Corporate tax in Macau

Summary
Corporate Income Tax Rate (%) 12 (a)
Capital Gains Tax Rate (%) 12 (a)(b)
Branch Tax Rate (%) 12 (a)
Withholding Tax (%) (c)
Dividends
0 (d)
Interest 0
Royalties from Patents, Know-how, etc. 0
Branch Remittance Tax 0
Net Operating Losses (Years)
Carryback 0
Carryforward 3

a) For the 2015 tax year, complementary tax is imposed on taxable profits in excess of MOP600,000 at a rate of 12%.

b) For details regarding the taxation of capital gains, see Section B.

c) Macau law does not contain any specific measures imposing withholding taxes except for service fees paid to individuals. Under certain circumstances, interest or royalties received by nonresidents from Macau may be regarded as income from commercial or industrial activities in Macau and taxed at the normal corporate income tax rates.

d) Dividends are not taxable if they are distributed by entities that have paid corporate income tax at the corporate level on the distributed income.

Taxes on corporate income and gains

Corporate income tax. Companies and individuals carrying on commercial or industrial activities in Macau are subject to com­plementary tax in Macau. An entity established in Macau is re­garded as carrying on business in Macau, and its profits are sub­ject to complementary tax. Non-Macau entities that derive profits from commercial or industrial activities in Macau are also subject to complementary tax.

Rates of corporate income tax. The same complementary tax rates apply to companies and individuals. The following are the com­plementary tax rates for the 2015 tax year.

Taxable profits Tax on lower amount Rate on excess
Exceeding                  Not exceeding    
MOP MOP MOP %
0 600,000 0 0
600,000 0 12

 

The tax rate for the 2016 tax year is expected to be announced in December 2016.

Offshore companies. Macau Offshore Companies (MOCs) are ex empt from Macau complementary tax. A company qualifies as an MOC if it is established under Macau’s offshore law and if it meets certain criteria. In general, MOCs must use non-Macau currencies in its activities, target only non-Macau residents as customers and concentrate only on non-Macau markets. Newly established MOCs may engage only in the eight categories of services contained in a list published by the government.

Capital gains. The Macau Complementary Tax Law does not dis­tinguish between a “capital gain” and “revenue profit.” Companies carrying on commercial or industrial activities in Macau are subject to complementary tax on their capital gains derived in Macau.

Administration. The tax year is the calendar year.

For tax purposes, companies are divided into Groups A and B. These groups are described below.

Group A. Group A companies are companies with capital of over MOP1 million (USD125,000) or average annual taxable profits over the preceding three years of more than MOP500,000 (USD62,500). Other companies maintaining appropriate account­ing books and records may also elect to be assessed in this cate­gory by filing an application with the Macau Finance Services Bureau before the end of the tax year.

Income of Group A companies is assessed based on their finan­cial accounts submitted for tax purposes. These companies are required to file between April and June of each year complemen­tary tax returns with respect to the preceding year. The tax returns must be certified by local accountants or auditors registered with the Macau Finance Services Bureau.

Group A companies may carry forward tax losses to offset tax­able profits in the following three years.

Group B. All companies that are not Group A companies are clas­sified as Group B taxpayers.

For Group B companies, tax is levied on a deemed profit basis. Financial information in tax returns submitted by Group B com­panies normally serves only as a reference for tax assessment. Group B companies are normally deemed to earn profits for each year of assessment, regardless of whether the taxpayers have earned no income or incurred losses for the year.

Group B companies are required to file annual tax return forms for the preceding year between February and March. Certification of the tax return forms by registered accountants or auditors is not required.

Group B companies may not carry forward tax losses.

Dividends. Dividends are normally paid out of after-tax profits. Consequently, no tax is imposed on dividends.

Group A companies (see Administration) may claim deductions for dividends declared out of current-year profits. Under such circumstances, the recipients of the dividends are subject to complementary tax on the dividends.

Foreign tax relief. Macau does not grant relief for foreign taxes paid.

Determination of trading income

General. As discussed in Section B, companies are divided for tax purposes into Groups A and B. For Group A companies, taxable profits are based on the profits shown in the signed complemen­tary tax return, subject to adjustments required by the tax law. Group B companies are taxed on a deemed profit basis.

To be deductible, expenses must be incurred in the production of taxable profits. Certain specific expenses are not allowed, such as life insurance and fines. The deduction of provisions is restricted.

Inventories. Inventories are normally valued at the lower of cost or net realizable value. Cost can be determined using the weighted average or first-in, first-out (FIFO) methods.

Provisions. The following are the rules for the tax-deductibility of provisions in Macau:

  • Provision for bad debts: deductible up to 2% of trade debtor’s year-end balance
  • Provision for inventory loss: deductible up to 3% of the value of the closing inventory at the end of the year
  • Provision for taxes: not deductible
  • Other provisions: subject to approval by the tax authorities

Tax depreciation. Tax depreciation allowances are granted for cap­ital expenditure incurred in producing taxable profits. These allowances are calculated based on the actual cost of purchase or construction, or, if the amount of the cost is not available, the book value accepted by the Macau Finance Services Bureau. The following are the maximum straight-line depreciation rates in Macau.

Asset Maximum rate (%)
Industrial buildings (including hotels)
First year 20
Subsequent years 4
Commercial and residential buildings
First year 20
Subsequent years 2
Central air-conditioning plant 14.29
Central telecommunication, telephone and telex systems 10
Elevators and escalators 10
Vessels, dredgers and floating cranes 10
Transport equipment
Light vehicles 20
Heavy vehicles 16.66
Furniture
Office 20
Residential 16.66
Computers, minicomputers and word processors 25
Other office equipment 20
Non-electronic equipment and machinery 14.29
Electronic equipment and machinery 20
Computer software 33.33
Molds 33.33
Patents 10
Other assets Various

Relief for losses. Group A companies (see Section B) may carry forward losses for three years. Loss carrybacks are not allowed.

Groups of companies. Macau does not allow consolidated returns or provide other relief for groups of companies.

Other significant taxes

The following table summarizes other significant taxes.

Nature of tax Rate
Property tax, levied annually on owners of
real property in Macau; the tax is applied
to the actual rental income for leased property
and to the deemed rental value for other
property as determined by the Macau Finance
Services Bureau; up to 10% of the rent or
rental value may be deducted to cover repairs
and maintenance, and other expenses related
to the property; certain buildings are exempt
including industrial buildings occupied by
their owners for industrial purposes, new
residential or commercial buildings for the
first 6 years on the islands of Coloane and
Taipa and for the first 4 years in other parts
of Macau, and new industrial buildings for
the first 10 years on Coloane and Taipa and
for the first 5 years in other parts of Macau
Rental property 10.00%
Other property 6.00%
Stamp duty, on selling price or assessable
value of transferred property; payable by
purchaser
1% to 3%
(plus 5% surcharge)
Additional stamp duty; payable on the
acquisition of residential properties by
corporations or non-Macau residents
10.00%
Special stamp duty, on transaction price;
payable by transferor of residential properties,
shops, offices and car parks; subject to
exemptions under certain special circumstances
Property acquired by the vendor on or after
14 June 2011(for residential properties) and
30 October 2012 (for shops, offices and
car parks) and sold within one year after
acquisition (from the issuance date of the
stamp duty demand note)
20.00%
Property acquired by the vendor on or after
14 June 2011 (for residential properties) and
30 October 2012 (for shops, offices and car
parks) and sold in the second year after
acquisition (from the issuance date of the
stamp duty demand note)
10.00%

Miscellaneous matters

Foreign-exchange controls. The currency in Macau is the pataca (MOP). Since 1977, the pataca has been closely aligned with the Hong Kong dollar (HKD), moving within a narrow band around an exchange rate of MOP103 to HKD100. Because the Hong Kong dollar is officially pegged to the US dollar, the value of the pataca is closely associated with the value of the US dollar. The current exchange rate is approximately MOP8:USD1.

Macau does not impose foreign-exchange controls.

Debt-to-equity rules. Except for the banking and financial services sector, no statutory debt-to-equity requirements or capitalization rules are imposed in Macau.

Tax treaties

Macau has entered into double tax treaties with Cape Verde, Mainland China, Mozambique and Portugal. Macau has also signed a tax treaty with Belgium, but this treaty is not yet in force.