Paulo Cordeiro de Sousa
Since 2011, the Macau government has adopted several measures against property speculation to improve the existing supply of housing, both for purchasing and rentals. Such measures have almost exclusively been adopted at the tax level, in particular within the Stamp Duty regulations.
Consequently, in 2011 the Legislative Assembly passed Law 6/2011, thus creating a Special Stamp Duty (SSD) on the Transfer of Real Estate («Imposto do Selo Especial sobre a Transmissão de Bens Imóveis»), firstly focusing solely on property for housing and then extending the regime in 2012 (via Law 15/2012) to commercial property, office space and parking lots. Such measures were aimed at increasing taxes imposed on vendors upon the on-selling of real estate within less than two years by charging 20% on the sales price of transfers occurring within one year and 10% within the second year. The aim is to avoid the speculative acquisition of housing property that takes advantage of real-estate appreciation, by attenuating any capital gains that may be obtained within a relatively short period of time. Simultaneously, Law 15/2012 introduced an aggressive stamp duty tax of 10% applicable to certain buyers of housing property: legal entities, commercial entrepreneurs (individuals) and non-residents. Once again, the rationale was to foster the acquisition of property by local residents that would inhabit such property.
More recently, in 2018, after the prior measures were found insufficient, Law 2/2018 created a Stamp Duty on the acquisition of a second and subsequent housing properties («Imposto do Selo sobre a Aquisição do Segundo e Posteriores Bens Imóveis Destinados a Habitação» – SD2+). The law imposes an additional 5% on the acquisition of the second housing property, and is applicable to all buyers, individuals and companies, residents and non-residents alike. There is a 10% levy on any third or subsequent housing property. Thus, for instance, should a company acquire its third property, it will have to pay, in addition to the regular Stamp Duty (with a progressive rate to the maximum of 3% for properties sold at over MOP$4,000,000), a 10% Stamp Duty as the purchaser is a company (deriving from Law 15/2012), plus a 10% Stamp Duty for the third property (SD2+). In addition to the referred amounts, it will also have to pay a 5% administration charge levied on the value of the total Stamp Duty payable (via item 15 of the Stamp Duty General Chart). This means that such a company would have to pay a minimum tax of 22.05% for this acquisition, which, in my opinion, is quite high.
Not much time has elapsed since Law 2/2018 came into force but the trend shows that real estate prices have continued to escalate. In addition, it is apparent that many dwellings on the market are still unoccupied and that owners continue to view real estate as a commodity, as investments in the short and medium term, in order to realize capital gains in the near future. The SSD has not brought changes to this situation – the seller only has to wait two years plus one day to automatically avoid paying additional taxes on the price. Unlike other investments, investing in real estate is seldom a very short-term decision. Wouldn’t it have been a wiser decision to create a tax on the capital gains made by the seller, regardless of the time for which he held the property? It is also important to note that individuals are not liable to pay any capital gains tax.
The SD2+ is currently easy to overcome if your second and subsequent real estate property is acquired by different members of your family.
Moreover, these measures have not have any effect on the prices in the rental market, which have kept steadily increasing, nor have they had an impact on the number of properties being offered for lease.
Measures with incentives to lease one’s property are clearly lacking. Why aren’t there tax benefits in place for owners who have their property leased and tax impositions on non-leased property? Perhaps those could be more effective than those presently in place.
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