Tax Matters | Major changes to stamp duty

Paulo Cordeiro de Sousa

The Legislative Assembly of Macau has passed a new law introducing substantial changes to the Stamp Duty (“SD”) Regulations and Chart. The law was unanimously approved by lawmakers on 30 October 2019, but is still awaiting publication in the Official Gazette.

The seven envisaged changes are the following:

1) Abolition of fiscal stamps (estampilhas), in order to simplify the assessment and collection of the stamp duty, which will in the future be made by “payment receipt” (selo de verba) and through electronic means.

2) Elimination of several stamps from the SD Chart, which are outdated. E.g., stamp duty on the lease of movable assets subject to registration, on concession contracts, on donations inter vivos, on private written documents.

3) Clear identification of the tax subjects and of the payment deadlines. Regarding each act or fact subject to SD, the new law will specifically determine who will be the tax subjects that shall assess, charge and pay or deliver the payment of SD to the tax administration. Moreover, the law will set forth the relevant deadlines to fulfil the referred obligations.

4) Strengthening of the supervision and enforcement of the law by the tax administration, which translates into (i) much higher fines in cases of non-compliance; (ii) the imposition to the entities that collect SD to keep the documents and records of the operations for a period of five years; (iii) the release of credit institutions, insurance companies, legal practitioners, auditors, accountants, real estate agents and brokers, from their professional secrecy obligations, regarding SD obligations, if so requested by the tax administration services; (iv) the granting of powers to the tax administration´s supervision officers to request the collaboration of the police and administrative authorities in case of need.

5) Simplification of the provisions for penalties. The existing provisions are revoked and some others are created setting forth penalties for non-compliance.

6) Changes to the SD on rental agreements. There are three major changes in this regard: (i) a special regime is created for refunding the excess of SD paid, in the case of agreements that terminate prior to the term agreed by the parties; (ii) in order to relieve the payment of SD vis-à-vis agreements that have a long term, a special regime is created to allow the landlords to pay the SD on an annual basis; (iii) aiming to promote the arbitrage in Macau and reduce the litigation in court, the law establishes a reduction to half of the SD that would be payable, if the contracting parties agree to subject any conflicts arising from the rental relationship to arbitrage.

7) The agreements for the use of shops in shopping centres will be subject to the payment of SD. The courts in Macau – both the Court of Second Instance and the Court of Final Appeal – had previously ruled that the lease of shops in shopping centres did not qualify as rental agreements and therefore should not be subject to the payment of SD. The view of the tax administration has always been that the economic substance is identical in these agreements and in the other lease agreements for the use of shops outside shopping centres. The Macau Government took this opportunity to change the law and establish that these agreements will be subject to the payment of SD, too, pursuant to the principle of equality.

The new law was approved by the Legislative Assembly in final version, but after more than three months it has not yet been published. Let’s wait to see how it will be implemented.