LAW OF MONGOLIA May 20, 2008, Government House, Ulaanbaatar. GENERAL LAW OF TAXATION /Revised version/ CHAPTER 1.

GENERAL PROVISIONS Article 1. Purpose of the Law 1.1.The purpose of this Law is to define the legal framework of establishment, setting, imposition, filing, payment, auditing and collection of taxes in Mongolia, fees, payments, rights, obligations and liabilities of taxpayers, and to regulate relations pertaining to rights, obligations and liabilities of taxpayers and tax administration. Article 2. Tax Legislation 2.1. The tax legislation shall comprise of the Constitution of Mongolia, this Law and other legislative acts enacted in conformity therewith. 2.2. Unless the international treaties of Mongolia stipulate otherwise than the Mongolian tax legislation, the provisions of international treaties shall prevail. Article 3. Introduction, Amendment, Granting tax credit and exemption and Annulment of Taxes 3.1. Solely the State Ih Hural (Parliament) is authorized to introduce, amend, grant tax credit and exemption, and annul taxes by law. 3.2. Except for cases mentioned below, the relations pertaining to establishing, amendment of any taxes, tax credit and exemption, tax imposition and payment shall be regulated solely by the taxation law: 3.2.1. establishing special tax regime in free zone; 3.2.2. Establishing regime maintaining tax conditions applied at the time when stability or investment agreement with investor is concluded by the Cabinet within the rights and limits of legislation. Article 4. Law Definitions 4.1. The following definitions set forth in this Law shall be understood as follows: 4.1.1. Transferred income means transfer through account of payment for work and services provided by an individual or legal entity on a contract base to this person or entity or on his request to other entities;

4.1.2. termination of tax payment liability due to invalidation of law on certain type of law means invalidation of the law on tax of type in question by the State Ih Hural and completion of the term for tax settlement; 4.1.3.electronic tax document means set of documents created, stored, sent or received electronically and secured by secure digital signature in accordance with tax legislation; 4.1.4.digital signature means personal key of tax administration or taxpayer created by specific algorithms for the purpose of verifying its integrity and correctness. 4.1.5. unified database of tax registration and information means set of data, information, software created, collected, received, processed and stored in accordance with requirements of unified classification, coding, standards and methodology 4.1.6. withholder means entity which has a function of imposition and withholding for further transfer to the state or local budget of tax on revenue of taxpayer in compliance with the taxation legislation; 4.1.7.tax return means tax return of legal entity or tax return form for personal income tax created in writing or electronically. 4.1.8. objective reason means following circumstances: 4.1.8.. being sick; 4.1.8.b.being treated; 4.1.8.c.looking after sick person; 4.1.8.d.being on business trip abroad or in the country; 4.1.8.e.being on training course; 4.1.8.f.being on public mobilization; 4.1.8.g.being within the quarantize zone for public health hazard infectious disease; 4.1.8.i. fire or natural disaster, or force majeure /flood, draught, dzud, dangerous snowstorm or dust storm, earthquake /. 4.1.9.to exercise resistance means following acts done to state tax inspector in discharge of his duties; 4.1.9.a.beating; 4.1.9.b. kicking; 4.1.9.c. pushing; 4.1.9.d. pouring any liquid; 4.1.9.e. physical resistance; 4.1.9.f. threatening; 4.1.9.g. word humiliation; 4.1.9.i. frightening; 4.1.9.j.intimidating; 4.1.9.k.other pressure on purpose. CHAPTER TWO Taxation of Mongolia Article 5. TAX SYSTEM 5.1.The Mongolia tax system comprises of taxes, fees and payments (hereinafter referred to as tax) 5.2.The term tax means money which is transferred to the state and local budget without repayment by assessing at a fixed rate, within a fixed period of time of tax on income,

property, goods, work and service of a individual or legal entity in conformity with the legislation. 5.3.The taxes comprise of direct and indirect taxes. 5.4.Direct tax is assessed in direct relationship with monetary amount of income, profit or property of individual or legal entity. 5.5.Indirect tax is assessed on certain types of goods and services regardless of activities of individual or legal entity. 5.6.The term fee means money which is paid to the state and local budget for the service provided by the state organizations to individual or legal entity in conformity with the legislation 5.7.The term payment means money which is paid to the state and local budget and special purpose fund for use of the state owned land, entrails of the earth, and its minerals, forest, plants, springs, water sources, pollution of air, water and soil, hunting animals by individual or legal entity. Article 6. Taxable Item 6.1.The taxable items shall be income, property, goods, work and service, specific right, land, its entrails, natural and mineral resources, pollution of air, soil and water. Article 7. Types of Taxes 7.1. Taxes are divided by types and specific tax relations are regulated by the specific tax law. 7.2. Specific type of tax shall be state tax or local tax. 7.3.The state taxes are referred to taxes, rates and bases for which are introduced by the State Ih Hural and Cabinet and which are collected in the same way in the territory of Mongolia.They shall include the following taxes: 7.3.1.Corporate income tax; 7.3.2.Customs duty; 7.3.3.Value-added tax; 7.3.4.Excise tax; 7.3.5.Tax on auto fuel and diesel fuel; 7.3.6.Payment for use of mineral resources; 7.3.7. Tax on price increase of some commodities; 7.3.8. Payment for special licence for mineral exploration and use. 7.4. The local taxes are referred to taxes, rates and bases for which are introduced by the State Ih Hural, Cabinet, Representatives Hural of each aimag and the capital city and which are collected in each territory for the local budget or which are applied only on specific territory. They shall include: 7.4.1.Personal income tax; 7.4.2. Tax on income of individuals who are engaged in work and services income from which can not be determined; 7.4.3.Real estate tax; 7.4.4.State stamp tax; 7.4.5.Payment for use of water and springs; 7.4.6.Tax on auto vehicles and self-moving vehicles; 7.4.7.License fee for use of natural resources, except mineral resources; 7.4.8.Payment for use of natural plants;

7.4.9.Payment for use of widely spread mineral resources; 7.4.10.Payment for use of hunting resources, animal hunting and catching license fee; 7.4.11.Land payment; 7.4.12.Payment for procurement and use of wood fuel and timber from forest; 7.4.13.Gun tax; 7.4.14.City tax; 7.4.15.Dog tax; 7.4.16.Inheritance and gift taxes. Article 8. Tax Rates 8.1. Rates of taxes shall be defined by the State Ih Hural, Cabinet or Representative Hural of aimag or capital on authorization from State Ih Hural in accordance with legislation. 8.2. With exception of paragraphs 8.3, 8.4 of this Law, all other rates of taxes shall be defined by the State Ih Hural. 8.3.Cabinet shall define the rates of payment for use of water resources set forth in paragraph 7.4.5 of this Law and taxes set forth in paragraphs 7.4.10-7.4.12 within the limits approved by the State Ih Hural. 8.4.Representative Hural of aimags and capital shall define the rates of payment for use of springs resource set forth in 7.4.5 of this Law and tax set forth in 7.4.8 within the limits approved by the State Ih Hural. Article 9. Tax Credit and Exemption 9.1.A taxpayer shall be provided the tax credits and tax exemptions in the following forms in conformity with the legislation: 9.1.1.Tax deduction 9.1.2.Reduction of tax rates 9.1.3.Tax exemption of income, property, goods, work and services beneath established minimum level 9.1.4.Tax exemption of a taxpayer; 9.1.5.Tax exemption of some part of taxable item ; 9.1.6.Other tax credit set forth by the legislation. Article 10. Termination of Tax Payment Obligation, Transfer Thereof to the Others 1 10.1.In the following cases, the obligation of the tax payment is considered to terminate: 10.1.1.The specific tax law is canceled; 10.1.2.The specific tax is paid; 10.1.1.3 The taxpayer is fully exempt from the specific taxes; 10.1.1.4. The taxpayer has deceased or considered to be dead; 10.1.1.5. The taxpayer legal entity has been liquidated. 10.2. The obligation of the tax payment of a taxpayer who has deceased or considered to be dead and the right connected with it shall transfer to the taxpayers heir. 10.3. The obligation to pay unpaid fully or partially tax payment of re-organized legal entity and the right connected with it shall transfer to newly organized legal entity as a result of reorganization. If legal entity were separated as an independent unit, the obligation of the tax payment according to the tax base shall transfer to them.

10.4. If a legal entity is bankrupt or has been liquidated, the commission of liquidation or the committee of shareholders should pay to the budget fully or partially owed payment of taxes from remaining property of that bankrupted or liquidated legal entity in accordance with article 7 of this Law. Article 11. Statute of limitations relating to taxes 11.1.The statute of limitations relating to taxes, interest and fines shall be 5 years. This shall not apply to the statute of limitations set forth in the Civil Code of Mongolia. 11.2. The statute of limitations shall not apply to payment of arrears owed on taxes, interest and fine. 11.3.The statue of limitations set forth in paragraph 11.1 of this Law shall be counted in following ways: 11.3.1.in case of tax which is filed and paid once a year according to legislation, from the next working day after the last day when the tax return shall be filed and payment made; 11.3.2.in case of tax which is filed and paid monthly or quarterly according to legislation, from the next working day after the last day when the December tax return or years last tax return shall be filed and paid; 11.3.3.in case of tax which is paid after a certain period after sale is made according to legislation or withholding tax, from the next working day after this specific tax return shall be filed; 11.3.4.in case of tax which is paid without filing tax return, from the next working day after the date which is stated in the relevant tax law as the last day when this tax shall be paid. 11.4.The statute of limitation shall be stopped and counting started anew from the date when tax administration gives a letter of notification set forth in article 54 of this Law. 11.5.In case of taxpayer has ceased activity or was liquidated, statute of limitation shall be counted starting from the date of cession of activity. 11.6.The statute of limitation for taxes, interest and fine revealed by the tax audit shall be counted from the date when state tax inspector s act became valid. CHAPTER THREE Taxpayer, rights and obligations Article 12. Taxpayer 12.1. The individual or legal entity which has taxable income, property, goods and rights or by conducting activity has aquired obligation to pay taxes for use of land, its entrails, natural and mineral resources, pollution of air, water and soil shall be taxpayer according to tax legislation.. 12.2.The specific tax law shall define in detail taxpayer individual or legal entity for this specific tax. Article 13. Registration of Taxpayer 13.1.Individual or legal entity which aquired obligation to pay taxes or withhold taxes according to tax law are subject to taxpayer registration at the Tax Administration. 13.2.Unless otherwise provided by Law, a newly established legal entity shall open tax file and register as taxpayer at the relevant Tax administration within 14 days since receipt of certificate from the registration agency.

13.3.Unless otherwise specified by law, an owner or possessor of the taxable items, other than income, shall open tax file at the relevant Tax administration within one month after starting ownership or possession thereof. 13.4.Tax administration shall open a tax file by the registration number of a taxpayer or tax withholder and keep the following information and data on it: 13.4.1. Full name, registration number, certificate or tax file book number, home address and contact phone number of a taxpayer individual; 13.4.2. Name, address, number of employees, curriculum vitae, photos and citizen card number of governing board members of taxpaying legal entity; 13.4.3. Date of registration of legal entity as a taxpayer and line of business thereof; 13.4..4. Copy of report estimating cost of real estate, land possessing status, copy of balance sheet indicating amount of fixed assets and working assets confirmed by auditor; 13.4.5. Name, number, location, address and contact phone number of shareholders and branch units thereof; 13.4.6. Type of tax imposed on taxpayer and bank account number thereof; 13.4.7. Copy of balance sheet, acts and letter of notification. 13.4.8. Tax audit terms of reference, report, act of violations, notification, demand letter for auditing taxpayer. 13.5. A taxpayer shall notify the relevant Tax administration within 20 working days since disposal of real estate by way of selling or giving as a gift and etc. 13.6. Unless otherwise specified by law, a taxpayer shall notify the Tax administration about the changes in his/her state registration certificate and file within 20 working days and have those changes made in his/her registration documentary and files. 13.7.Any taxpayer and tax withholder shall state taxpayer registration number, given to it, in its report, statement, customs clearing and invoice and other necessary documents, specified by law. 13.8.Non-registration as taxpayer shall not be a ground for exemption from obligation regarding imposition, payment, withholding of taxes and liabilities arising thereof. 13.9. Chairman of the General Department of National Taxation shall approve regulation on taxpayer registration. Article 14. Providing principles of assuring a taxpayers rights and legitimate interests 14.1.In exercising its competence, tax administration and a state tax inspector shall assure taxpayers rights and legitimate interests and giving confidence thereto. 14.2. Tax administration and a state tax inspector shall not interfere in a taxpayers activities pertaining to matters other than conducting tax audit, determining tax imposition, tax payment supervision and tax collection according to the Law. 14.3. Tax administration, a state tax inspector and other officials of tax administration must maintain confidentiality of a taxpayers secrets, specified by the Law on Individuals privacy and Law on Organizations secrets as a secret and which he/she obtained while performing his/her duties. Such information shall be given only to the following officials of the state bodies, by decision of a head of the tax administration: 14.3.1. State tax inspector and other officials of the tax administration, who are performing his/her duties specified by Law;

14.3.2. Enquiry, investigation and court officials who deal with crimes related to the violation of tax legislation and prosecutor officials on matters pertaining to the case; 14.3.3. Authorized officials of tax administration of other countries according to the duty of Mongolia set forth by International Treaties. 14.4. In cases, except set forth by the paragraph 14.3 of this Law, information and documents, not prohibited by law, may be disclosed based on a taxpayers written consent. 14.5. Tax administration may disclose information without written consent of taxpayer mentioned in the paragraph 14.4 of this Law if his/her violation of tax legislation has been proved, or if taxpayer is being searched for tax avoidance or he/she has escaped from his/her address or location. Article 15. Serving a taxpayer 15.1.Tax administration and a state tax inspector shall provide the following services to a taxpayer in fulfilling duties thereof specified by legislation: 15.1.1. Explaining of tax legislation; 15.1.2. Providing instructions, methodologies, handbooks and application forms pertaining to the consistent abidance of tax legislation, determining tax duties, and releasing reports and statements; 15.1.3.organizing training on tax legislation, instructions and methodologies; 15.1.4. enabling conditions to get advice for group or individual taxpayers and give advice on fulfillment of tax duties. 15.1.5.organizing promotion, training and information programmes via mass media and tax administration website, publishing. Article 16. Giving professional advice to taxpayers 16.1. The relations pertaining to giving taxpayers professional advice services for the purpose of abiding taxpaying duties defined by tax legislation, protecting his rights and legitimate interests shall be regulated by law. Article 17. Rights of a Taxpayer 17.1.The taxpayer shall have the following rights: 17.1.1.to receive from tax administration and state tax inspector information and advice pertaining to abidance of tax legislation, excercising rights and fulfilling duties of taxpayer, regulations, methodologies, forms for tax imposition, payment, filing; 17.1.2.to enjoy tax credit and tax exemption according to the tax legislation; 17.1.3. to extend tax payment period according to legislation; 17.1.4. to get refunds of overpaid taxes or interest or sheet to apply overpaid taxes to future taxes obligations 17.1.5. to protect his rights and legitimate interests in person or through authorized representativem professional advisor, be present at tax audit; 17.1.6. to examine acts, conclusions, other documents produced by tax administration, in case if he regards them as groundless or unlawful, to file a complaint through administrative or court channels within 30 days from examining them; 17.1.7.To make or get explanations in reference with tax imposition, tax payments and results of tax audit;

17.1.8.To demand abidance of tax legislation from tax administration, state tax inspector, to get repayment for damages caused by unlawful decisions or actions of the Tax Administration in conformity with the legislation; 17.1.9.To file a protest for unlawful actions and decisions of the Tax Administration and state tax inspector to a court or authorized administrative agency. This protest shall not serve a ground for stopping payment of imposed taxes, fine and interest. 17.1.10.To receive assistance and advice from tax advisor authorized by law for the purpose of implementing obligations and excercising rights given by tax legislation; 17.1.11. other rights set forth by legislation. Article 10. Taxpayers Obligations 18.1.A taxpayer shall have the following obligations: 18.1.1.To report ones taxable item and tax honestly and to pay taxes within the prescribed time limit; 18.1.2. To provide the Tax Administration with corresponding calculations, reports and returns on imposed taxes and payment of taxes within the prescribed time limit; 18.1.3. To keep book-keeping records and accounting in compliance with regulations and accounting standards, provide balance sheets and reports on financial and economic operations; 18.1.4. To meet the demands of the Tax Administration to eliminate any infringements are occurred in case of committing violation of the tax legislation; 18.1.5. To sign the act or conclusion of the audit of the Tax Administration in case of agreement therewith. To submit written explanation to tax administration within 10 working days in case of disagreement therewith; 18.1.6. To withhold correctly taxes imposed on others wages, transferred income, pay them to the budget within prescribed period; 18.1.7. To notify the Tax Administration about obtaining a special permit for conducting production and services not prohibited by law within 3 days after receipt of such permit from the relevant state administrative body and to have a note made in the tax payers certificate; 18.1.8. To use cashier machines meeting the requirements of Mongolian standards; 18.1.9. To submit to the Tax Administration a document on transfer into possession of other person of taxable property and right; 18.1.10.To ensure not to provide opportunity for tax evasion by assigning for use by other person of its name, address, stamp, seal, state registration certificate, company and personal account, signature; 18.1.11.To notify the relevant Tax Administration unit about lease or sale to an individual or legal person of a special permit obtained from an authorized organization; 18.1.12. To notify the Tax Administration about opening or closing a bank account; 18.1.13. To provide financial and other documents and materials needed for tax audit at the demand of tax administration, state tax inspector, to comply with tax audit. 18.1.14. Other obligations set forth by the legislation. CHAPTER FOUR NATIONAL TAX ADMINISTRATION OF MONGOLIA

Article 19. Structure of National Tax Administration 19.1.The National Tax Administration of Mongolia is comprised of the General Department of National Taxation, tax offices of aimags, capital city, tax units of soums (county) and state tax inspectors. 19.2. The General Department of National Taxation can have branch units responsible for state budget income, audit, training, registration and press. 19.3.The General Department of National Taxation, and aimag and capital city tax agencies shall run Tax Dispute Settlement Council /further referred as Dispute Settlement Council/ authorized to settle disputes arising between taxpayers and the Tax Administration. The procedure of work of the Tax Dispute Settlement Council will be set forth by the Cabinet. Article 20. Logo of Tax administration 20.1. Tax administration shall have a logo and its description, regulation for its use shall be approved by the head of the General Department of National Taxation. Article 21. Charter of National Tax Administration 21.1.The Charter of the National Tax Administration shall be approved by the Cabinet. Article 22. Functions of The National Tax Administration 22.1.The National Tax Administration shall exercise the following functions: 22.1.1. To organize work of implementing tax legislation, provide taxpayers with information, advice, to conduct training and public awareness building; 22.1.2.To supervise the implementation of the tax legislation; 22.1.3.To build up the state and local tax revenue. Article 23. Principle of Work of The National Tax Administration and State tax inspectors 23.1. The National Tax Administration and state tax inspectors will follow in its work the principles of rule of law, impartiality, respect of taxpayers rights and legitimate interests, direct reporting of low-level organization to higher-level organization. Article 24. Ensuring of rule of law and impartiality principles by Tax administrations and state tax inspectors

24.1. The National Tax Administration and a state tax inspector shall be impartial and abide only by the Law and other legislative acts enacted in conformity therewith in exercising its competence. 24.2. A citizen, legal entity and an official shall not interfere or show pressure on tax administration, a state tax inspector in exercising its competence. Tax administration and a state tax inspector shall have right to appeal to the relevant authorities about the person interfering and showing pressure for resolution of this matter. 24..Unless authorized by the legislation, no person or authority shall render decisions on matters pertaining to the tax administration and state tax inspectors competence. 24.4. Unless otherwise provided by law, no person shall take responsibility on matters pertaining to tax imposition, tax credit and exemption before others.

24.5. An individual and legal entity shall follow procedures, instructions and methodologies that are enacted by the highest body of the tax administration with the purpose of enabling conditions for consistent nationwide abidance of tax legislation and ensuring implementation thereof. Article 25. Providing principles of assuring a taxpayers rights and legitimate interests 25.1. Tax administration and a state tax inspector shall fulfill the provisions of article 14 of this Law and ensure principles of respect for taxpayers rights and legitimate inte rests. Article 26. Budget of the National Tax Administration 26.1.The expenses for activities and investment of the National Tax Administration shall be financed from the budget. Article 27. Management of Tax Administration and Powers Thereof 27.1.The National Tax Administration shall have a unified and centralized management 27.2. The General Department of National Taxation shall work under supervision of the Member of Cabinet in charge of finance and budget issues, the aimag and capital city tax offices and divisions under supervision of the General Department of National Taxation, district tax divisions and soum state tax inspectors under supervision of capital city and aimag tax department and division. 27.3. The General Department of National Taxation shall provide the work of tax agencies of all levels with professional and methodological management, budget and assets, supervise their activities. 27.4. The Chairman of the General Department of National Taxation shall appoint or dismiss the head of aimag and capital city tax departments and divisions, the head of the capital city tax department shall appoint or dismiss a head of the district tax division respectively upon consultation with the Governor of the relevant level. 27.5. The Chairman of the General Department of National Taxation and heads of aimag, capital city, district tax departments and divisions shall be appointed after selection and examination from state officials with state tax inspector rank, with professional background in finance, economics and accounting, with experience in tax administration no less than 3 years in accordance with provisions of paragraph 17.1 of the Civil Service Law. 27.6. A Chairman of the General Department of National Taxation shall be a Chief state tax inspector and shall exercise the following powers along with the powers of the state tax inspector specified in Article 29 of this Law: 27.6.1. to provide National Tax Administration and state tax inspectors in exercising their functions with management, organization, budget and assets, organize supervision of their activities; 27.6.2. to enact procedures, instructions, methodologies and recommendations to be followed in Mongolia to ensure implementation of tax legislation; 27.6.3. to grant, suspend and annul rights of state tax inspectors, to dismiss and to impose disciplinary sanctions; 27.6.4 to issue ordinances within the powers extended by the tax legislation; 27.6.5. to participate in the development of draft tax legislation, prepare proposals on methods,forms and possibilities for their implementation by tax administration and present to the Cabinet and State Ih Hural; 27.6.6. to make proposals to international treaties and agreements on avoidance of double taxation of income and property and on prevention of tax evasion;

27.6.7. to revise, amend and annul the acts of audit, conclusions and other decisions issued by state tax inspectors in compliance with law; 27.6.8. to review and approve or amend and annul decisions of the Dispute Settlement Council of the General Department of National Taxation; 27.6.9. to appoint, dismiss, transfer, rotate or reward employees of the General Department of National Taxation; 27.6.10. to dispose of the budget and assets of the National Tax Administration. Article 28. Competence of The National Tax Administration 28.1. The National Tax Administration shall excercise the following functions: 28.1.1. to organize work of consistent abidance of tax legislation on the territory of Mongolia; 28.1.2.provide taxpayers with methodologies, instructions and information for implementation of tax legislation, giving advice; 28.1.3.organize tax audit work in order to check whether the taxpayer has assessed taxable items correctly and paid fully and on time; 28.1.4. To provide exemptions and deductions to a taxpayer in conformity with the tax legislation; 28.1.5. to collect third party information about taxpayer and keep a database, use it for tax audit and tax collection activities; 28.1.6.To impose a tax in the amount specified in law for similar types of business on a taxpayer which fails to maintain primary records and accounts and whose income and expenses cannot be defined 28.1.7.To temporarily freeze the bank account of a legal entity which did not pay taxes on time, until full payment of taxes is made; 28.1.8 to collect tax arrears, to conduct tax collection activities in accordance with regulations set forth in this law; 28.1.9.To withhold over paid taxes for the next tax liability or, if taxpayer should ask for a refund, overpaid taxes will be paid back within 10 days from the end of the assessment 28.1.10.To impose penalties indicated under the law on a taxpayer who has failed to pay taxes, interest, fine and did not submit a tax return and records in time, and who did not make appropriate measures to stop violations which were discovered during the tax inspection; 28.1.11.to annul and revise the decisions of the lower level Tax Administration, if the upper level Tax Administration finds it groundless; 28.1.12. to organize work of training and authorizing tax advisors in accordance with legislation, provide assistance for their activity, work together; 28.1.13.To obtain information, studies, other relevant documents needed for tax investigation from individual or legal entity without cost; 28.1.14. to provide electronic services; 28.1.15. to conduct electronic audit; 28.2. To appeal to court in the following cases: 28.2.1.to stop the business operations of a taxpayer which many times seriously violated tax legislation until elimination of these infringements.

28.2.2. to confiscate for ever income gained from carrying out production and services prohibited by law; 28.2.3. to confiscate for ever income of a taxpayer gained from carrying out production and services not prohibited by legislation, but for which a relevant permit was not obtained; 28.2.4. to confiscate for ever income gained by a taxpayer through invalid contract or unlawful act; 28.2.5. to impose appropriate sanctions on the person, who posed hindrance, resistance, put a pressure in connection with his work and endangered health and life of a state tax inspector 28.2.6. other cases set forth by legislation Article 29. State tax inspectors competence 29.1. The state tax inspector shall exercise the following functions: 29.1.1. To audit accounts, balance sheets, records, projections and other financial documents connected with imposition and payment of taxes and to get explanations and surveys referred above mentioned examination, on revealing violation produce act, conclusion, other relevant documents; 29.1.2. To obtain at no cost from a taxpayers partner business entity, organization, individual and financial institutions evidence and copies of documents, bank transactions required for tax audit; 29.1.3. To temporarily seize and seal property and documents evidencing of hiding by a taxpayer of taxable items, collateralize property for the purpose of tax arrears settlement; 29.1.4. To enter premises and warehouse (regardless of its location) of taxpayer used for gaining income or for storing taxable items to conduct audit, inventory taking, work photo taking and, if necessary, to carry out inspection; 29.1.5. In the event of a failure of legal entity to withhold pay to the budget tax on labor remuneration and income paid to others, to have the legal entity to repay from its assets; 29.1.6. To impose the liability defined in paragraphs 74, 75 of this Law on a taxpayer who violated tax legislation; 29.1.7. To supervise whether taxpayers book-keeping records and accounting, tax returns, assessment of income and tax, documentation are conducted in accordance with legislation, give professional and methodological advice; 29.1.8. to abide strictly Mongolian tax and other legislation when conducting audit of tax imposition and payment, collecting taxes; 29.1.9. to follow strictly Code of Ethics of Civil Servants and Code of Ethics of state tax inspector; 29.1.10. to transfer taxes, payments, fees, interest and fine to the budget within period prescribed in law; 29.1.11. to ensure implementation of tax audit act, conclusion or other decision; 29.1.12. to respect legitimate interests of taxpayer, give advice and assistance within legislation framework on tax imposition and tax payment issues; 29.1.13. to maintain confidentiality of taxpayers secrets set forth by law. Article 30. Prohibited actions for state tax inspector

30.1. In addition to actions prohibited for civil servants by Civil Service Law , a state tax inspector is prohibited following actions: 30.1.1.Commence and conduct tax inspections without assignment. 30.1.2.Print out on his/her own the state tax inspectors act and conclusion print -out sheets, utilize invalidated or false forms. 30.1.3.Present to the taxpayer state tax inspector act, conclusion, and report in draft form, before their finalization. 30.1.4. Make amendments to and changes in the presented and certified act, conclusion, and report. 30.1.5.Violate principles of the rule of law and non-withholding interference from the outsiders. 30.1.6. Disrespect the taxpayer rights and legitimate interests. 30.1.7. Breach Code of Ethics of state tax inspector. 30.1.8. Disclose off the taxpayer confidential information to persons other than set forth in article 14 of this Law, utilize it for private purposes. 30.1.9. Receive tax returns, impose taxes or conduct tax audits without state tax inspector license or if this license has expired; 30.1.10. to be lax in providing implementation of acts, conclusion, other documents, supervsion thereof; 30.1.11. to keep the accounting books, balance sheet and auditing documents pertaining to tax payer.; 30.1.12. to enable conditions for taxpayer to evade taxes, to advise, pressure or demand taxpayer to break the law; 30.1.13. not to register taxpayers oral or written proposal, request, complaint, information in the tax administration unified documentation register or confidential documentarion register, or to investigate and resolve unregistered proposal, request, complaint, information; 30.1.14.in case of receiving application, complaint or information regarding violation of tax legislation or evasion of taxes, to investigate or organize investigation oneself. Article 31. Unified tax registration and information database. 31.1.National tax administration shall have unified tax registration and information database. 31.2. Unified tax registration and information database has following purposes: 31.2.1.supervise tax imposition, payment, collection, provide fast management; 31.2.2.organize efficiently tax audit work; 31.2.3. to provide consistent abidance of tax legislation in the whole country; 31.2.4. to ensure disclosure and transparency of tax administration activities; 31.2.5. organize fast taxpayer services. 31.3. Tax administration has a right to collect third party data to the database set forth in paragraph 31.1 of this Law in conformity with legislation. Article 32. Procedure for collecting information and data, conducting audit

32.1.Tax administration and a state tax inspector shall follow the following procedures in defining tax liabilities of a taxpayer, collecting information and data on tax collection and supervising thereof: 32.1.1. To present tax audit assignment, general and special terms of reference, a state tax inspectors ID and explain purpose of his/her actions 32.1.2.When temporarily seizing document, making copies of related documents and items call for a witness to be present, keep protocol and give it to them for signing; 32.1.3. To take photo and video record of evidence, that can be used as a proof; 32.1.4. To have explanations made in written form or keep protocols of inquiry or discussions and have them signed by relevant people; 32.2. In case, a state tax inspector uses others equipments in making copies of necessary information and data, he/she shall pay for such use at a market price or agreed price. 32.3. The head of the tax administration in charge of audit shall supervise day to day activities of state tax inspector conducting audit and provide him with professional and methodological management. Article 33. Documents to be issued by the Tax administration, state tax inspector 33.1.Tax administration and a state tax inspector while exercising his/her competence on supervising tax imposition, tax payment and tax collection shall issue statement, act, demand, letter of notification, invoice, conclusion, agreement, and a protocol /hereinafter referred as to protocol/. 33.2.Tax administration and a state tax inspector shall issue documents, set forth in the paragraph 33.1 of this Law according to the following grounds and procedures and taxpayer shall fulfill request set therein: 33.2.1.Tax administration and a state tax inspector shall write a statement for calling on a taxpayer or other person within its competence specified in the Article 28, 29 of this Law. In such statement, a date of issuing thereof, full name and signature of a head of tax administration or a state tax inspector, a date of compliance with specified demand, a date of handing over of the statement shall be stated. 33.2.2.Tax administration and a state tax inspector shall write an act for determining tax amount, for sealing properties, for imposing liabilities specified in the Article 74 of this Law. In such act, a date of issuing thereof, full name of a head of tax administration and a state tax inspector, protocol on violation, grounds of decision, a date of handing over of the act shall be stated. 33.2.3.Tax administration and a state tax inspector shall write a demand for purpose of eliminating causes and conditions of violation of tax legislation. In such demand, a date of issuing thereof, full name and signature of a head of Tax administration or a state tax inspector, protocol on violation, date of reply upon elimination of causes and conditions of that violation, a date of handing over of the demand shall be stated. 33.2.4.A letter of notification shall be written to have a taxpayer paid tax amount, which was not paid on time or was imposed indirectly. If a letter of notification is to be handed over to a taxpayer it shall be written as specified in the Article 54 of this Law, if this to be handed over to the taxpayers correspondent bank it shall be written as specified in the Artic le 63 of this Law. 33.2.5. If tax arrears is to be paid from the salary and other income of a taxpayer, invoice shall be issued to a legal entity, from which a taxpayer is gaining income. In such an invoice, a date of issuing thereof, name and address of tax payment receiving organization, full name

and signature of a head of Tax administration and a state tax inspector, amount of imposed tax arrears, a date of handing over of invoice and a date for giving reply shall be stated. 33.2.6.Tax administration shall write conclusion for starting criminal enquiry of person, who seriously violated tax legislation, or has hidden great amount of taxable income and avoided tax payment. In such a conclusion, a date of issuing thereof, protocol on violation that led to be considered as a crime, related documents, full name of a head of Tax administration and a state tax inspector, explanation of person who related to the violation, date of acquaintance of this person with the conclusion shall be stated. 33.2.7.Tax administration and a state tax inspector shall conclude an agreement with a taxpayer according to the Civil Code to take its property as collateral. 33.2.8.A state tax inspector shall keep a protocol while inspecting premises of taxpayer, making inventory, getting on-job photo taking, sealing property, taking collateral and interviewing and questioning a taxpayer within the framework of his/her competence. In such protocol, full name of a head of tax administration or a state tax inspector, a taxpayers address, date of issuing of protocol shall be stated and it shall be signed by every person, being present at the time of issuing thereof. 33.3. Handing over or sending documents set forth in paragraph 33.1 of this Law by registered mail to a taxpayer shall be considered as handed over. Taxpayers address shall be last address registered at the relevant registration authority. Article 34. Grounds for writing state tax inspector's acts and conclusion 34.1.A state tax inspector on grounds specified in the paragraphs 47.1, 48.1, 67, 74 of this Law writes act and on grounds, specified in the paragraph 33.2.6 of this Law writes conclusion. Conclusion shall consist from 2 parts: remarks and resolution part. 34.2.A state tax inspectors act and conclusion /referred further as act, conclusion/ shall be effective from the date when it is signed by state tax inspector who conducted tax audit and taxpayer, then head of department or unit in charge of supervision of the tax administration shall confirm the act and conclusion by signing. 34.3. If taxpayer refused to sign act, conclusion, then regardless of whether explanation was given according to paragraph 18.1.5 of this Law, they shall become effective starting from the date when they were handed over to taxpayer and state tax inspector shall keep protocol on handing over the act and conclusion to a taxpayer. 34.4.The act and conclusion shall be registered in one registry and have registration number. 34.5. A state tax inspector shall make three copies of the act and conclusion and one copy shall be filed in investigation document, the second copy handled to a taxpayer and the third copy shall be kept in the files of a taxpayer. Article 35. Ensuring implementation of state tax inspectors act and conclusion 35.1.tax administration shall supervise implementation of the act and conclusion, written by the state tax inspector. 35.2. Tax administration and a state tax inspector shall put claim to the court according to the legislation on the act and conclusion, implementation of which on procedure set forth in articles 63 and 64 of this Law became impossible. 35.3. The annulment of conclusion set forth in paragraph 33.2.6 of this Law by authorized organization or official shall not be a ground for exempting the person who committed violation from administrative liability. Article 36. Making changes or annulling state tax inspectors act and conclusion

36.1.The state tax inspectors act and conclusion shall be changed or annulled by order of the head of relevant tax office on following grounds: 36.1.1. on taxpayers complaint; 36.1.2. head of the unit directly supervising state tax inspector has proposed to amend or annul his act, conclusion; 36.1.3. Dispute Settlement Council had made a decision to amend or annul the act or conclusion. 36.2.Head of tax administration can appoint a working group to resolve case and make a conclusion when making a decision set forth in paragraph 36.1 of this Law. Article 37. State tax inspectors rank. 37.1.state tax inspector can be given following ranks. 37.1.1. actual tax councillor; 37.1.2.authorized tax councillor; 37.1.3. tax councillor. 37.2.The procedure for giving ranks of state tax inspectors shall be approved by the Member of Cabinet in charge of finance and budget issues. Article 38. Renumeration of state tax inspector 38.1.state tax inspector shall get a wages from the state. 38.2. The state tax inspectors wages shall comprise of base salary, performance bonus, bonuses for number of years in service, for a professional rank and degree. 38.3. The state tax inspectors monthly performance bonus shall not exceed a monthly base salary. 38.4.The rules for setting up performance bonuses set forth in paragraph 38.2 of this Law shall be approved by the Cabinet. Article 39. Ensuring Rights of state tax inspector 39.1.A state tax inspector shall use uniform and rank symbols provided at the state budget expense. 39.2.The design of the uniform, rank symbols of state tax inspectors, the procedure and duration of their use and shall be approved by the Chairman of the General Department of National Taxation 39.3. Other organizations and individuals are prohibited from using uniforms and rank symbols resembling state tax inspectors.. 39.4.In the event of a state tax inspector losing temporarily working capability, becoming handicapped, losing life under influence of others while discharging his duties, he or his family shall be given grant aid and a base salary difference: 39.4.1.In the case of temporarily losing working capability, allowance for the period of being sick and a difference of base salary for the relevant rank; 39.4.2.In the case of becoming handicapped, an allowance for handicapped a difference of base salary for the relevant rank; 39.4.3.In the case of death the family shall receive one time grant aid equal to his salary for 3 years. Article 40. Dismissal from tax administration.

40.1.state tax inspector shall be dismissed on following grounds: 40.1.1.committed disciplinary infringements many times; 40.1.2.seriosly infringed legislation, Code of Ethics of state tax inspector; 40.1.3.proved guilty of committing a crime; 40.1.4.ceased being a citizen of Mongolia. Article 41. Collector. 41.1. The tax official working as an intern for period of one year before obtaining right of state tax inspector shall be called collector. 41.2. Collector has no right to conduct tax audit independently. Article 42. Dispute Settlement Council. 42.1. Dispute Settlement Council resolves disputes between tax administration and taxpayer regarding tax act, conclusion solely at the taxpayers complaint. 42.2. Dispute Settlement Council comprises of chairman, secretary and members. 42.3. Dispute Settlement Council of the General Department of National Taxation shall comprise of 11 members including chairman and secretary and its members shall be appointed by the Member of Cabinet in charge of finance and budget issues. Dispute Settlement Council of the aimag, capital city tax offices shall comprise of 7-9 members appointed by the head of the General Department of National Taxation. 42.4. Members of Dispute Settlement Council shall include representatives of state and local organizations responsible for taxation and legal issues, tax administration, NGOs and their appointment shall be done in consultation with management of relevant organization. 42.5. Head and members of Dispute Settlement Council shall be citizens with professional background in accounting, finance, economics and law and no less than 60 per cent of members shall be professional state tax inspectors. 42.6. Dispute Settlement Council meetings shall be convened when no less than two thirds of all members are present and decisions made by simple majority of present members. 42.7. Dispute Settlement Council shall make a decision on changing, annulling, leaving intact state tax inspectors act and conclusion and this decision shall have a form of decree. 42.8. Dispute Settlement Council decree shall be confirmed by the order of head of the relevant level tax office and in case of there is no ground for such confirmation, he shall return it to Dispute Settlement Council with concrete explanation of reason. 42.9. Dispute Settlement Council shall discuss at the meeting head of tax administrations decision set forth in paragraph 42.8 of this Law and in case of accepting this decision, shall change the decree and in case of not accepting, put the issue to the upper level tax administration management. 42.10. Dispute Settlement Council has a right to issue recommendations on eliminating the reason for dispute and its enabling conditions and on preventing violation of tax legislation. CHAPTER FIVE. Tax imposition, payment, filing Article 43. The procedure for tax imposition, payment, filing

43.1.Taxpayer shall report himself ones taxable item and tax honestly on the basis of relevant documents and records in tax return and to pay taxes in cash or non-cash form. 43.2. Forms of tax imposition and payment other than set forth in paragraph 43.1 of this Law can be defined by the specific tax laws. 43.3.Tax return can be filed in tax electronic document form and head of General Department of National Taxation shall approve relevant procedure. 43.4.Taxpayers tax return sent to the tax administration /in cluding electronic return/ shall be received, registered and resolved in accordance with state documentation keeping procedure. 43.5.The date for filing tax return and making tax payment shall be set forth by specific tax law and deadline of the tax payment and the filing tax return shall be the same. 43.6.If a deadline for filing tax return, making tax payment falls on weekend or public holiday, then the preceding day shall be the deadline. 43.7.No person who conducted tax assessment, tax withholding, payment to the budget shall pay for settlement work and services. 43.8.Overdue and re-imposed taxes, interest, fine shall be paid in accordance with this law and specific tax law. 43.9. Taxpayer shall pay indirect taxes without waiting the final results of its operation. 43.10.The tax imposition date shall be counted either by the date of issuing a claim, invoice, or payment, as set forth in specific tax law. Article 44. Filing, registering, storing documents related to taxation 44.1.A taxpayer shall file documents related to taxable items, defining tax amount according to the legislation and legal entities shall keep book accounting and individuals shall keep ordinary book keeping. 44.2.If the documents set forth in the paragraph 44.1 of this Law are prepared in foreign language, a taxpayer shall be responsible for its translation into Mongolian. Taxpayer shall bear translation expenses. 44.3.A taxpayer or his/her representative that obliged to file and book keep tax related documents should store those documents within the territory of Mongolia until the expiration of tax payment prescription date. Article 45. Filling in and filing tax return 45.1. Taxpayer shall fill in tax return within the date set by law, according to format, instructions, specified by legislation and shall submit them to the relevant tax administration. 45.2.Taxpayer, who is entitled to tax credit and exemption according to law, is not released from his/her duties to submit tax report and whether he/she is entitled to tax credit or exemption shall be decided upon reviewing his/her tax report. 45.3.An authorized official of legal entity and a taxpaying individual or his/her legal representative shall sign the tax report. 45.4.Person, who produced or took part in filling in a taxpayers tax report, shall sign therein. In case when more than one official take part in producing tax report, chief accountant shall sign the tax report. 45.5. Person, who transferred his/her taxable items to others, shall present related documents to a recipient on date of transfer and to tax administration at a demand.

Article 46. Receiving tax return. 46.1.Tax administration shall provide supervision whether taxpayer has filed tax return within period prescribed by legislation and made payment. 46.2. Tax administration shall register taxpayers tax return filing and may undertake measures for their streamlining and stabilizing. 46.3.Tax administration, state tax inspector in receiving tax return shall check following requirements: 46.3.1.correctness of tax return based for legal entity on accounting, for individual taxpayer on income and tax registration book; 46.3.2.whether the tax return is filled in according to format, instructions, specified by legislation and officially confirmed by signature of taxpayer and other relevant persons and stamp and seal; 46.3.3.whether there is date of handing over in the tax return and if it is late from the date set forth in legislation, make a note. 46.4. Tax administration, state tax inspector when receiving tax return shall check following parameters: 46.4.1.whether accounting and tax return figures are compatible with each other; 46.4.2.whether figures in the tax return are compatible with each other, whether there are any calculation errors; 46.4.3. whether tax credit and tax exemption in the tax return are calculated in accordance with legislation; 46.4.4.whether tax in tax return paid on time; 46.4.5.whether tax arrears or overpaid taxes in tax return is compatible with figures registered at tax administration; 46.4.6. whether the third-party data related to taxpayers tax return is available in the unified registration and information database of tax administration. 46.5.The infringements revealed during receiving tax return shall be eliminated in following way: 46.5.1. missing items shall be filled in and legally confirmed, calculation errors corrected by taxpayer himself; 46.5.2.assessed tax and tax arrears in tax return shall be paid; 46.5.3. if no accounting was kept, if the state tax inspectors demand to eliminate the infringements revealed during assessment of tax was not accepted and if tax was assessed incorrectly, the conclusion to conduct a tax audit shall be written and presented to manager of relevant unit. CHAPTER SIX Tax audit Article 47. Tax audit. 47.1.Tax administration and state tax inspector shall conduct audit and check whether the taxpayer has assessed fully and paid on time tax as set forth in Mongolian tax legislation. 47.2.Tax audit work shall be done by National tax administration.

47.3.ax administration, state tax inspector with the purpose of assisting taxpayer in excercising rights and fulfilling duties set forth by tax legislation, eliminating any infringements shall conduct following audit activities: 47.3.1.enable conditions for taxpayer to abide with tax legislation, assess tax and make tax payments correctly and check whether taxpayer maintains accounting records, files tax returns on time and makes tax payments; 47.3.2.check whether the assessed tax in taxpayers tax return is full; 47.3.3.in case of taxpayer did not maintain accounting records correctly or did not file tax return, to assess taxpayers tax and make him pay. 47.4. Tax administration, state tax inspector shall conduct audit work striving to save tax collection expenses, promote efficiency, not to hinder taxpayers normal operations, not to pose excessive hindrance, in all lawful forms in line with international experience including planned, random, full or partial, individual or group audit and has a right to audit any taxpayer at any time it considers appropriate. 47.5. In cases other than absolutely necessary, taxpayer shall be informed about upcoming audit 10 working days before it starts. 47.6.In order to maintain budget revenue stability, head of the rank taxpayers tax revenue by the state and local budget and assign their auditors. 47.7.Tax administration shall organize audit and make audit assignments on the basis of state tax inspectors competence, work experience, avoidance o f corruption and ethical violations. 47.8.Head of the General Department of National Taxation shall approve a procedure for receiving and resolving applications, complaints and information regarding violations of tax legislation. Article 48. Imposing tax amount by indirect method 48.1.Tax administration shall impose tax amount by the following indirect methods if taxpayer in current business activities or activities that are proved to be in action, used unrealistic price in its activities, failed to keep or did not properly keep records and balance sheet or failed to submit tax report: 48.1.1.Method of real price; 48.1.2. Method of defining by using samples. 48.2. Method of real price means price used in case when the price of production, trade and financial activities between related entities differs from the one between entities which is not related to each other. This price shall be set by the way of comparing and calculating market price used in regular condition. 48.3. A taxpayer shall use method of real price in calculating tax amount in case when price, payment and fee /hereinafter referred to as price/ which are used in such activities as sale, purchase, transmitting workforce, technical service or corporate production between Mongolian or foreign related entity is higher or lower than the real price. 48.4. Related entities," means entities, eligible for direct or indirect interference in management, supervision and property rights of Mongolian or foreign business entity. 48.5. Method of defining by using samples means defining a taxpayers tax amount by comparing it with local taxpayer who has similar capacity and conditions in business activities, and, if there is no local taxpayer with same condition, with several other taxpayer located in similar region based on activities, income, expense and other real records calculation thereof. 48.6. Instruction for defining tax amount by indirect method shall be issued by a Member of the Cabinet in charge of finance and budget issues.

48.7. In case of defining tax amount by indirect method, a taxpayer shall be obliged to submit necessary documents and information to tax administration. Article 49. Entering premise and warehouse 49.1.A state tax inspector according to the Paragraph 29.1.4 of this Law may enter a premises, commercial building or office that considered to be used for purpose of gaining income or storing taxable items, information, research data and other related documents which are necessary in providing tax activities except those premises where law prohibited, to carry out inspection and conduct on the job photo-taking, inspection, inventory taking, temporarily seize documents and property, conduct inspection. 49.2. In carrying out activity set forth in paragraph 49.1 of this Law, a state tax inspector shall use his/her assignment and guidance on inspection of particular objects of business entity or organization that own thereof, issued by a head of relevant tax administration as a ground for his/her activities. 49.3.In entering a premise or warehouse, a state tax inspector or legal representative thereof must present his/her assignment, terms of reference and a state tax inspectors identity to taxpayer or taxpayers legal representative. 49.4. Diplomatic and Consular mission, office or warehouse of an official with diplomatic status of International organizations shall not apply to the paragraph 49.1 of this Law. Article 50. Procedures of carrying out inspection 50.1.A state tax inspector shall follow the following procedures in carrying out inspection set forth in paragraph 29.1.4 of this Law: 50.1.1. To call a witness to be present while carrying out inspection. A witness shall be person over 18 years old, with legal capability and not having personal interest in actions of investigations and not having hierarchical relations therewith; 50.1.2. To have a possessor of a premise, which contains investigated items or legal representative thereof, if not possible, a representative of a local administration to be present; 50.1.3. To keep protocol on carried out inspection. Person, who carried out inspection or participated at it shall sign the protocol and if there is refusal of signing, he/she shall explain such refusal and explanation shall be attached to the protocol. 50.2.Inspection shall be carried out regardless of ownership of the investigated items or premises. Article 51. Procedure for inventory taking 51.1.A state tax inspector shall follow the following procedures while conducting inventory taking specified by the paragraph 29.1.4 of this Law: 51.1.1. Take inventory of goods, assets and cash with a presence of a taxpayer or a legal representative thereof, a certified accountant, or a representative of local administration and keep inventory taking records and protocol. 51.1.2.Person, carried out or participated at inventory taking shall sign the protocol and if there is refusal of signing, he/she shall explain such refusal and explanation shall be attached to the protocol. Article 52. Procedures of on-job photo- taking 52.1. A state tax inspector shall follow the following procedures in on-job photo taking, specified by the paragraph 29.1.4 of this Law:

52.1.1.Take on-job photo with a purpose of defining taxpayers payable tax amount, estimating amount and expense of production and service; On-job photo may be taken with or without prior notice to a taxpayer. In case of prior notice, have a taxpayer and in case of without prior notice, have a witness be present at this proceeding; 52.1.2.Various types of equipments may be used and relevant specialists may participate at the on-job photo taking; 52.1.3.A state tax inspector shall make necessary calculations of on-job photo taking and keep protocol. Person, participated at on-job photo taking shall sign the protocol and if there is refusal of signing, he/she shall explain such refusal and explanation shall be attached to the protocol. CHAPTER SEVEN Tax records, arrears Article 53. Tax records 53.1.Tax administration shall maintain accounting records of taxes, interest and fine in conformity with legislation. 53.2.ax administration records shall reflect taxpayers taxable amount, tax credit and exemption, interest, fine, their payment, collection, arrears based on the book-keeping records. 53.3.ax administration shall have an acount for the purpose of registering income from taxes, interest, fine, repaying VAT and other tax refund in conformity with legislation. 53.4.Bank shall transfer the value added tax refund and other tax refund based on tax administration payment order from that days revenue on tax administration accou nt and the remainder shall be transferred to treasury account. 53.5.he procedure for keeping account for tax record and tax revenue shall be approved by the Member of Cabinet in charge of finance and budget issues. Article 54. Handing over a letter of notification 54.1. A letter of notification shall handed over to a taxpayer, on his/her failure to pay the imposed tax on time or for payment of tax amount, which has been defined by tax administration, according to the Article 48 of this Law. The following shall be stated therein: 54.1.1. Full name of a taxpayer 54.1.2. A taxpayers registration number 54.1.3. Date of issuance of a letter of notification 54.1.4. Taxable items 54.1.5. Amount of payable tax 54.1.6. Demand to pay the tax within 10 working days after the handing over of a letter of notification 54.1.7. Place of tax payment 54.1.8. Grounds of determining tax amount 54.1.9. Other demands considered as necessary by the tax administration. 54.2. In case of apparent failure to pay the imposed tax, a head of tax administration may decide to have imposed tax amount paid before the date, specified in the paragraph 54.1.6 of this Law. Article 55. Tax arrears 55.1.The following unpaid in time stipulated by law tax, interest, fine shall comprise the tax arrears:

55.1.1. tax arrears defined by taxpayer tax return, interest on it; 55.1.2. the tax, interest and fine assessed by the tax administration in conformity with article 48 of this Law; 55.1.3. the tax, interest and fine imposed by tax administration tax audit. Article 56. Order of disbursing tax arrears 56.1.Tax, interest, fine arrears /hereinafter referred to as tax arrears/ which was not paid on time specified by law shall be disbursed according to the following order: 56.1.1. Interest fee on particular tax; 56.1.2.Fine; 56.1.3. Initial tax arrears. 56.2. When a taxpayer has not stated a term and a type of the particular tax arrears, tax administration shall define the order of the tax arrears payment. Article 57. Tax arrears due date and extension thereof 57.1Tax administration, a state tax inspector shall define the due date of the payment of tax arrears as follows: 57.1.1.Tax arrears and tax remains revealed through tax imposition shall be paid within 15 working days since handing over such act; 57.1.2.Re imposed tax, interest and fine revealed through tax audit shall be paid within 10 working days since handing over such act. 57.2.If a taxpayer, was unable to pay his/her tax within the date, set forth in paragraphs 54.1.6, 54.2, 57.1 of this Law due to objective reason, a head of the particular tax administration by his/her decision may extend the date of payment once up to 60 days based on written request from a taxpayer. 57.3.The setting and extension of tax arrears payment due date in accordance with paragraphs 57.1, 57.2 of this Law shall not be a grounds for not imposing interest. Article 58. Tax deduction and refund 58.1.Tax administration according to the Paragraph 17.1.4 of this Law shall decide overpaid tax issue by the following procedures: 58.1.1.Deduct for the payment of other taxes payable at the same time; 58.1.2.Deduct for the future tax payment with taxpayer consent; 58.1.3.Refund overpaid tax amount 58.2.In case of deduction of over paid tax amount tax administration shall notify a taxpayer thereabout. Article 59. Money collected by tax administration, state tax inspector without grounds or over correct amount

59.1.The following items shall comprise money collected by tax administration, state tax inspector without ground or over correct amount: 59.1.1. the sum of tax, interest and fine fully or partially refunded because of annullment or amendment of state tax inspectors act;

59.1.2. the sum of tax, interest and fine fully or partially refunded because of annullment or amendment of the assessed tax by the relevant authority in conformity with article 48 of this Law; 59.1.3. the sum of money collected without grounds or over correct amount by other decision of tax administration, state tax inspector. 59.2. The taxpayers money collected without grounds or over correct amount shall be refunded within 10 days after tax administration issues a decision specified in paragraphs 59.1.1-59.1.3 of this Law. 59.3. The money set forth in paragraph 59.1 of this Law may, if taxpayer agrees, be settled according to article 58 of this Law and this shall not be a grounds for not counting interest. Article 60. Procedure for imposing interest and period 60.1.Interest shall be imposed on tax unpaid on time stipulated by law or on tax collected from taxpayer without grounds or over correct amount due to tax administration or state tax inspectors fault. 60.2.The rate of interest stipulated in paragraph 60.1 of this Law shall be set by the Cabinet each year at the average interest rate of commercial banks. 60.3. Interest counting period shall be set by following: 60.3.1.the number of days starting from date stipulated in paragraphs 43.5, 43.6-or this law, which is a date when taxpayer shall self-assess and pay tax untill the payment is made; 60.3.2. in case of tax collected from taxpayer without grounds or over correct amount, the interest shall be set by the number of days starting from the date when the money was collected from taxpayers amount due to wrong decision of tax administration, state tax inspector untill the day when the tax refund is made or tax is settled as tax arrears. 60.4.No interest shall be imposed on tax interest or fine. 60.5.The interest imposed and tax refund made in accordance with articles 43 and 59 of this Law shall be done by state tax inspectors act and this act can be done together with act for tax refund, imposion of fine set forth in paragraphs 74.1, 74.2 of this Law. CHAPTER EIGHT Collecting tax arrears not paid on time Article 61. Tax arrears not paid on time 61.1. The tax arrears assessed according to paragraphs 54.1.6, 54.2, 57.1 of this Law and not paid within the extension time shall be called tax arrears not paid on time. 61.2.Tax arrears not paid on time shall be collected and settled by tax administration. Article 62. Collection of tax not paid on time 62.1. In case of a failure of a taxpayer to pay his/her tax within the time, specified in legislation, tax administration shall take the following actions: 62.1.1. Have it paid on indisputable condition; 62.1.2. Have it paid from property, salary and other income; 62.1.3. Claim to the court.

62.2. Tax administration may take more than one action simultaneously, from that specified in Paragraph 62.1. of this Law, to have a taxpayer make full payment of imposed taxes. Article 63. Disbursement of tax arrears at indisputable condition 63.1.Tax administration shall have the tax arrears paid from the taxpayers cash at bank account at indisputable condition. If the amount of cash in a taxpayers bank account is not enough to cover tax arrears, all the debit transactions except those made by the court decision shall be blocked until tax arrears is paid. 63.2. A letter of notification from a state tax inspector to have tax arrears paid as stipulated in paragraph 63.1 of this Law shall be approved by a head of the relevant tax administration and be submitted to the bank. Letter of notification shall specify grounds of withdrawing tax arrears, its amount and period of time for blocking the debit transactions fully or partially. Article 64. Disbursement of tax arrears from taxpayers property, salary, and other income 64.1.If a taxpayer fails to pay the tax arrears within the time specified in paragraph 57.2 of this Law, the payment shall be made from taxpayers property, salary, receivables, dividends, owned shares and other income. 64.2. Tax administration shall make the decision to make a payment as set forth in paragraph 64.1 of this Law. 64.3.In case of disbursement of a taxpayers tax arrears from his/her property, tax administration may conclude collateral agreement with a taxpayer as specified in the article 69 of this Law and collateralize a taxpayers property or sell the tax arrears through an public auction with particular condition upon negotiating with a taxpayer and transfer received money to the state budget. Article 65. Disbursement of tax arrears from a taxpayers salary and other income 65.1.Following procedures shall be followed in disbursement of tax arrears from a taxpayers salary and other income according to the Article 64 of this Law: 65.1.1. Arrears payment invoice shall be delivered to a taxpayers employer or income providing entity with a purpose of disbursing tax arrears from salary and other income; 65.1.2. Upon receiving the payment invoice a business entity shall deduct certain amount from taxpayers income each month and transfer it to the account stated on arrears payment invoice within three days since deduction; 65.1.3. tax arrears shall be deducted prior to all arrears payment from the salary and other income except those deducted by the court decision; 65.1.4. If a taxpayer quits job, a business entity shall return the payment invoice to tax administration within 7 days with the note stating total tax arrears payment and place of transfer. 65.2.If tax arrears is paid from shares, it shall be done in accordance with provisions of article 25 of Company Law and article 66 of this Law. Article 66. Disbursement of tax arrears from a taxpayers property 66.1. In order to have tax arrears paid from a taxpayers property according to t he Article 64 of this Law a head of the tax administration shall appoint a commission:

66.2. A commission set forth in paragraph 66.1 of this Law shall carry out the following activities: 66.2.1. Set the initial price for selling the property at public auction considering quality, usage, depreciation, a taxpayers offer and local market price thereof and keep protocol. Property registration shall be attached to the protocol; 66.2.2. Property for arrears payment shall be sold through an auction. If a taxpayer wants he/she or his/her legal representative may be present at the auction; 66.2.3. Property that has not been sold on auction shall be returned to the taxpayer; 66.2.4. If price of property sold through auction is more than the tax arrears and expenses born for an auction, tax administration shall refund the remainder to the taxpayer and issue a protocol. 66.3. If price of property sold through auction is less than the tax arrears, a taxpayer will not be exempted from the remainder of tax arrears. 66.4. For setting initial price of the property, which will be sold an auction assistance from the special organization and specialists may be used. Article 67. Grounds for sealing property 67.1.Based on decision of a head of tax administration, a state tax inspector may seal property, money, documents, premise and warehouse /further referred as property/ of a taxpayer, which is in tax arrears for the following grounds and durations: 67.1.1 when making tax supervision, inventory taking, inspection and on-job photo taking until the completion of such activities and making conclusion and decisions thereof; 67.1.2. If there is a notice of possible hiding of properties and transferring thereof to others until the matter is investigated; 67.1.3. When case appealed to the court according to the provisions of this Law and when necessary to protect documents, registration records, forged or ineffective contracts, agreements, money and property until the date when claim is submitted to the court. 67.2. In case, the time specified in paragraphs 67.1.1, 67.1.2 of this Law is expired, tax administration shall return the sealed property to its owner. 67.3. If taxpayer disagrees with decision of the head of tax administration set forth in paragraph 67.1, he is entitled to appeal to the court. Article 68. Procedure for sealing a property 68.1.A state tax inspector, who is appointed to carry out inventory taking, supervision and inspection or who is appealing to the court shall seal the property in following way: 68.1.1. Property shall be sealed in presence of a taxpayer or his/her legal representative, certified accountant or a representative of particular local administration bodies and a witness. 68.1.2.A state tax inspector shall write an act and keep protocol on property sealing. Shape, amount, quality, quantity, color and characteristics of property shall be stated in such protocol. Act shall state grounds and date of sealing of the property. 68.1.3. The property shall be sealed with seal and sealing wax and given to the possessor. 68.2. A person specified in paragraph 68.1.1. shall be in charge of verifying all actions of property sealing activity and shall sign the protocol of being present at such activities. If there

is refusal of signing, he/she shall explain such refusal and explanation shall be attached to the protocol. 68.3.Possessor of the property sealed in accordance with provisions of paragraph 68.1.3of this Law shall be in charge of safe keeping the property, the seal and sealing wax should not be touched and property should not be lost, sold and transferred to others without permission from tax administration and, state tax inspector shall explain about the liability for failure to do this function and get the protocol signed. Article 69. Grounds and procedures for collateralizing a property 69.1. In disbursing tax arrears by collateralizing a taxpayers property according to the paragraph 64.3 of this Law, the following procedures shall be followed: 69.1.1. Collateralized property shall be owned by the taxpayer in tax arrears; 69.1.2. When property collateralized, a contract shall be concluded with the taxpayer stating precisely quality, price, shape, amount, location, and ownership of the property. If real estate is collateralized, this shall be registered at the Real Estate agency. 69.1.3. Parties to the collateral contract shall agree on and set the expiration date thereof; 69.2. A taxpayer is entitled to disburse tax arrears in time, specified by the contract and have the collateralized properties returned. 69.3.A taxpayer has not right to use, to dispose, damage or lose the collateralized property and in case of violating this function and causing any harm shall be liable for damages. 69.4. Taxpayers following properties shall not be collateralized: 69.4.1. daily /seasonal/ clothes and utilities of a taxpayer, family members thereof; 69.4.2. foodstuff that can not be stored for long time and that perish quickly; 69.4.3. items that are old and useless; 69.4.4. a taxpayer are residing house or apartment and firewood and coal in cold seasons. 69.5. In selling of collateral, the procedures specified by the Article 66 of this Law shall be followed. Article 70. Appealing to the court on disbursement of tax arrears 70.1. If disbursement of tax arrears by the procedures set forth in the Articles 63, 64 of this Law is not possible tax administration shall put claim to the court. 70.2. In case when a taxpayers regardless of agreement made according to the Article 64 of this Law delayed or refused to pay tax arrears from property, salary and other income without due reasons, relevant property shall be sealed as provided by the procedures of the Article 67 of this Law and tax administration may put claim to the court on such matter. CHAPTER SIX Liabilities of other organizations Article 71. Liabilities of bank and financial institution on tax issues

71.1. The following organizations shall have the following functions related to implementation of tax legislation:

31.1. Commercial banks and non-bank financial institutions: 71.2.1. shall transfer client taxpayers tax payment to the bank named by the tax administration within 12 hours, the bank which accepted the tax payment in accordance with article 53 of this Law shall transfer the payment to the state treasury account via the tax administration account on the same day, if working hours are over, within the next working day; 71.2.2. Notify the tax administration within 10 working days about taxpayers openin g new accounts, or changing old account number and transfer of accounts as stipulated in Article 12 of the Law on Deposit, loan and banking transactions. 71.2.3. to disburse clients arrears in following order:

71.2.3..Payment for priority debt as stipulated in legislation; 71.2.3.b.The tax arrears payment at taxpayers request or at indisputable condition on tax administration decision. 71.2.3.c. Debt payment to financial institutions, to other borrowers and creditors 71.3. If bank failed to fulfill duties stipulated in paragraph 71.2.1 of this Law, tax administration shall impose an interest of 0.3 per cent per day on non-transferred tax payment sum. 71.4. The provisions of paragraph 71.2.3 of this Law shall not comprise provisions of paragraph 2 of Article 17 of the Law on Deposit, loan and banking transactions. 71.5. the stock exchange: 71.5.1. shall quarterly submit the information on location of shareholders of a public company. 71.6. the police: 71.6.1. shall assist and enable to carry out such activities as entering of tax administration and a state tax inspector into a taxpayers premise and warehouse and providing supervision, inventory taking and inspection in case when such activity was suspended with using force or organized hindering or resistance thereto. 71.6.2. The police shall submit information or research data at its possession related to registering a citizen of Mongolia, a foreign national and stateless person as a taxpayer and verifying address thereof, except information re lated to individuals secret, at the request of tax administration. 71.6.3.The police shall assist and cooperate in actions of searching for a taxpayer, which avoided paying tax and escaped. 71.6.4. Law enforcing and investigation bodies and state organization and officials thereof must submit information on violation of tax legislation, that were acquired while performing their duties, to tax administration. 71.7.Customs office: 71.7.1. shall supervise a taxpayers obligation to provide registration n umber thereof in customs declaration and submit information related to a taxpayers export and import activities at the request of tax administration. 71.8. The state agency responsible for citizen registration and information and agency for foreign citizens and nationals shall submit information or research data at its possession related to registering a citizen of Mongolia, a foreign national and stateless person as a taxpayer and verifying address thereof, except information related to individuals secr et, at the request of tax administration.

71.9. other state organizations at central and local level, their management, officials: 71.9.1.to explain social and economic significance of taxation, assist in building conditions for tax legislation implementation; 71.9.2. to advertise and report on the example of their industry or organization the results of budget expenditure financed from tax revenue; 71.9.3. to assist tax audit work, provide necessary information, work together with tax administration; 71.9.4. The state agency responsible for audit, their officials if in the course of their work have revealed violations of tax legislation, they shall give oficially inform the tax administration. Article 72. Solving taxpayers complaint 72.1. If taxpayer has complaints regarding decision of a state tax inspector or tax administration he shall resolve it through the following channels: 72.1.1.Complaints about a state tax inspectors decision shall be resolved by the tax administration where a state tax inspector works or to which he/she directly belongs within the time period set forth in paragraph 17.1.6 of this Law; 72.1.2. Complaints about decisions of tax administration to the head of upper level tax administration. 72.1.3. Complaints about a state tax inspectors decision to the Dispute Settlement Council where state tax inspector directly belongs; 72.1.4.Complaints about Dispute Settlement Councils decision to the Dispute Settlement Council of the upper level tax administration. 72.2. If taxpayer disagrees with decisions made according to the paragraphs 72.1.2, 72.1.4 of this Law, he is entitled to appeal to the court. 72.3.Tax administration and Dispute Settlement Council when resolving complaints filed according to paragraph 72.1 of this Law, shall follow this law, Law on Administrative Liability, Law on Resolving Administrative Cases, Law on resolving applications and complaints from citizens to state organizations and officials, Regulation on Dispute Settlement Council. Article 73. Liability of a state tax inspector 73.1.A state tax inspector shall be subject to disciplinary, administrative, pecuniary and criminal liability specified by this law and other relevant legislation in the event of a failure to exercise properly his duties set forth in articles 29, 30 of this Law. 73.2. If the state tax inspector exceeded his powers, failed to exercise properly his duties, conducted actions prohibited by this law, but is not subject to criminal liability, then he shall be subject to following disciplinary sanctions: 73.2.1. Reprimand; 73.2.2. Reduction of remuneration up to 20% for a period of 6 months; 73.2.3. Demotion in position or rank; 73.2.4.Freezing state tax inspectors right for a period up to 12 months or stripping off state tax inspectors right completely; 73.2.5.Dismissal from National Tax Administration. 73.3. The penalties set forth in paragraph 73.2. of this Law shall not necessarily be used in this order and depending on the type of infringement, the penalties stipulated in paragraphs

73.2.3, 73.2.5 of this article can be imposed together with penalty stipulated in paragraph 73.2.4 and penalty stipulated in paragraph 73.2.3. Article 74. Liability for violators of legislation 74.1. If taxpayer has hidden taxable income and taxable items other than income through following actions or inaction and is not subject to criminal liability, the tax administration and state tax inspector shall make him repay the tax and impose a fine equal to 30 per cent of the tax payment amount: 74.1.1.physically hidden; 74.1.2 transferred without ground to other legal entity, individual; 74.1.3. left unreflected in accounting records, balance sheet, statement, tax return; 74.1.4. figures were lowered when reflected in in accounting records, balance sheet, statement, tax return or with the purpose to minimize them, costs and other subtractable items were raised; 74.1.5.destroyed, hidden or liquidated accounting and book-keeping records, tax return, related documents; 74.1.6. forged or changed documents; 74.1.7. made filing tax return impossible by not keeping accounting records or by not preparing relevant documents; 74.1.8.conducted fraud, invalid contract or agreement; 74.1.9. created false debt; 74.1.10.transferred and let others use legal entitys name, adress, stamp, seal, account, state registration licence and other property, documents. 74.2.If tax is not paid on time, for each late day a fine equal to 0.1 per cent of tax amount shall be imposed. 74.3. On repaid and unpaid on time taxes stipulated in 74.1, 74.2 of this Law an interest shall be calculated and the sum of interest shall not exceed 50 per cent of reimposed tax amount. 74.4.The fine set forth in articles 74, 75 of this Law is not related to fine stipulated in article 232 of the Civil Code of Mongolia. Article 75. Administrative liability for violators of tax legislation 75.1.Tax administration, state tax inspector shall impose following administrative liability to the taxpayers who have violated the tax legislation: 75.1.1.for violation of provisions of the paragraps 13.1-13.3 of this Law, individuals shall be fined by amount equal to the minimal wage, or two to three times this amount, official shall be fined by amount equal to three to four times the minimal wage; 75.1.2. for violation of provisions of the paragraps 13.5-13.7 of this Law, individuals shall be fined by amount equal to the minimal wage, or two times this amount, official shall be fined by amount equal to two to three times the minimal wage; 75.1.3. the individual taxpayer who failed to file tax return within the time specified by the tax legislation shall be fined by amount equal to the minimal wage, or two to three times this amount, official shall be fined by amount equal to three to four times the minimal wage; 75.1.4. individual taxpayer who through following action or inaction has evaded payment of taxes, interest or fine, shall be fined by amount equal to the minimal wage, or two to three times this amount, official shall be fined by amount equal to three to four times the minimal wage:

75.1.4.a. gave false permanent or temporary address or place of business operations; 75.1.4.b. did not came when called by tax administration several times without objective reason; 75.1.4.c. failed to inform address of residence without being proclaimed by court as missing. 75.1.5. Individual guilty of losing, transfering to others without authorization, damaging, selling without authorization of property sealed by state tax inspector shall be fined by amount equal to the minimal wage, or two to three times this amount, legal entity shall be fined by amount equal to ten to fifteen times the minimal wage and the amount equal to the cost of lost, transferred, damaged or sold property shall become state income; 75.1.6. individual who through following action or inaction has hindered actions of state tax inspector in discharge of his duties shall be fined by amount equal to the minimal wage, or two to three times this amount, official shall be fined by amount equal to three to four times the minimal wage: 75.1.6.a.did not give the necessary accounting records, balance sheet, tax information, related documents; 75.1.6.b.did not give opportunity to enter premises or warehouse; 75.1.6.c. prevented inventory taking; 75.1.6.d.prevented on the job photo taking, inspection, collaterilazition or sealing of property; 75.1.6.e.did not fulfill notification, act, letter of notification, payment order, demand regarding implementation of tax legislation. 75.1.7. Official who infringed provisions of paragraphs 24.5, 65.1.4, 71.2, 71.5, 71.6.2, 71.6.4, 71.7 of this Law shall be fined fined by amount equal to two to three times minimal wage; 75.1.8. Individual who infringed provisions of article 44 of this Law shall be fined by amount equal to the minimal wage, or two times this amount, official shall be fined by amount equal to three to four times the minimal wage. Article.76. Entry Into Force 76.1.This Law comes into force on July 1 of 2008.

CHAIRMAN OF THE STATE IH HURAL OF MONGOLIA

D.LUNDEEJANTSAN