A standard deduction of 25% of taxable income is available for both self-employed individuals and salaried employees. The standard deduction is increased to 30% for the tax year 2020 due to outbreak of COVID-19.
Personal allowances or subsidies
The following examples of allowances or subsidies can be claimed as non-taxable items in determining taxable income for professional tax purposes:
- According to the Budget for the financial year 2020, which has already been approved by the Legislative Assembly, the personal allowance is MOP 144,000 per annum or MOP 12,000 per month (previously, MOP 95,000 per annum or MOP 7,916 per month) for income derived in the tax year 2020. The personal allowance for employees over the age of 65 or proved to be 60% disabled or above is further increased to MOP 198,000. Whilst it is generally believed that the direction of the Macau government policy would remain stable at least for the medium term, the extension of the tax incentive beyond the tax year 2020 is subject to approval by the Legislative Assembly on an annual basis unless such amendments are written into the relevant tax laws.
- Medical claims for medical/hospital expenses incurred by the employee and/or family members with relevant supporting documents.
- The following allowances are non-taxable, up to the prescribed limits, provided that such allowances have also been included as remuneration items in the employees’ employment contracts:
- Family allowance (spouse and parent, children aged 18 or under, and children aged above 18 but with proof of student status: MOP 910/month.
- Marriage allowance: MOP 4,095.
- Birth allowance: MOP 5,460.
- Housing allowance: MOP 3,640/month.
- Rental allowance, applicable when a stamped tenancy agreement is produced: Ranging from MOP 3,500/month to MOP 12,000/month, depending on the size of the rented property.
- Death allowance: Six times the basic salary.
- Funeral allowance: MOP 5,005.
- Transportation of remains allowance.
- Safety allowance in compensation for hardship and unsafe conditions (e.g. police, guards): The maximum amount is MOP 30,000 per annum.
- Reimbursed entertainment and travel expenses with supporting receipts.
- Reimbursed transportation expenses, daily allowance, and travel allowance for business trips, up to the limit of those applying to civil servants, with supporting receipts.
- Compensation for termination of employment within the statutory limit, provided that the employment relationship will not be reinstated within the next 12 months.
- Compensation in lieu of mandatory holidays or benefits in accordance with the Macau Labour Law due to certain rights forfeited by the employees.
- Allowance for error transactions (e.g. cashiers, tellers): The maximum limit is 12% on gross employment income in cash and in kind.
Business deductions are applicable only to self-employed individuals (i.e. business or professional income) whose income is taxed under the professional tax regulation.
For salaried employees, there is no provision in the tax regulation for business deductions.