Foreign tax credit
There is no foreign tax credit provision in the Macau Complementary Tax Law. Foreign tax credit is only available under the relevant provisions of the comprehensive tax arrangements/agreements that Macau has entered into with the People's Republic of China, Portugal, Mozambique, Cabo Verde, and Vietnam respectively.
Capital investment incentives
A 50% reduction in complementary tax and stamp duty on certain transactions, as well as exemptions from annual industrial tax (currently exempt for all taxpayers) and property tax (up to periods prescribed by the MFB), are allowable for taxpayers in the manufacturing industry (as defined in the Decree-Law) whose capital investment is aimed at the introduction of new products or high technology, improvement of productivity, and increase in exports of goods to new markets.
Where profits are retained in reserves and reinvested in installation of new equipment within the following three financial years, the reinvested reserves can be deducted from taxable profits, provided that the reinvested reserves are attributable to profits earned from normal business operations and the investment is considered to be beneficial for the economic development of Macau.
Offshore services business incentives
Profits derived by approved offshore institutions from prescribed offshore service-related activities are exempt from all forms of taxes, such as complementary tax, annual industrial tax (currently exempt for all taxpayers), and stamp duties.
The Macau Offshore Regime will be abolished on 1 January 2021. Existing approved offshore institutions can continue to operate until the end of year 2020 with the following transitional arrangements:
- Income derived from IP acquired on or after 16 October 2017 is no longer eligible for complementary tax exemption starting from 1 July 2018. Approved offshore institutions with such income from IP are required to file complementary tax returns under Group A taxpayer with the Macau Finance Bureau for year 2018.
- Purchase of office premises after the effective date of the abolishment law are no longer eligible for stamp duty exemption.
- Newly approved resident permit holders after the effective date of the abolishment law are no longer eligible for professional tax exemption, while existing approved resident permit holders who continue to work in the approved offshore institutions can continue to enjoy professional tax exemption for the first three years within the license validity period of the approved offshore institutions.
- Disposal of office premises with stamp duty previously exempted are no longer required to be clawed back even if the approved offshore institution has possession of the concerned property for less than five years.
Existing offshore operating licences will automatically become invalid on 1 January 2021. Approved offshore institutions will transit to Macau onshore entities from 1 January 2021.
Incentives for owners of touristic facilities
Additional incentives, such as an extended property tax exemption period, exemption from annual industrial tax (currently exempt for all taxpayers), reduction in stamp duty, as well as acceleration of depreciation for complementary tax purposes, are available to owners of facilities that qualify as touristic facilities.
Incentives for financial leasing companies
Approved financial leasing companies are exempt from stamp duty for registration of start-up/additional capital, interest and commission, and financial leasing contracts. Premise purchased for financial leasing operation is exempt from stamp duty, subject to a cap of MOP 500,000.
For complementary tax deduction purpose, tax deductible depreciation for financial leasing assets can be accelerated to three times for complementary tax purposes. The complementary tax rate is reduced from 12% to 5%. The tax allowable threshold for bad debt provision is increased from 2% to 10% on total receivables; bad debt provision exceeding 10% of total receivables is not allowed as tax deduction. Financial leasing income derived from jurisdictions outside of Macau will be exempt from complementary tax provided that such income has been subject to tax at its place of origin.