Conducting commercial or industrial operations in Macau entails certain tax responsibilities. The primary obligations impacting all businesses in Macau include industrial tax and profits tax. However, in recent years, the Macau Government has exempted industrial taxes, and the profits tax threshold was raised in 2018. Consequently, Macau boasts one of the lowest corporate tax liabilities in Asia.
Complementary tax is levied on the global income earned by Macau-registered entities, regardless of their residence or headquarters' location and the income nature (excluding rental income). If a foreign entity engages in commercial/industrial activities or provides services in Macau, the resulting gains are subject to complementary tax.
Aside from income from ordinary business operations, capital gains and interest income received by a Macau company are also subject to Complementary Income Tax.
Taxpayer Classification
For Complementary Income Tax purposes, taxpayers are categorized into two groups: Groups A and B.
Group A taxpayers are required to have their financial statements audited and can carry forward tax losses for a maximum of three years. Conversely, Group B taxpayers are not mandated to audit financial statements but are prohibited from carrying forward tax losses.
In recent years, the Macau Government has entered into agreements to avoid double taxation with partner countries and regions such as Mainland China, Hong Kong, and Portugal, benefiting individuals and companies operating in Macau.
Income Subject to Complementary Income Tax
Complementary Income Tax, also referred to as corporate income tax or profits tax, is imposed on adjusted profits derived from commercial or industrial activities conducted in Macau.
Taxpayers
The Macau Government classifies all taxpayers into two categories: Group A and Group B.
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Group A |
Group B |
|
|
Criteria |
1. Companies limited by shares 2. All forms of business entities having a capital of no less than MOP1,000,000 or whose average taxable profit in the last three consecutive years is higher than MOP 500,000 3. Those who elect to be a Group A taxpayer. |
1. . All sole proprietorship business 2. All limited companies with a turnover less than МОР1,000,000 3. All forms of business entities whose average taxable profit in the last three consecutive years is less than MOP500,000 |
Tax Rates
Complementary Income Tax in Macau is imposed on a progressive rate scale ranging from 3% to 9% for taxable profits up to MOP$300,000 and 12% for profits exceeding MOP$300,000. Profits below MOP$32,000 are exempt from tax.
With effect from 2014, exemption allowance has been increased to MOP$600,000:
|
Annual Taxable Income (MOP) |
Rate (%) |
|
Up to 600,000 |
0 |
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Over 600,000 |
12 |
Taxable Income
Taxable income is the remaining amount from gross taxable income in a year after deducting allowable expenses, losses, and tax-exempt items. Gains from the realization of capital assets, interest income, and dividends are subject to Complementary Income Tax.
Tax Losses
Group A taxpayers can carry forward losses for three years, whereas Group B taxpayers cannot. The carry-back of losses is not permitted, and group relief is unavailable.
Filing and Payment
All business entities, regardless of group classification, must file an annual tax return with the Macau Financial Services Bureau.
Group A taxpayers are required to file between April 1st and June 30th.
Group B taxpayers must file between February 1st and March 31st.
Upon receiving tax returns, the Financial Services Bureau issues notices of assessment to taxpayers, prompting them to pay taxes.
Taxpayers who underreport income, fail to file tax returns, or miss tax payment deadlines face penalties ranging from MOP 100 to MOP 20,000. Late payment also incurs interest charges, which are not deductible for Complementary Income Tax purposes.
Conclusion
From tax rates to taxable income and exemptions, businesses operating in Macau must comply with the provisions set forth by the Macau Government. Whether you're classified as a Group A or Group B taxpayer, timely filing and payment are crucial to avoiding penalties and ensuring compliance. If you require further information or assistance regarding corporate income tax in Macau, please don't hesitate to reach out to us.