Legal environment of Mongolia on Organizational confidentiality: Where the legal confidentiality environment is well established in a fairly competitive marketplace, business organizations are crucial in helping to build their own strengths, characteristics and colors.
"Organizational confidentiality" means information, document and tangible things that it considers to be confidential in the law to protect the legitimate interests of the organization, human rights and reputation.
The organization shall be established its own organizational confidential information.
The following information cannot be categorized as confidential information of the organization:
- Information about impact to affect or affected on human health, environment as result of the operation, manufacturing, service or using technology;
- Information about the harm of toxic and radioactive substances which may cause to the human health and environment due to a breach of storage and protection procedure;
- Other information related to crime or other information to inform to the public.
In case of the confidential information of the organization has been obtained within competence of taxation inspector, it is prohibited to disclose it to others and allowed to use the confidential information within applicable law and regulation.
The official who obtained the confidential information of the organization may disclose it if confidential information may cause damage to the legitimate interest of others.
The defaulted individual or legal entity shall be liable under Law on Offence and Criminal code for disclosing the confidential information of the organization.
New taxation regulation to share corporate confidential information for taxation purpose: The Mongolian Government has been approved a set of taxation law which included the General law on Taxation, the Corporate Income tax law, the Value Added Tax law and Personal Income tax law on March 22, 2019. The new set of the taxation law are will become effective on 1 January 2020.
Mongolia became a member of Global Forum of OECD in 2018. The OECD is a unique forum where governments work together to address the economic, social and environmental challenges of globalization. It provides a setting where governments can compare policy experiences, seek answers to common problems, identify good practice and work to co-ordinate domestic and international policies.
The Global Forum has 158 members in 2019 on equal footing and is the premier international body for ensuring the implementation of the internationally agreed standards of transparency and exchange of information in the tax area. Through an in-depth peer review process, the restructured Global Forum monitors that its members fully implement the standard of transparency and exchange of information they have committed to implement. It also works to establish a level playing field, even among countries that have not joined the Global Forum.
The number of exchange of information agreements has increased dramatically in recent years and in order for countries to take advantage of the opportunities that this rapidly expanding network provides, countries and their taxpayers need to have confidence in the confidentiality of the information exchanged under these agreements. Both taxpayers and tax administrations have a legal right to expect that information exchanged under exchange of information agreements remains confidential. This requires that exchange of information partners have adequate safeguards to protect the confidentiality of the information that is shared and assurances that the information provided will only be used for the purposes permitted under the exchange of information instrument.
Within the obligation on setting up legal environment to exchange information with taxation authority of other country and protect confidentiality of organizational information, Mongolia has adopted new provisions on its taxation laws.
The authorized person shall implement the following rights and obligations when to exchange corporate confidential information:
- Receive report and account information of the legal entity;
- Collect and deliver relevant information and evidence of the legal entity which is a taxpayer;
- Deliver the documents to the requested party which is allowed under the law;
- Exchange information, automatic exchange information and implement the executes agreements between authorized organizations;
- Request additional information if required by the requested party of the information.
If confidential information delivered to an authorized person of taxation authority for the purpose of exchanging information at the request and automatically according to the General Law on Taxation of Mongolia, the authorized person shall not be liable on sharing confidential information.
However, the member of the Government in charge of finance, budget and legal affair shall develop and adopt procedure on keeping confidentiality of the information and implementation procedure on mutual information exchange treaty for taxation purpose.
Conclusion: Any company or legal entity may define its confidential information and adopt the procedure on keeping confidentiality of its information within the organization.
The official of the competent authority may obtain confidential information and shall use it only for its dedicated purpose.
There are legal liabilities under Law on Offence and Criminal code for a defaulted party which disclosed the confidential information and caused damage to the organization or legal entity.
As the world becomes increasingly globalized and cross-border activities become the norm, tax administrations need to work together to ensure that taxpayers pay the right amount of tax to the right jurisdiction. An open international architecture where taxpayers operate cross-border but tax administrations remain confined to their national borders, can only be sustained where tax administrations co-operate.
In compliance with the Law on Organizational confidentiality, the taxation authority is allowed to obtain and share confidential information of the organization with other country's taxation administration.
Under the General Law on Taxation, the taxation administration and its officer of Mongolia may exchange confidential information of the taxpayer or organization with foreign taxation administration.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.