Macau - Income Tax

Macau - Income Tax

Taxation of international executives

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All information contained in this document is summarized by KPMG LLP, the Macau member firm of KPMG International, based on Law No. 21/78/M introduced in September 1978 regarding Macau Complementary Tax, personal income tax imposed under Law No. 2/78/M in February 1978, the further amendments made by Executive Order No. 267/2003 in December 2003, property tax under Law No. 19/78/M in August 1978, the further amendments based on Law No. 1/2011, and stamp duty tax imposed under Law No. 17/88/M.

Tax returns and compliance

When are tax returns due? That is, what is the tax return due date?

An annual return form M3/M4 is to be filed by the employer within January and February following the year of assessment. Separate returns should be made for resident and non-resident employees.

Employees with income from more than one employer also are required to file an annual return form M/5 before the end of February of the following year.

Self practitioners are required to file an annual return form M/5 before the end of February of the following year if proper books and records are not maintained, and the filing deadline is 15 April of the following year for those with proper books and records.

What is the tax year-end?

31 December.

What are the compliance requirements for tax returns in Macau?

Residents and non-residents

For residents and non-residents with a working permit, tax payment is made quarterly (15 January, 15 April, 15 July, and 15 October) by the employer and the filing of detail remuneration is not required. For expatriate employees, a tax return is filed monthly, 15 days after receiving the remunerations, with details of remuneration paid to individuals.

Tax rates

What are the current income tax rates for residents and non-residents in Macau?

Residents and non-residents with working permit

Income tax table for 2016

Taxable income bracket Total tax on income below bracket Tax rate on income in bracket
From MOP To MOP MOP Percent
0 144,000 0 0
144,001 164,000 0 7
164,001 184,000 1,400 8
184,001 224,000 3,000 9
224,001 304,000 6,600 10
304,001 424,000 14,600 11
424,001 Over 27,800 12

Expatriates

Income tax payable is the higher of 5 percent of taxable income and the amount calculated using the progressive tax rates as stated earlier.

Residence rules

For the purposes of taxation, how is an individual defined as a resident of Macau?

There is no distinction between residents and non-residents for tax purposes. An individual is regarded as being a resident of Macau if he/she possesses an identity card issued by the Macau SAR or has a Permanent Resident Permit issued by the Macau Immigration Department. A non-resident is required to apply for a non-resident working permit in order to work in Macau.

For instructional, technical, quality control, or business supervisory service pursuant to an agreement between a foreign enterprise and a natural person or legal entity residing in Macau for the provision of certain specific and non-recurrent projects or services, a non-resident working permit is not required if the non-resident stays continuously or intermittently in Macau for work or service for a maximum of 45 days in every 6 consecutive months.

Is there, a de minimus number of days rule when it comes to residency start and end date? For example, a taxpayer can’t come back to the host country for more than 10 days after their assignment is over and they repatriate.

No.

What if the assignee enters the country before their assignment begins?

Assignees are subject to income tax once they start working in Macau.

Termination of residence

Are there any tax compliance requirements when leaving Macau?

When the person with a working permit starts working in Macau, he/she needs to file an M2 form.

On quitting the current employment, he/she must file a M2A form.

What if the assignee comes back for a trip after residency has terminated?

No restriction.

Communication between immigration and taxation authorities

Do the immigration authorities in Macau provide information to the local taxation authorities regarding when a person enters or leaves Macau?

No.

Filing requirements

Will an assignee have a filing requirement in the host country after they leave the country and repatriate?

No.

Economic employer approach

Do the taxation authorities in Macau adopt the economic employer approach1 to interpreting Article 15 of the OECD treaty? If no, are the taxation authorities in Macau considering the adoption of this interpretation of economic employer in the future?

No.

De minimus number of days

Are there a de minimus number of days2 before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimus number of days?

Not applicable.

Types of taxable compensation

What categories are subject to income tax in general situations?

  • employment income and remuneration
  • daily wages
  • salaries
  • service fees
  • bonuses
  • commissions
  • allowances and gratuities
  • directors’ fees
  • share of profits
  • share options
  • non-cash benefits such as electricity, servants, car benefits, telephone, and so on.

Tax-exempt income

Are there any areas of income that are exempt from taxation in Macau? If so, please provide a general definition of these areas.

Allowances up to the maximum limit granted for civil servants include the following:

  • family allowance
  • marriage allowance
  • birth allowance
  • death allowance
  • funeral allowance
  • transportation allowance
  • payments set by law to be made to an employee as compensation for injuries, including permanent incapacity
  • severance payments for termination of employment to employees for long service payment according to law
  • medical expenses with supporting documents
  • lump-sum payments made to employees on retirement or withdrawals made by an employee from an approved pension fund.

Certain employer provided housing allowances (employer’s contribution to rent)

Non-monetary annual housing allowance is subject to professional tax with a taxable limit of the lower of the annual rental of the place and 15 percent of the total annual cash remuneration received by the employee.

Certain employer provided housing allowances (monetary compensation)

Housing allowances provided by the employer are subject to professional tax with a non-taxable limit of MOP3,320per monthin 2017.

Rental allowance (reimbursement of rental)

Rental allowance provided by the employer is subject to professional tax with non-taxable limits as follows:

  • one bedroom: MOP3,500/month
  • two bedrooms: MOP4,700/month
  • three bedrooms: MOP8,700/month
  • four bedrooms: MOP10,000/month
  • five bedrooms: MOP12,000/month.

Marriage allowance

Marriage allowance provided by the employer is subject to professional tax with a non-taxable limit of MOP 3,735 in 2017.

Birth allowance

Birth allowance provided by the employer is subject to professional tax with a non-taxable limit of MOP 3,735 in 2017.

Death allowance

Death allowance provided by the employer is subject to professional tax with a non-taxable limit of six times monthly remuneration.

Funeral allowance

Funeral allowance provided by the employer is subject to professional tax with a non-taxable limit of MOP4,565.

Transportation allowance

Different types of transportation allowances may be provided by the employers such as the transport of remains, business trips, home trips, and expenses related to setting up an entity. These are all taxable with non-taxable limits depending on the nature of the trip as well as the origin and destination of the trip.

Non-cash benefits received by employees

There is a deemed taxable value for non-cash benefits (maximum) as follows:

  • electricity: MOP500/month
  • servants: MOP1,500/month
  • car benefits: MOP500/month
  • telephone: MOP720/year.

Expatriate concessions

Are there any concessions made for expatriates in Macau?

Expatriates receive the same tax treatment as residents and non-residents with working permit.

Salary earned from working abroad

Is salary earned from working abroad taxed in Macau? If so, how?

General rule

Whether salary earned from working abroad is taxed in Macau or not depends on the source of income. If the income is paid through Macau, it is subject to Macau professional tax; otherwise, it is subject to foreign income tax only.

Under the agreements between Macau and the PRC, Macau and Portugal and Macau, the Republic of Mozambique and The Republic of Cape Verde (in avoidance of double taxation).

Foreign-sourced salary and wages income of a Macau resident will be taxable in Macau (professional tax) where:

  • the recipient is present in the foreign place for a period or periods not exceeding in the aggregate 183 days in any 12-month period commencing or ending in the fiscal year concerned
  • the remuneration is paid by, or on behalf of, an employer who is not a resident of that foreign place
  • the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the foreign place.

Otherwise, income generated in the foreign place will be taxable in that corresponding place.

Taxation of investment income and capital gains

Are investment income and capital gains taxed in Macau? If so, how?

Investment income (such as rental income, gain from stock option exercise and dividends) is assessed to tax in the year in which it is received.

Rental income

Rental income in Macau is subject to property tax. Under the regulations, property taxes generally are levied on two categories of real estate properties. The first applies to leased properties on which the levies are based on the actual rental income at the rate of 10 percent. The second category involves properties which have not been let and are occupied by the owners, in which case taxes are levied at 6 percent on the assessable rental value. The assessable rental value is estimated by the government and revised periodically after taking into account all relevant factors and changes in the property market.

Gain from stock option exercise

Gain from a stock option exercise is subject to income tax for both residents and non-residents.

Dividends

Dividends received are subject to income tax based on the company’s income tax rate, that is zero percent (for income below MOP600,000) and 12 percent for income over MOP600,001 for the year of assessment 2016 (1 January – 31 December). Details for the year of assessment 2017 have not yet been announced.

General deductions from income

What are the general deductions from income allowed in Macau?

For income from employment, there is a general personal deduction of 25 percent of total remuneration. For self-practitioners, expenses incurred such as personnel costs, rent, depreciation, and administrative expenses normally are deductible. Losses brought forward also are deductible if the taxpayers maintain proper books and records.

Tax reimbursement methods

What are the tax reimbursement methods generally used by employers in Macau?

Current year gross-up is the normal method of recognizing tax reimbursements paid by the employer.

Calculation of estimates/prepayments/withholding

How are estimates/prepayments/withholding of tax handled in Macau? For example, Pay-As-You-Earn (PAYE), Pay-As-You-Go (PAYG), and so on.

Pay-as-you-earn (PAYE) withholding

Deductions from employment income are covered under the PAYE system.

If an individual is paid and/or employed, the employer will be required to withhold tax from their salary and wages and remit the tax to the Macau tax department.

When an individual commences employment, they will be requested to quote their Tax File Number (TFN) to their employer.

When are estimates/prepayments/withholding of tax due in Macau? For example: monthly, annually, both, and so on.

Monthly for expatriates, quarterly for Macau residents and non-residents with a working permit.

Relief for foreign taxes

Is there any Relief for Foreign Taxes in Macau? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on?

Macau has entered into double taxation treaties with Mainland China, Portugal, The Republic of Mozambique and The Republic of Cape Verde to prevent double taxation.

General tax credits

What are the general tax credits that may be claimed in Macau? Please list below.

None.

Sample tax calculation

This calculation3 assumes a married taxpayer resident in Macau with two children whose three-year assignment begins 1 January 2015 and ends 31 December 2017. The taxpayer’s base salary is USD100,000 and the calculation covers three years.

  2015
USD
2016
USD
2017
USD
Salary 100,000 100,000 100,000
Bonus 20,000 20,000 20,000
Cost-of-living allowance 10,000 10,000 10,000
Housing allowance 12,000 12,000 12,000
Company car 6,000 6,000 6,000
Moving expense reimbursement 20,000 0 20,000
Home leave 0 5,000 0
Education allowance 3,000 3,000 3,000
Interest income from non-local sources 6,000 6,000 6,000

Exchange rate used for calculation: USD1.00 = MOP7.92.

Other assumptions

  • All earned income is attributable to local sources.
  • Bonuses are paid at the end of each tax year, and accrue evenly throughout the year.
  • Interest income is not remitted to Macau.
  • The company car is used for business and private purposes and originally cost USD50,000.
  • The employee is deemed resident throughout the assignment.
  • Tax treaties and totalization agreements are ignored for the purpose of this calculation.

Calculation of taxable income

Year ended 2015
MOP
2016
MOP
2017
MOP
Days in Macau during year 365 365 366
Earned income subject to income tax      
Salary 792,000 792,000 792,000
Bonus 158,400 158,400 158,400
Cost-of-living allowance 79,200 79,200 79,200
Net housing allowance 95,040 95,040 95,040
Company car 47,520 47,520 47,520
Moving expense reimbursement 158,400 0 158,400
Home leave 0 39,600 0
Education allowance 23,760 23,760 23,760
Total earned income 1,354,320 1,235,520 1,354,320
Other income 0 0 0
Total income 1,354,320 1,235,520 1,354,320
Deductions 361,350
391,590
399,600
Total taxable income 874,170
962,730
954,720

Calculation of tax liability

  2015
MOP
2016
MOP
2017
MOP
Taxable income as above 874,170
962,730
954,720
Macau tax thereon 57,275
64,714
64,041
Less:      
Domestic tax rebates (dependent spouse rebate) 0 0 0
Foreign tax credits 0 0 0
Total Macau tax 57,275
64,714
64,041

If the company provides a car to the employee, MOP500/month is calculated as the non-cash remuneration received by the employee.

Footnote

1Certain tax authorities adopt an "economic employer" approach to interpreting Article 15 of the OECD model treaty which deals with the Dependent Services Article. In summary, this means that if an employee is assigned to work for an entity in the host country for a period of less than 183 days in the fiscal year (or, a calendar year of a 12-month period), the employee remains employed by the home country employer but the employee's salary and costs are recharged to the host entity, then the host country tax authority will treat the host entity as being the "economic employer" and therefore the employer for the purposes of interpreting Article 15. In this case, Article 15 relief would be denied and the employee would be subject to tax in the host country.

2For example, an employee can be physically present in the country for up to 60 days before the tax authorities will apply the ‘economic employer’ approach.

3Sample calculation generated by KPMG LLP, the Macau member firm of KPMG International, based on Law No. 21/78/M introduced in September 1978 regarding Macau Complementary Tax, personal income tax imposed under Law No. 2/78/M in February 1978, the further amendments made by Executive Order No. 267/2003 in December 2003, property tax under Law No. 19/78/M in August 1978, the further amendments based on Law No. 1/2011, and stamp duty tax imposed under Law No. 17/88/M.

© 2017 KPMG, a Macau partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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