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Macau: Proposal to repeal offshore company regime, related tax incentives

Macau: Proposal to repeal offshore company regime

The government of Macau SAR has proposed repealing the existing offshore company regime as part of Macau’s commitment in joining the OECD’s inclusive framework to combat cross-border tax evasion and promote tax transparency.

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The proposed repeal of the Macau offshore company regime would be effective as from 1 January 2021 under a pending draft bill. The proposed repeal process includes certain transitional provisions, and apparently the repeal would be phased in over a period of years. 

Under the first phase, entities eligible for the Macau offshore company regime would no longer qualify for the Macau stamp duty exemption on newly acquired movable or immovable properties, and any income derived from newly acquired intellectual properties would no longer be exempted from tax. In addition, offshore company managerial and technical personnel who have been granted permission to reside in Macau would no longer be eligible for Macau salary tax benefits.

In the final phase (expected beginning 1 January 2021), all tax benefits for Macau offshore companies would be fully repealed. Any offshore business license that has not been terminated by that time would expire on 1 January 2021. 

KPMG observation

It is anticipated that entities eligible for the Macau offshore company regime would be required to change their business names and to register as ordinary domestic companies (and thus be subject to full Macau complementary tax). Many groups based in Hong Kong have used tax-exempt Macau offshore companies in their supply chains. These companies have continued to operate even though new Macau licenses have not been issued for many years. With the proposed repeal of the Macau offshore company regime, corporate groups would want to consider what would be the consequences of repeal on their operations and what viable alternatives might be available.

 

Read an October 2018 report prepared by the KPMG member firm in Hong Kong

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