Choice of business entity
A foreign company conducting business (except for short-term projects) in Macau is obligated to set up a legal establishment, which can be in the form of a company or a branch.
There are two types of Macau companies: companies limited by shares and companies limited by quotas. The capital and corporate governance requirements for a company limited by shares are higher than a company limited by quotas, and, in general, a company limited by quotas is used by investors that are not in regulated industries.
Exchange of information
Law 5/2017 is the legislation that governs the exchange of information by Macau with other tax jurisdictions within the scope of bilateral and multilateral tax treaties or arrangements.
The following tables summarise the tax information exchange agreements (TIEAs) and DTAs that Macau has signed, and the TIEAs and DTAs that are in negotiation:
TIEAs have been signed by Macau with the following countries:
||United Kingdom of Great Britain and Northern Ireland
TIEAs are in negotiation with the following countries:
DTAs have been signed by Macau with the following countries:
||Not yet effective
||25 November 2012
|The Mainland of China
||1 January 2004
||11 January 2011
||1 January 1999
||3 October 2018
||Not yet effective
In addition, the Multilateral Convention on Mutual Administrative Assistance in Tax Matters has entered into force for Macau since 1 September 2018, and the Macau government has signed the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information.
As the information of a Macau taxpayer is becoming more transparent under comprehensive DTAs, TIEAs, and multilateral agreements, it is important for Macau entities with cross-border transactions to perform periodic tax health checks to ensure that tax planning arrangements, if any, that have been put in place in the past, remain technically defensible. As Macau offshore entities continue to be a focus of investigations for many tax jurisdictions, it is important to ensure that such entities have adequate commercial substance in Macau and the entities' transfer pricing policies are supported by appropriate transfer pricing documentation and transfer pricing studies.
Foreign Account Tax Compliance Act (FATCA)
On 14 December 2016, Macau and the United States (US) signed an inter-governmental agreement (IGA) that will facilitate compliance with the US FATCA by financial institutions in Macau. FATCA is an anti-tax evasion regime enacted by the United States to detect US taxpayers who use accounts with non-US financial institutions to conceal income and assets from the US Internal Revenue Service (IRS). The IGA signed between Macau and the United States is Model 2, which requires financial institutions in Macau to report the relevant account information of US taxpayers to the US IRS directly, supplemented by group requests made by the US IRS, on a need basis, for exchange of information on relevant US taxpayers at a government level. Under the IGA, financial institutions in Macau need to register and conclude separate individual agreements with the US IRS. Under the agreements, these institutions shall seek the consent of their account holders who are US taxpayers for reporting their account information to the US IRS annually. The IGA covers exemptions for financial institutions or products that present low risks for tax evasion by US taxpayers.