Macau: An overview of tax system in Macau

1. Introduction 

Macau is one of the two Special Administrative Regions (the SAR) of the People’s Republic of China, the other being Hong Kong. Macau lies on the western side of the Pearl River Delta across from Hong Kong to the east. 

Being a former Portuguese colony, the tax system of Macau is basically derived from Portugal. The tax system of Macau has an attractive characteristic of its simplicity and the lowest tax rates (for example, highest progressive Complementary Tax rate is only 12%) as compared to those of other Asian regions. The main reason of such low tax rates system is that direct and indirect taxes are not the principle components of total public revenue. The major source of public revenue comes from revenues from franchises granted, which are actually the rent, the complementary tax and other revenues collected from the gaming industry. In fact, Macau government believes that low tax rates are essentials for attracting foreign investments. With the gaming industry supporting most of Macau’s operating expenditure, the investors in Macau can be benefited from a low tax burden and simple tax reporting system. 

2. Taxation in Macau 

Companies incorporated in Macau are regarded as resident companies. They are taxed on their revenue derived worldwide (except for the special type of offshore company mentioned below). Companies which are not incorporated in Macau are regarded as non-resident and only revenue derived from Macau will be subjected to Macau taxes. 

For individuals, the distinction between resident or non-resident is not essential, since only personal revenue derived from work rendered in Macau will be subjected to Professional Tax. 

In Macau there are two main types of taxes, namely Direct and Indirect Taxes. 

2.1 Direct Taxes 

The direct taxes in Macau include Industrial Tax, Complementary (Profit) Tax, Professional (Salary) Tax and Urban Property Tax. The revenue from gambling franchises granted is also considered to be a kind of direct tax revenue that are under special gambling tax law of about 40%. 

The following table shows the present complementary tax rates of Macau. In fact, Macau SAR government exempts complementary tax of annual assessable profit of MOP200,000 for years Of 2011 and 2012.

2.2 Indirect Taxes 

Indirect taxes in the territory include Tourism Tax, Stamp Duties, Consumption Tax, Land Rent, And Vehicle Tax, etc. Of all, the consumption tax revenue comprises the largest portion of the indirect tax revenue. 

2.3 Tax Incentives in Macau 

In Macau, there are incentives for the tourism, manufacturing industry and specially approved offshore companies. 

(a) Tourism industry 

To promote tourism in Macau, the tax authority approves special incentives tourism projects. Projects which are awarded these incentives will enjoy the following tax exemptions and reductions: 

• Exempted from property tax during the first eight operating years in Macau City or ten years in the other Islands; 

• Exempted from industrial tax for a period equal to the property tax exemption; 

• Eligible for depreciation allowances at rates being double the maximum approved rates for a period equal to the property tax exemption; and 

• Reduction of stamp duty on property transfers and all facilities required for the project. 

(b) Manufacturing industry 

The following investments are entitled to a 50% reduction on complementary tax rates, stamp duty on property transfers and are exempted from property tax and industrial tax: 

• Investments which increase the export of non-quota restricted goods. 

• Investments which install high technology and new industries. 

• Investments which will be located in non-traditional industrial areas. 

(c) Macau Company Offshore Institution 

Under the Decree-Law No. 58/99/M (Offshore Law) of Macau SAR effective from 1 November 1999, approved investors can operate offshore business in Macau and enjoy tax exemption incentives, provided that their operations are in accordance with the applicable offshore legislative provisions and local statutory requirements. The approved offshore institution is exempted from all the following taxes: complementary tax, industrial tax, and stamp duties. In addition, the offshore institution’s management and specialised technicians (non-Macau residents), authorised to reside in Macau, are exempted from professional tax for the first three years of their employment at the offshore institution. All MCO application and registration are strictly controlled and monitored by Offshore department (IPIM). 

Basic Criteria for Offshore Services Operations 

To operate offshore service business in Macau, the investors must abide by the following rules: 

• To use only non-Macau currency in their activities 

• To target only non-Macau residents as customers 

• To focus only on non-Macau markets 

Types of Businesses of MCO 

There are two types of businesses of Macau offshore companies, they are: 

• Offshore finance business, regulated and supervised by the Macau Monetary Authority for financial and monetary products business. 

• Offshore service business, regulated and supervised by the Macau Trade and Investment Promotion Institute (“IPIM”), which is a more common type of MCO. There are more than 500 MCO has been approved and registered.To use only nonMacau currency in their activities 

Range of Approved Service Business of MCO 

The Macau offshore law currently allows a MCO to operate the following categories of offshore service businesses:

2.4 Double Tax Agreements (DTA) 

Investors in Macau currently enjoy DTA with Mainland China and Portugal.

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