Oyu Tolgoi LLC and tax

Oyu Tolgoi LLC is consistently recognized as one of the largest taxpayers in Mongolia.

Oyu
Tolgoi LLC has paid more than MNT5.8 trillion (approximately US$2.8
billion) in taxes, royalties and fees to the Government of Mongolia
since 2010.

Oyu Tolgoi LLC is a major contributor to the
Mongolian economy, with gross in-country spend of over US$11.3 billion,
since 2010. Furthermore, Oyu Tolgoi is proud to be creating significant
value for Mongolia as a large employer in the country, with a workforce
of over 12,300 – 94 per cent of whom are Mongolian nationals.

In
2020, the company paid taxes and royalties, of approximately US$290
million, and accommodated some early royalty payments throughout the
year to support the GoM’s actions on COVID-19.

On 22 December
2020, Oyu Tolgoi LLC received a Tax Assessment claim for MNT649 billion
(approximately US$228 million) from the Mongolian Tax Authority (MTA).
This Assessment relates to an audit of taxes paid by Oyu Tolgoi LLC
between 2016 and 2018.

Oyu Tolgoi LLC pays all taxes and charges
required under Mongolian laws and the stabilised tax environment created
by the Oyu Tolgoi Investment Agreement (IA), the Underground
Development Plan (UDP) and guidance letters from the MTA.Oyu Tolgoi
complies with all applicable international rules and guidelines
including the OECD Transfer Pricing Guidelines.

During this audited period, between 2016 and 2018, Oyu Tolgoi LLC paid approximately US$797 million[1] in taxes, royalties and fees. During that same period, Oyu Tolgoi LLC posted net earnings losses of over US$600 million.

The MTA has also sought to reduce Oyu Tolgoi’s carried-forward tax losses by MNT3.4 trillion (approximately US$1.5 billion).

Many
of the matters raised by this new Tax Assessment are a continuation of
the matters raised by the January 2018 penalty notice covering the
period of 2013 to 2015.Those matters have been previously referred to
international arbitration by joint agreement between Oyu Tolgoi LLC and
the Government of Mongolia in 2020, in compliance with the dispute
resolution provisions of the IA and UDP, and in order to resolve and
clarify the different interpretations of the tax provisions.Oyu Tolgoi
LLC will apply over the coming days to include the new matters from the
latest Tax Assessment in the existing international arbitration as the
matters are substantially similar and, in some cases, identical.

A
spokesperson for Oyu Tolgoi LLC said, “Oyu Tolgoi LLC has a proud
record of paying the taxes it owes on time and in full.Investments of
the size and scale of Oyu Tolgoi LLC can only be made on the basis of a
transparent and predictable tax regime.”