The Macao Special Administrative Region may only have gained worldwide prominence with the advent of the liberalization of the gaming industry (casino) less than two decades ago, but it is important not to devalue what was and still represents Macao: a trading post. Macao’s history as a colony dates back to the 18th century. XVI when it was voluntarily ceded by China to the Portuguese to facilitate trade. Since then, this peaceful coexistence between East and West has defined Macao, making it an attractive business hub given the region’s stability and uniqueness, which is currently celebrating its twentieth anniversary of its return to the Chinese administration.
That said, the connection with Portugal, or with Lusophony, has never been lost, which is noticeable in the fact that the Portuguese language remains one of the official ones (together with Chinese). As such, official documents are almost all bilingual, and Portuguese is still heard in various public and private services (although in this latter context English is also often an option).
Another noteworthy aspect has been China’s investment in Portuguese-speaking countries (PALOPs), which has been carried out directly or through Macao. Forum Macao, as it is known, is a China-funded organization that aims to facilitate trade cooperation with the PALOPs. Moreover, at the advent of the Macao International Fair (MIF), it is worth noting this and other events held in Macao to promote products from around the world and in, which various buyers participate.
For any business owner, the difference in tax burden is currently an important aspect of decision making. In Macao, given the considerable government revenue from gambling tax, corporate income tax is limited to only 12%. The same applies to the amount of profits after deduction of the exemption, which varies each year from MOP600,000 for the 2018 financial year, currently equivalent to about USD74,273. Also, there is no dividend tax, which means that net income is the amount the end-day investor takes home. Business taxation is divided into two groups of taxpayers, one of which is based on presumed income. To do so, the annual statement provided by the Finances must include the total amount of income and expenses – overall, Macao has a much easier bureaucracy. Likewise, the personal income tax is progressive up to a maximum of 12%. Since the employer is only required to withhold and pay social security contribution (which is not high). Besides, there is no value-added tax and Macao is considered a free port, there are no customs duties on imported products. Also, the Macao Government has entered into various double taxation agreements.
Another interesting aspect is the Mainland and Macao Closer Economic Partnership Arrangement (CEPA), which gives Macao companies privileged access to the interior of China, including the export of certain goods. types of products exempt from customs duties. Company formation in Macao is a relatively simple procedure open to any investor and can be done remotely. The subsequent opening of a bank account currently requires (depending on the requirements of KYC), in addition to the usual documents, proof of the existence of a (legitimate) business, final beneficiary and, in most banks, a personal journey in front of the counter.
It is therefore advisable to set up the company first, which may take up to 1 month (two weeks minimum for registration with the Conservatory), with a subsequent director traveling to Macao to handle the opening procedures of bank account. In this context (as anywhere), professional assistance can be a valuable help in saving time in making any investment in the region.
This text is only a basic guide and should not be taken as a reference for making investment decisions in Macao as the specifics of the case may translate into the application of different rules.
Written by Jose Alvares, Partner, CA Lawyers – Macao