The Macau tax system has a lot of competitive advantages vis-à-vis other territories that people, especially international economic groups, do not yet seem to be fully aware of.
Regarding the taxation of companies, the highest tax rate of the corporate income tax (CIT, the “Imposto Complementar de Rendimentos”) is 12 percent. According to the CIT Regulations, the CIT rate is a progressive tax rate and is applicable to taxable income of more than MOP300,000.00 every year. In the Annual Budget, the Government has been approving a tax-exemption for taxable income of up to MOP600,000.00.
The highest tax rate (also a progressive tax rate) of the Personal Income Tax (PIT, the “Imposto Profissional”), applicable to individuals, is also 12 percent. According to the PIT Regulations, the 12 percent rate applies to taxable income of more than MOP280,000.00, but the Government usually approves in the Annual Budget higher tax-exemptions (for 2018, the exemption is for taxable income of up to MOP144,000.00) and tax-deductions than the ones provided by the PIT Regulations.
The companies residing in Macau are taxed on their worldwide income. This means that any income obtained from abroad will be treated as taxable income in Macau and will potentially be subject to CIT at the referred rates. Macau is not a tax haven, contrary to what many people think, but the tax rates are very competitive, from an international point of view.
Double taxation relief for income received from foreign sources is not available, except if a tax treaty for the avoidance of double taxation applies. Currently, Macau has tax treaties with China (Mainland), Portugal, Belgium, Mozambique, Cape Verde and Vietnam. This means that, provided some requirements of the treaties are met, the taxes paid in the referred countries with respect to income received by a Macau company may be credited against the CIT payable in Macau.
The CIT and PIT Regulations do not provide for withholding taxation on income paid to residents and/or non-residents from any source, with the exception of the withholding on salaries paid to employees by their respective employers. For instance, the payment of dividends by a resident company to a resident or non-resident shareholder, or the payment of interest by a resident company to a resident or non-resident creditor, is not subject to any withholding taxation in Macau.
Also, capital gains obtained by a resident company from the sale of assets, whether in Macau or elsewhere, is treated for tax purposes as normal revenue profits and will be subject to CIT. Again, double taxation relief may be available if a tax treaty applies. If the capital gain is obtained by a resident individual, such gain is out of the scope of any tax in Macau (provided that it is not derived from a commercial or industrial activity of said individual), and it will not be subject to any taxation.
As mentioned, the Macau tax law does not provide for any double taxation relief. It also does not provide for any participation exemption regime, for any holding companies regime, for any CFC (controlled foreign corporation), transfer pricing or thin capitalisation rules. It is not a very modern tax system, but it is a simple, straightforward one.
Adding to the above, the fact that Macau has no foreign exchange control rules – meaning that the proceeds may be sent abroad with no major difficulties – makes the Macau SAR a very interesting territory to invest in.