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Macau (SAR), China - Income Tax

Macau (SAR), China - Income Tax

Taxation of international executives

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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 employees with residence or work permit and short-term business travelers allowed to work without a permit.

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 (SAR)?

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.

Tax rates

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

Residents and non-residents with working permit

Income tax table for 2020

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 (SAR)?
 

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

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 (SAR) 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 (SAR) 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/jurisdiction for more than 10 days after their assignment is over and they repatriate.
 

No.

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

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

Termination of residence

Are there any tax compliance requirements when leaving Macau (SAR)?
 

When the person with a working permit starts working in Macau (SAR), an M2 form should be filed. On quitting the current employment, a M2A form should be filed.

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 (SAR) provide information to the local taxation authorities regarding when a person enters or leaves Macau (SAR)?
 

Not automatic but may be upon the local taxation authorities’ request.

Filing requirements

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

No.

Economic employer approach

Do the taxation authorities in Macau (SAR) adopt the economic employer approach to interpreting Article 15 of the Organisation for Economic Co-operation and Development (OECD) treaty? If no, are the taxation authorities in Macau (SAR) considering the adoption of this interpretation of economic employer in the future?
 

No and no updates about an adoption in the future. Currently, the Macau (SAR) tax authority considers all employment (including certain self-employed freelances and professions) income earned in Macau (SAR) as taxable, even for a single day.

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.

 

Intra-group statutory directors
 

Will a non-resident of Macau (SAR) who, as part of their employment within a group company, is also appointed as a statutory director (i.e. member of the Board of Directors in a group company situated in Macau (SAR)) trigger a personal tax liability in Macau (SAR), even though no separate director's fee/remuneration is paid for their duties as a board member?

Directors of a Macau (SAR) company are taxed as the employee of the Macau (SAR) entity for any income earned for working for the Macau (SAR) entity.

a)   Will the taxation be triggered irrespective of whether or not the board member is physically present at the board meetings in Macau (SAR)?

Yes.

b)  Will the answer be different if the cost directly or indirectly is charged to/allocated to the company situated in Macau (SAR) (i.e. as a general management fee where the duties rendered as a board member is included)?

No, as long as the director are paid for their role to implement the director’s duty and other responsibilities.

c)   In the case that a tax liability is triggered, how will the taxable income be determined?

There are no specific guidance. The company may apply a reasonable basis to allocate part of the remunerations of the director as taxable income derived from Macau (SAR).

Tax-exempt income

Are there any areas of income that are exempt from taxation in Macau (SAR)? 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 MOP3,640 per month in 2020.

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 MOP4,095 in 2020.

 

Birth allowance

Birth allowance provided by the employer is subject to professional tax with a non-taxable limit of MOP5,460 in 2020.

Death allowance

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

Funeral allowance

Funeral allowance provided by the employer is subject to professional tax with a non-taxable limit of MOP5,005 in 2020.

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 (SAR)?

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 (SAR)? If so, how?

General rule

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

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

Foreign-sourced salary and wages income of a Macau (SAR) resident will be taxable in Macau (SAR) (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 plac
  • 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 (SAR)? 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 (SAR) 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 8 percent for 2020. The second category involves properties which have not been rented 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 an employee stock option exercise is subject to professional tax for both residents and non-residents.

Dividends

Pre-tax 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 2020 (1 January – 31 December).

General deductions from income

What are the general deductions from income allowed in Macau (SAR)?

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 from past 3 years 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 (SAR)?

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 (SAR)? 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 (SAR) 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 (SAR)? For example: monthly, annually, both, and so on.
 

1. Within 15 days since payment to expatriates, and

2. quarterly for Macau (SAR) residents and non-residents with a working permit.

Relief for foreign taxes

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

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

General tax credits

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

None.

Sample tax calculation

This calculation assumes a married taxpayer resident in Macau (SAR) with two children whose 3-year assignment begins 1 January 2018 and ends 31 December 2020. The taxpayer’s base salary is 100,000 US dollars (USD) and the calculation covers 3 years.

 

2018

USD

2019

USD

2020

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

Family allowance

0

0

3,000

Company car (non-cash)

6,000

6,000

6,000

Moving expense reimbursement

20,000

0

20,000

Home leave

5,000

0

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 (SAR).
  • The company car is used for business and private purposes and originally cost USD50,000. 6,000 is the annual depreciation of the car.
  • The employee is deemed resident throughout the assignment.
  • Tax treaties and totalization agreements are ignored for the purpose of this calculation.
  • The taxpayer is aged less than 65 throughout 2020.

Calculation of taxable income

Year ended

2018

MOP

2019

MOP

2020

MOP

Days in Macau (SAR) during year

365

366

365

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

Family allowance

0

0

23,760

Company car (NB1)

6,000

6,000

6,000

Moving expense reimbursement

158,400

0

158,400

Home leave

39,600

0

0

Education allowance

23,760

23,760

23,760

Total earned income

1,352,400

1,154,400

1,336,560

Other income

0

0

0

Total income

1,352,400

1,154,400

1,336,560

Deductions

 

 

 

Housing allowance (NB2)

 40,800

 42,240

 43,680

Family allowance (NB3)

0

0

10,920

Moving expense reimbursement (NB4)

2,500

0

2,500

General deduction (NB5)

 327,275

 278,040

 319,865

Total deductions

 370,575

 320,280

 376,965

Total taxable income

 981,825

 834,120

 959,595


Calculation of tax liability

 

2018

MOP

2019

MOP

2020

MOP

Taxable income as above

 981,825

 834,120

 959,595

Macau (SAR) tax thereon

94,739

77,014

92,071

Less:

 

 

 

Domestic tax rebates (dependent spouse rebate)

0

0

0

Foreign tax credits

0

0

0

Current year tax deduction (NB6)

(28,421)

(23,103)

(27,621)

Total Macau tax

66,318

53,911

64,450


NB1: If the company provides a car to the employee, MOP500/month is calculated as the taxable non-cash remuneration received by the employee.

NB2: The non-taxable monthly housing allowance for 2018 to 2020 are MOP3,400, MOP3,520 and MOP3,640, respectively.

NB3: The non-taxable monthly family allowance for 2020 is MOP910.

NB4: The first MOP2,500 moving expense reimbursement is non-taxable for employee with monthly salary over MOP30,000

NB5: There is a general deduction calculate at 25 percent of net taxable income NB6: The Financial Budget of the Macau (SAR) of 2018 to 2020 grants a 30 percent deduction to the professional tax payable. This is a temporary tax relief granted on annual basis.

Footnote

1. Certain 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/jurisdiction 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/jurisdiction employer but the employee's salary and costs are recharged to the host entity, then the host country/jurisdiction 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/jurisdiction.

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

Disclaimer:

All information contained in this publication is summarized by KPMG, a Macau (SAR) partnership and a member firm affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity, based on Law No. 21/78/M introduced in September 1978 regarding Macau (SAR) Complementary Tax and the further amendments made by Law 21/2019 in December 2019, personal income tax imposed under Law No. 2/78/M in February 1978 and the further amendments made by Executive Order No. 267/2003 in December 2003, property tax under Law No. 19/78/M in August 1978 and the further amendments based on Law No. 1/2011 and Law No.1/2018, stamp duty tax imposed under Law No. 17/88/M, and Law No.4/2010 regarding social security system and further amendment made by Executive Order No. 357/2016 and Law No.6/2018.

© 2021 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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