Complementary tax is imposed on the worldwide income earned by Macau-registered entities, irrespective of where their residence or headquarters are situated and irrespective of the nature of the income. The exception to the foregoing is rental income from leasing of immovable properties located in Macau SAR, which is taxed separately under the property tax regime.
Generally, if a foreign entity is engaged in commercial/industrial activities and/or rendering services in Macau SAR, the resultant gain from such commercial/industrial activities and/or services rendered will be subject to complementary tax.
According to the Macau Complementary Tax Law, complementary tax is imposed on a progressive rate scale ranging from 3% to 9% for taxable profits below or equal to MOP 300,000 and 12% for taxable profits over MOP 300,000. Taxable profits below MOP 32,000 are exempt from tax.
According to the Budget for the financial year 2021 approved by the Legislative Assembly (2021 Budget), the tax-free income threshold for complementary tax has been increased from MOP 32,000 to MOP 600,000 for income derived in the tax year 2020 (taxable income in excess of MOP 600,000 is taxed at 12%). The changes in the tax-free income threshold and the tax brackets are subject to approval by the Legislative Assembly on an annual basis unless such amendments are written into the relevant tax laws.
Types of taxpayers and associated tax bases
Group A taxpayers
Taxpayer entities whose registered capital reached MOP 1 million, or whose average taxable profits reached MOP 1 million per year in three consecutive years, will automatically become Group A taxpayers in the tax year following the year in which the relevant notification is issued by the Macau Finance Bureau (MFB). A taxpayer entity that is considered the ultimate parent entity of an MNE will also be classified as a Group A taxpayer. Any taxpayer entity not falling under the above criteria can also elect to become a Group A taxpayer by filing a Group A declaration form. Profits of Group A taxpayers are assessed based on the actual accounting income after making necessary tax adjustments.
Group B taxpayers
Group B taxpayers refer to any individual or any other form of companies not mentioned above and those taxpayers that do not keep detailed accounting records. Profits of Group B taxpayers are assessed on a deemed basis if the reported income is below the internal parameters set by the MFB for taxpayers in similar industries.