Macau – Fiscal Consequences Of Offshore Regime Revocation.

12 September, 2019

 

Introduction

 

Macau's offshore regime, which is provided by Decree-Law 58/99/M, will be revoked on 1 January 2021 when Law 15/2018 enters into force (for further details please see "New rules for companies incorporated under offshore regime").

 

The main reason for establishing an offshore company is to take advantage of an offshore regime, primarily for tax benefits. However, in light of the impending revocation, such advantages will soon be inapplicable to offshore companies established in Macau.

 

Fiscal consequences

 

Income tax

 

Pursuant to Article 6(1) of Law 15/2018, offshore companies should complete their business activities before 1 January 2021 in order to benefit from Macau's existing favourable tax policy. Profits made on or after this date will be subject to income tax.

 

Pursuant to Article 3(1) of Law 15/2018, profit made from intellectual property acquired after 16 October 2017 and before 30 June 2018 is tax exempt. However, the income tax exemption policy applies to intellectual property acquired before 16 October 2017 only until 1 January 2021.

 

Professional tax

 

Pursuant to Article 3(4) of Law 15/2018, offshore company leaders and specialised technicians with fixed residency in Macau will benefit from a three-year professional tax exemption (pursuant to Article 12(5) of Decree-Law 58/99/M) only until 1 January 2021, irrespective of whether three years has lapsed by this date.

 

Transfer tax

 

Pursuant to Article 3(3) of Law 15/2018, property acquired (whether gifted, free of charge, inter vivos or mortis causa) by offshore companies exclusively for business purposes before 1 January 2021 will still be exempt from property transfer tax.

 

Comment

 

The revocation of Macau's offshore regime and the special tax regulations prescribed by Law 15/2018 reflect a wider national trend to transform offshore activities and eventually stop them entirely. However, it would arguably be wise to first transform offshore companies into general companies, in light of Macau's developing market alongside China's Greater Bay Area and its low tax policy.

 

This update was first published in the International Law Office Offshore Services Newsletter – www.internationallawoffice.com.