNT 2 million will come into force in 2028.

The government says the changes are intended to ease the tax burden on lower- and middle-income households while making Mongolia's personal income tax system more progressive.

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