Introduction to Major Taxes in Macau
Macau is one of the free trade ports with the lowest tax liability in the Asian region. The main characteristics of the Macau tax system is that it only has a limited number of taxes, lower tax rates and the adoption of the territorial principal of taxation. The Macau Government imposes mainly direct taxes, such as Industrial Tax, Professional Tax, Complementary Tax, Stamp Duty and Property Tax. There are also a few indirect taxes, including Property Transfer Tax, Tourism Tax and Excise Tax.
The Macau Government borrows its tax system largely from that of Portugal, especially the tax system that the Portuguese Government amended the 1960s. Since then, the Macau Government introduced a series of amendments. For example, the Macau Government introduced a major amendment to its tax law that modernised the method of collection of taxes. When the foreign entities conducting business in Macau, the main taxes on direct income that should be considered comprehensively include Professional Tax, Industrial Tax, Complementary Tax and Property Tax.
In respect of Complementary Tax, companies organised and registered in Macau and considered to be Macau tax residents and are subject to Complementary Tax on their worldwide net profits derived from commercial and industrial activities. Whereas individuals are only taxed on the income derived from services performed in Macau.
This article aims to introduces the several major taxes currently being imposed in Macau, including Complementary Tax, Industrial Tax, Professional Tax, Property Tax, Excise Tax and Stamp Duty.
- Macau Tax System
The Financial Services Bureau (DSF) is the tax authority in Macau. It is responsible for the implementation of tax laws and collection of taxes. It also provides guidelines and relevant legislative information for employers and business owners.
The tax year in Macau runs from 1 January to 31 December.
Macau imposes the following major taxes on entities and individuals conducting business or providing services in Macau:
(1) Complementary Tax (Corporate Income Tax, 所得补充税)
(2) Industrial Tax (营业税)
(3) Professional Tax (Salaries Tax, 职业税)
(4) Property Tax
(5) Excise Tax (消费税/关税)
(6) Stamp Duty
- Complementary Tax
(1)
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Taxpayers
Complementary tax is imposed on the total income earned in Macau by individuals or corporations irrespective of where their residence or headquarters are situated, excluding rental income from buildings situated in Macau.
The Macau Government borrows its tax filing system from Portugal and classifies all taxpayers into 2 categories namely, Group A and Group B. Most of the taxpayers fall into Group B. The difference between Group A and B taxpayers are as follows:
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Group A Taxpayers
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Group B Taxpayers
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Criteria
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(i) Companies limited by shares
(ii) All forms of business entities having a capital of no less than MOP$1,000,000 or whose average taxable profit in the last three consecutive years is higher than MOP$ 500,000
(iii) Those who elect to be a Group A taxpayer.
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(i) All sole proprietorship business
(ii) All limited companies with a turnover less than MOP$1,000,000
(iii) All forms of business entities whose average taxable profit in the last three consecutive years is less than MOP$500,000
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The main difference between Group A and Group B taxpayers is that Group A taxpayers must establish a sound accounting system and reporting by qualified accountants. The taxable income will be verified according to the declaration documents. Group B taxpayers may not have a complete accounting system and it is not mandatory for reporting by qualified accountants. The taxable income will be assessed by the Tax Assessment Committee.
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(2)
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Tax rates
With effect from 2014, exemption allowance for profit tax assessment has been increased to MOP$600,000. That is, the first MOP$600,000 is tax free and the remaining is subject to Complementary Tax at 12%. Tax rates are as follows:
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Annual Taxable Income (MOP$)
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Tax Rate
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Up to 600,000
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0%
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Over 600,000
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12%
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(3)
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Taxable Income
The Complementary Tax is imposed on the worldwide income earned by Macau-registered entities, irrespective of where their residence or headquarters are situated and irrespective of the nature of the income. The exception to the foregoing is rental income from leasing of immovable properties located in Macau, which is taxed separately under the property tax regime
The worldwide income of an individual refers to the income earned after deducting the relevant burden from the income of its industrial and commercial activities. The worldwide income of an enterprise refers to the net profit of the industrial and commercial activities for the whole year calculated in accordance with the related provisions.
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(4)
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Filing and Payment
Regardless whether a business entity is in Group A or Group B, it is required to file an annual tax return with Macau Financial Services Bureau. The annual tax returns must be filed with the Financial Services Bureau by the following dates:
(a) Group A taxpayers ?1 April to 30 June
(b) Group B taxpayers ?1 February to 31 March
Upon receipt of the tax returns, the Financial Services Bureau will issue notice of assessment to those taxpayers demanding the payment of taxes.
Normally, payment of tax shall be made by two equal instalments normally in September and November. However, if the amount is not greater than MOP$3,000, payment shall be made by one instalment, normally in September.
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(5)
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Tax Benefits
According to the Budget and the revised Budget for the financial year 2020 approved by the Legislative Assembly (2020 Budget), the tax-free income threshold for complementary tax has been increased from MOP$32,000 to MOP$600,000 for income derived in the tax year 2019.
Also, companies, which have already registered as Group A taxpayer in the FSB, will be able to deduct from their taxable revenues 300% of the first MOP$3 million spent on qualifying research and development activities, and 200% of any additional R & D expenditure, subject to a cap of MOP$15 million.
The interest on national bonds, local government and central state-owned enterpirse bonds issued in Macau, the proceeds from bond sales and from Portuguese-speaking countries, are exempt from Complementary Tax, but the taxes for relevant proceeds should already be paid in the these countries.
The following income are exempted from Complementary Tax:
- Income received by cooperatives from utilising its own funds
- Income received by recognised religious entity or organisation;
- Individuals or entities which pay tax in accordance with special regulation or as exempted by relevant regulation or ordinance;
- benefits derived purely from employment;
- Income obtained through the operation of aircraft business and its other supplementary activities in Macau by air transport companies whose residence or place of effective management is outside Macau, if equivalent exemption is granted to companies of the same nature whose residence or place of effective management is in Macau, and reciprocity is recognized in the Air Transport Agreement or the Chief Executive’s resolution published in Macau’s official gazette.
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- Industrial Tax
All business activities in Macau are required to perform Industrial Tax (营业税) registration. In other words, any self-running economic activities, which are not regulated under the Professional Tax, are to be considered as commercial activities. Any individual or organization carrying commercial activities are subject to Industrial Tax.
The amount of Industrial Tax payable depends on the nature of a business. The amount of tax for business with general nature varies from MOP$150 to MOP$1,500, and for banking business, it varies from MOP$20,000 to MOP$80,000.
However, it is worth noting that the Macau Government had exempted business since the return of sovereignty to Mainland China. The Macau Government exempted business tax again by its 2020 Budget.
Normally, Macau Financial Services Bureau will send the notice of taxation of that year from January to February every year to all taxpayers. Taxpayer are required to pay the tax during in February and March in the same year.
- Professional Tax
(1)
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Taxpayers
Professional tax, also known as Salaries Tax or Individual Income Tax, is levied on all personal income arising in or derived from Macau, including salaries, wages, bonuses, commissions, leave pay, value of free accommodation and other prerequisites.
Taxpayers are divided in two groups: employees (those employed to render services to third parties in return for compensation on daily or monthly basis) and professional practitioners (those who are self-employed and render professional services, including doctors, accountants and lawyers etc).
In the case of employees, all employment income falls within the scope of professional tax, except for items that are not taxable income as required by law. Professional tax is deductible at source and the tax deducted by the employer must be paid to the tax department on a quarterly basis within the prescribed period.
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(2)
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Tax rates
Professional Tax is charged on taxable income (after personal allowance) at rates from 6% to 12%.
Tax Table One (Applicable for under 65 years old)
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Annual Taxable Income （MOP$）
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Tax Rate
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Lowest
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Highest
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0
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144,000
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Nil
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144,000
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164,000
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7%
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164,000
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184,000
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8%
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184,000
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224,000
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9%
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224,000
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304,000
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10%
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304,000
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424,000
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11%
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Nore than 424,000
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222
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12%
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Tax Table Two (Applicable for or over 65 years old/persons with disabilities)
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Annual Taxable Income (MOP$)
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Tax Rate
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Lowest
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Highest
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0
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198,000
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Nil
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198,000
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218,000
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7%
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218,000
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238,000
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8%
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238,000
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278,000
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9%
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278,000
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358,000
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10%
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358,000
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478,000
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11%
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More than 478,000
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12%
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(3)
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Non-Residents
Professional tax is payable by all non-resident specialists, technicians and professionals working in Macau. The amount payable is the same as Macau residents, with a minimum of 5% even if the respective remuneration does not exceed the exempt amount. The tax deducted by the employer must be paid to Macau Financial Services Bureau on a monthly basis within the prescribed period.
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(4)
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Filing and Payments
- Group A Taxpayers (Employers)
Employers are required to file Form M2 with Macau Financial Services Bureau within 15 days after commencement of employment. Employers are required to file any changes of the personal details of employees with Macau Financial Services Bureau within 15 days the changes become effective.
Employees must declare the previous year’s income to Macau Financial Services Bureau in January and February of each year. If the employee has only one employer, there is no need to declare.
Employees must keep a register of employees and submit a declaration, including employee’s name, tax number, salary,etc. to Macau Financial Services Bureau in January and February of each year. Employers are required to deduct professional taxes from their employees?salary incomes on a “pay-as-you-earn?basis, and remit these deductions to the tax authorities on a quarterly or monthly basis. Non-residents are required to pay tax on a monthly basis.
- Group B Taxpayers (Professional practitioners)
Prefessional practitioners are required to file form with Macau Financial Services Bureau before starting their business, and also required to file any changes of the business scope with Macau Financial Services Bureau.
Professional practitioners who work together with not less than five other professional practitioners or have an average turnover over the last three years of more than MOP$1million are obliged to prepared accounting accounts properly. Prefessional practitioners who do not have properly prepared accounting accounts should file Form M/5 in January and February of each year to declare all employment income. Prefessional practitioners who have properly prepared accounting accounts are obliged to submit Form M/5 with qualified accountant’s or auditor’s signature annually, before 15 April.
The professional practitioners must send back M/7 receipt when receiving payment from clients. The accounting books and files should be archieved and properly kept within the next five years.
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(5)
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Tax Benefits
30% exemption on professional tax and the exemption allowance for its assessment in 2020 is MOP$144,000.00 (refer to “Tax Table One?. In case of the following situation: employer should withhold tax from causal worker whose daily salary is over MOP$686.00 or employee whose monthly salary is over MOP$17,143.00. Please refer to the Simulation Calculation disposal in website of FSB. In addition, exemption allowance for part-time and employee who are aged 65 or above or with permanent disability level of or above 60%, is adjusted to MOP$198,000.00 (refer to “Tax Table Two?.
According to “The Budget for the Fiscal Year 2020? the employers shall deduct 30% of tax payables based on the exemption and deductions when withholding the tax for employees or causal workers.
70% of the Salaries Tax paid for the assessment year 2018 will be refunded to Salaries Taxpayers who hold a Macau Resident Identity Card on 31 December 2018, up to a ceiling of MOP$20,000.00.
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- Property Tax
(1)
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Taxpayers of Property Tax
The property tax is charged on the revenue derived from all urban houses in Macau, no matter they are being leased or for self-use. In other words, owners of properties located in Macau are liable to Property Tax.
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(2)
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Property Tax Rates
For leased houses, their revenues are referred to their amounts of rent use. For non-leased houses, a deduction of up to 10% of the rental income shall be allowed upon request made to Macau Financial Services Bureau to cover the cost of repairs and maintenance incurred by the taxpayer.
Property tax is charged at the following rates:
- A fixed tax rated of 6% is applied to the rateable venue of the property not rented out.
- A fixed rate of 10% on the rateable value of the leased property.
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(3)
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Exemptions
Exemptions from property tax include the following situations:
- Buildings are used by the owners for industrial purposes.
- New residential or commercial buildings or buildings which have undergone improvements or extensions with investment in excess of 50% of the value of the property are exempted for a period of four years in Macau City or six years in the Islands.
- New industrial buildings are exempt for a period of five years in Macau City or ten years in the Islands.
- Buildings being occupied by non-profit making schools, approved charitable organizations and religious bodies.
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(4)
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Filing and Payment of Property Tax
Within 15 days after a property is leased out, the property owner should file a notice in a specified format and the lease agreement with Macau Financial Services Bureau. Also, the property owner should inform Macau Financial Services Bureau at the termination of the lease agreement.
Property tax shall be payable by single payment during the period from June to August every year.
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(5)
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Special Tax Incentives
In its 2020 Budget, the Macau Government provided the following special incentives in respect of the property tax:
- Exemption of property tax levied on residential units of Macau residents.
- Property tax levied on properties registered for the purposes of offices, commercial, industrial, hotels and similar activities:
- Fixed deduction of MOP$3,500
- Deduction of 25% on the remaining property tax
- Fixed deduction of MOP$3,500 on the payable property tax of Macau residents for other purposes not mentioned above.
The urban property tax rate for leased premises is reduced to 8% in Year 2020.
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- Consumption Tax
The Macau Government only imposes certain custom excise (consumption tax) on a limited number of products imported into Macau, including drinks with alcoholic content above 30% and tobacco products. Other than the custom duty stated above, there is no Value Added Tax or Goods and Service Tax charged in Macau.
- Stamp Duty
(1)
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Object of Stamp Duty
Stamp duty is a type of tax that levies on deignated documents and behaviours. The taxable items including company establishment, administrative licenses, building sales, document verification, lottery, etc. There are two main collection methods: tax stamp and voucher stamp.
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(2)
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Rates of Stamp Duty
Stamp duty is levied on a variety of documents and transactions executed in Macau.
The rates of Stamp Duty charged on transfer of fixed property (such as commercial and residential buildings, factories and parking, etc.) are 1% for first MOP$2,000,000, 2% for the next MOP$2,000,000 to MOP$4,000,000 and 3% for the amount over MOP$4,000.00. While free transfer of property (real estate) or free transfer of assets is subject to 5%.
The tax payable shall be the higher of the value declared by the taxpayer or the record value of the property. In addition, for the second residential property, the tax rate is 5% of the taxable amount, the third or above residential property is taxed at 10% of the taxable amount.
The tax rates are as follows:
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No.
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Nature
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Tax Rate
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1
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Share Capital
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Up to MOP$1 million
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0.4%
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Next MOP$4 million
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0.3%
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Next MOP$5 million
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0.2%
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Thereafter
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0.1%
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2
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Public deeds or contracts
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Sale of moveable and fixed assets up to MOP$2 million
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1.0%
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Sale of moveable and fixed assets MOP$2 million to MOP$4 million
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2.0%
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Sale of moveable and fixed assets up to MOP$4 million
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3.0%
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Free transfer of assets over MOP$50,000
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5.0%
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Transfer of shares
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1.0-3.0%
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Supply of goods
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0.2-0.5%
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3
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Insurance premium plus surcharges
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2.0-5.0%
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4
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Interest and commission received by banks
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1.0%
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(3)
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Special and Additional Stamp Duty
A Special Stamp Duty at the rates of 20% is charged on the seller if any residential property, commercial property, office and parking space which is sold within one year of purchase. The rate of 10% is charged on the above properties which are sold within 1-2 years of purchase.
Also, an Additional Stamp Duty (10%) is levied on top of the existing stamp duty on corporation, sole proprietor and non-resident individual who acquires residential property with or without consideration.
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(4)
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Special Tax Incentives
In the year 2020, the government will continue to exempt stamp duty on insurance contract and banking business, property rights of products, goods and properties, or movabe or immovable properties due to auctions. The admission tickets for performances, exhibitions or entertainment, lecense fees for the posting or place ment of promotional or advertising items are also exempt from stamp duty.
Exemption of stamp duty on the first MOP$3,000,000 of fixed asset value which is only applicable for Macau permanent residents, an application form “Confirmation of exemption from stamp duty?should be submitted and confirmed, this is not applicable to the taxpayers who have received such an exemption in previous years or the current financial year.
In the situation where two or more people acquire a property, only the eligible taxpayer (the one who does not own any property in the said tax year) is entitled to receive the tax exemption proportionally. Moreover, when a couple acquires an immovable property, they are entitled to receive the relevant tax exemption only when either of them is not the owner of any immovable property.
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