Tax Matters | THE MACAU SAR BUDGET FOR 2020

Paulo Cordeiro de Sousa

The Macau SAR Budget for 2020 was approved by Law 22/2019, published in the Official Gazette in December 31st, 2019 (the “2020 Budget”). Again, as is usual in the annual budgets, the 2020 Budget sets forth some tax benefits for Macau resident individuals and companies. As I mentioned one year ago, I think that the Macau SAR Government should consider including such tax benefits in the general tax statutes, at least in such cases where they are recurrently approved in successive annual budgets. The main tax benefits inserted in the 2020 Budget are the following:
1. Total exemption from Industrial Tax (Contribuição Industrial). Industrial Tax is levied annually and payable by all entities (natural and legal persons) that perform any kind of commercial or industrial activity – it is a one-off payment of a fixed pre-determined amount. This exemption has been long granted by the successive Macau SAR Annual Budgets. Notwithstanding the exemption from the payment of Industrial Tax, the taxpayers are required to present their tax returns.
2. Regarding Stamp Duty (Imposto do Selo), several exemptions are granted by the 2020 Budget: (i) exemption for insurance policies and banking operations; (ii) exemption on the transfer of real estate for dwelling purposes, up to a transfer amount of MOP$3,000,000.00, provided that some requirements are met by the purchaser (e.g. must be of legal age and cannot own any other immovable property in the Macau SAR); (iii) exemption on auctions of goods or assets; (iv) exemption on shows, exhibitions or amusements of any kinds; (v) exemption on the issue or purchase of public debt securities.
3. Tourism Tax – exemption granted to the majority of tourism operators.
4. The display of advertising and propaganda material will be exempt from licencing fees and Stamp Duty.
5. With respect to the Personal Income Tax (“PIT” – Imposto Profissional), the 2020 Budget sets forth that: (i) there will be a deduction of 30% to the tax payable; (ii) the tax-exemption threshold will be of MOP$144,000.00 (instead of MOP$95,000.00, as established in the PIT Regulations); (iii) there will be a tax withholding exemption for salaries of up to MOP$16,000.00 per month; (iv) the tax-exemption threshold for employees with more than 65 years or with a permanent disability equal or above 60% will be of MOP$198,000.00 (instead of MOP$135,000.00). Also, the 2020 Budget establishes a reimbursement for Macau residents, in 2020, of 60% of the PIT paid with respect to the year 2018, up to a maximum amount of MOP$14,000.00.
6. The 2020 Budget provides also for a tax deduction, in a fixed amount of MOP$3,500.00, to the real estate property tax payable by resident individuals who are not entrepreneurs. Additionally, for 2020 the real estate property tax rate over leased property is reduced from 10% to 8%.
7. Regarding the Corporate Income Tax (“CIT” – Imposto Complementar de Rendimentos) applicable to companies and to individuals that carry on an industrial or commercial activity, the tax-exemption threshold for income obtained in the 2019 financial year is increased to MOP$600,000.00, whereas income above that threshold is taxed at a 12% rate.
8. The 2020 Budget also creates higher deductions for expenses related to innovation, science and technology activities, and sets forth a CIT exemption for income obtained or sourced in Portuguese-speaking countries, provided that it was taxed in said countries.
Further to the above, it is worth noting that major changes are expected in 2020 on Stamp Duty. The Legislative Assembly already approved the law containing extensive amendments to the Stamp Duty Regulations and Chart, but it was not published in the Official Gazette yet.