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Income Tax in Macau



Personal Income Tax:

Generally, professional tax is payable by anyone receiving income from employment services performed in Macau or from a Macau employment, irrespective of the following:

·  Where the income was received.

· The number of days spent in Macau and where the services were performed.

· Whether the recipient is a resident or not.

· Whether the recipient is paid in money or in kind. Where income other than cash is received, the Macau Finance Bureau (MFB) may assess the value of benefits so received.

Earnings of self-employed persons are also subject to professional tax.

On the other hand, income derived by all other taxpayers (i.e. companies, partnerships, sole proprietors, etc.) from commercial activities in the territory is subject to complementary tax (see the Taxes on corporate income section in the Corporate summary for more information).

Professional tax rates:

The professional tax rates are progressive and cumulative up to a maximum rate of 12%.

Assessable Income
Cumulative tax liability
Each Range
From
To
0
144,000
0
0
144,001
164,000
1,400
7
164,001
184,000
3,000
8
184,001
224,000
6,600
9
224,001
304,000
14,600
10
304,001
424,000
27,800
11
Above 424,000

12

Foreign freelancers and artists engaged by Macau entities without valid work visas are taxed at the higher of 5% on taxable income and the tax amount arrived by applying the progressive tax rate table on taxable income.

Residency Rule:

Residence and/or domicile are irrelevant for Macau Professional Tax purposes.

A taxpayer who is a resident of a country with which Macau has a bilateral tax agreement or tax arrangement will have to refer to the relevant article of such agreement/arrangement to determine one’s liability to professional tax. See the Foreign tax relief and tax treaties section for a list of countries with which Macau has a bilateral tax agreement or tax arrangement.

Taxable Income:

Employment income:

Employment income is comprised of the following items:

· Salary, overtime, commission, and bonuses, excluding lump-sum payments on retirement under a registered pension plan.

·  Passages for holidays.

· Other benefits in kind, such as hotel accommodation, utilities, and use of company cars provided by the employer.

· Other allowances paid by the employer (other than reimbursements of expenses incurred on behalf of the employer).

Certain overseas personnel who hold key managerial positions in an approved offshore institution established in Macau may enjoy an exemption from professional tax for the first three calendar years of their employment if they are approved to reside in Macau. Embassy officials from countries that have signed mutual tax agreements with Macau are exempt from professional tax.

Equity compensation:

Stock options and any other forms of share-based payments rewarded under Macau employment are taxable for professional tax purposes.

Capital gains and investment income:

Capital gains and investment income are not taxable to individual recipients, except for dividends received from local corporations, which are subject to complementary tax either at the corporate or the shareholder’s level.

Deductions from Income:

Standard deductions:

A standard deduction of 25% of taxable income is available for both self-employed individuals and salaried employees.

Personal allowances or subsidies:

The following examples of allowances or subsidies can be claimed as non-taxable items in determining taxable income for professional tax purposes:

· According to the Budget for the financial year 2017, which has already been approved by the Legislative Assembly, the personal allowance is MOP 144,000 per annum or MOP 12,000 per month (previously, MOP 95,000 per annum or MOP 7,916 per month) for income derived in the tax year 2017. Whilst it is generally believed that the direction of the Macau government policy would remain stable at least for the medium term, the extension of the tax incentive beyond the tax year 2017 is subject to approval by the Legislative Assembly on an annual basis unless such amendments are written into the relevant tax laws.

· Medical claims for medical/hospital expenses incurred by the employee and/or family members with relevant supporting documents.

· The following allowances are non-taxable, up to the prescribed limits, provided that such allowances have also been included as remuneration items in the employees’ employment contracts:

o   Family allowance (spouse and parent, children aged 18 or under, and children aged above 18 but with proof of student status: MOP 830/month.
o   Marriage allowance: MOP 3,735.
o   Birth allowance: MOP 3,735.
o   Housing allowance: MOP 3,320/month.
o   Rental allowance, applicable when a stamped tenancy agreement is produced: Ranging from MOP 3,500/month to MOP 12,000/month, depending on the size of the rented property.
o   Death allowance: Six times the basic salary.
o   Funeral allowance: MOP 4,565.
o   Transportation of remains allowance: Ranging from MOP 62,410 to MOP
o   65,580, depending on the location.
o   Safety allowance in compensation for hardship and unsafe conditions (e.g. police, guards): The maximum amount is MOP 30,000 per annum.
o   Reimbursed entertainment and travel expenses with supporting receipts.
o   Reimbursed transportation expenses, daily allowance, and travel allowance for business trips, up to the limit of those applying to civil servants, with supporting receipts.
o   Compensation for termination of employment within the statutory limit, provided that the employment relationship will not be reinstated within the next 12 months.
o   Compensation in lieu of mandatory holidays or benefits in accordance with the Macau Labour Law due to certain rights forfeited by the employees.
o   Allowance for error transactions (e.g. cashiers, tellers): The maximum limit is 12% on gross employment income in cash and in kind.

Business deductions:

Business deductions are applicable only to self-employed individuals (i.e. business or professional income) whose income is taxed under the professional tax regulation.

For salaried employees, there is no provision in the tax regulation for business deductions.




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 2016 tax year.

Taxable Profit
Tax on lower amount
Rate on excess (%)
Exceeding
Not Exceeding
0
600,000
0
0
600,000
-
0
12

Offshore companies:

Macau Offshore Companies (MOCs) are exempt 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.
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Note: Information placed here in above is only for general perception. This may not reflect the latest status on law and may have changed in recent time. Please seek our professional opinion before applying the provision. Thanks.

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This blog is Created by CA Anil Kumar Jain.