Tax code

Government seeks to overhaul the current tax code

The Macao SAR Executive Council has completed a proposal to overhaul and update the local tax code in line with international standards, which will be submitted to the Legislature for evaluation.

“In order to put in place a more modern tax system that meets the requirements of Macao SAR’s economic development and public administration reform, the authorities consider it essential to develop a tax code that will constitute , in the future, the basis of the Macao SAR tax system, ”added the Executive Council.

The Executive Council is a formal body of advisers to the Chief Executive who serves as the basic governing body of local government.

Macau is currently considered internationally as a tax haven for its advantageous tax structure for individuals and businesses, residents and non-residents benefiting from low taxes levied on professional and business income.

For example, foreign income is not taxed, but residents are taxed on the income of Macanese companies, the first MOP 144,000 being exempt from income tax, after which the top level is taxed at 12%.

According to the advisory body, the current tax regime in effect in the Macao SAR was gradually established in the 1970s and constitutes “for the most part separate tax laws, developed according to the needs of tax collection” without including tax concepts and principles that apply uniformly and globally.

“For that, it is necessary to systematize them and to establish even clearer standards”, he added.

The new tax code comprises a total of 293 legal articles, divided into five sections, namely: tax ordinance, tax legal relationship, tax procedure, tax court procedure and tax seizure procedure.

The draft code introduces concepts such as tax residence and tax residence “in order to” better comply with its international tax obligations “and better” attract more foreign investors “to the SAR.

It also aims to “unify the separate rules of the current tax legislation”, as well as to clearly define the rights and obligations in tax legal relations, in the tax judicial process and in the tax execution process, in order to “protect fully the rights and legitimate interests of taxpayers and other taxpayers, while ensuring the city’s tax revenue.

In order to comply with the latest international standards on the exchange of information on request and the automatic exchange of information, established by the “Global Forum on Transparency and Exchange of Information in Tax Matters” of the Organization Cooperation and Development (OECD), as well as the improvement of the legal framework for the exchange of tax information in the local authorities of the SAR, also progressed with a new legal framework for the exchange of information in tax matters.

The proposal – which must also be submitted to the recently sworn in LA – proposes to extend the scope of the exchange of information on request to information that is available to pension funds and central management entities. non-compulsory pension funds and the repeal of the provisions according to which the information necessary for the exchange of information on request is limited only to that relating to the year in which Macau received the request and to the five fiscal years previous ones.

It also proposes that sanctions be applied in the event of violation or circumvention of due diligence obligations; financial institutions that have not obtained self-certification or relevant documents from their clients proving that they are foreign tax residents; or for not having kept the required financial information for the period indicated.

Last year, Macau’s Executive Council also concluded new administrative regulations for the registration and exchange of information on financial activities carried out by multinational groups operating in the city.

The new regulations came into effect on January 26, 2020 and were designed to align Macau with international tax rules set by the OECD to prevent “base erosion and profit shifting.”

In October 2018, the LA also passed a bill repealing the current offshore law, with offshore companies operating in Macao SAR having until January 1, 2021 to apply to the Institute for Trade and Investment Promotion to Macau (IPIM) to switch to onshore companies or cancel their operations. .

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