The Macau Property Tax system is quite possibly just about to burst!
We will get to the details of the tax system shortly. In the meantime, if you register your property as being rented out and pay the tax you owe on the rental income, the registration and stamping of that document will take between three and four months.
Why does it take so long to calculate the tax and issue a bill that should in theory be an instant calculation based on an algorithm?
One of the factors could be the amount of people responsible for making the calculations in the process. We are informed by a reliable but un-named source that this totals two people for the whole of Macau.
The new laws that become effective in February 2018 are designed in part to encourage landlords to pay tax in accordance with the law.
If the new laws are successful, Macau may have a major problem on it’s hands.
If the number of submissions grow by just 10% in a system that is already failing, the pressure will build exponentially. Why? Because 10% growth in the submissions may represent a much larger number in ‘cases waiting’. Let’s hypothesize;
If the number of current submissions is 1,000 per month and the tax team are handling 800 of them, they are falling behind by 200 submission per month. Thus a 10% increase in submissions will result in 100 extra cases, taking the number of delayed cases from 200 to 300, an increase of a whopping 50%.
What happens if the increase in submissions is closer to 30% or 50%? You can probably see where the system would be headed.
Should the delay reach 12 months, a downward spiral would be created where the tax would become due faster than the system could advise the taxpayers of the bill amount and the bill could be paid. This in turn would create ever increasing delays in payment in a system that would crash itself.
Hopefully the government will review and upgrade the system prior to the implementation of the new law.
In the following parts of this article we discuss the questions we are most often asked on Property and Land tax, so let’s take a closer look at the system through some ‘question and answers’
1. What is land tax ? (‘Renda’ in Portuguese)
Land Tax is the annual ‘rent’ for the land on which the property stands. It is shared amongst the owners that have a property on that land and is usually a nominal sum. The land tax bill issued this year is for the current year’s tax, and bills are usually issued and payable in May.
2. What is property tax? (‘Contribuicao predial’ in Portuguese)
Property Tax is the annual tax levied on the actual living space.
If the property is being used as a home, then the tax estimated by the government and based on what they believe to be a fair ‘rental’ rate for the property. If the property is rented out, the tax is calculated as 10% of the rental income for the year or is based on the most recent submitted Rental Agreement. Unlike the land tax, the property tax bill issued this year is for the previous year and bills are usually issued in June, July & August.
That concludes this week’s article. Please feel free to email any questions and we will be happy to answer you.
Next Week: Part Two
Juliet Risdon is a Director of JML Property and a property investor.
Having been established in 1994, JML Property offers investment property & homes. It specializes in managing properties for owners and investors, and providing attractive and comfortable homes for tenants.