The tax year in Macao starts on January 1 and ends on December 31. Taxes collected on businesses are calculated from the date when the businesses are started to the end of the year.
Macao taxation system-sourcing from Portugal
Macao taxation system was introduced from Portugal, and its framework has remained the same despite changes made in the system. Yet there has been major change in the Portuguese taxation system since the 1970s. As a result, the taxation system currently in force in Macao is somewhat different from that in Portugal.
Macao sources of taxation
Seventeen taxes are collected in Macao. In terms of sources of taxation, taxes are collected on earning, property, wealth, assets and services, etc. The taxes in Macao are also classified into direct taxes and indirect taxes. The direct taxes include business tax, job tax, housing tax, additional income tax, gambling tax, franchise tax, inheritance and gift tax and real estate transfer tax, etc. The indirect taxes include stamp tax, tourist tax, consumption tax. In addition, charges are collected on issuing certificates, conducting legal and administrative affairs and inspections.
Similarity of Macao Taxation to others
Macao taxation system is quite similar to that of Hong Kong, which is small in the types of taxes collected and low in tax rate. Both areas mainly collect direct taxes which are supplemented by indirect taxes.
Major Differences between Macao Taxation and others
Gambling tax is what makes Macao taxation system different from others is that franchise tax is a major source of government revenue in Macao. The franchise tax, taking the form of contract, is a special tax collected by the Macao government on companies or institutions which, with special permission, operate a particular type of business. It consists of franchise tax on gambling and franchise tax on other businesses. Since the 1990s, franchise tax has made up 40% to 60% of the total government revenue. The gambling tax accounts for a lion share of the franchise taxes. The gambling tax makes up over 30% of the total government revenue.
Since the Portuguese Government adopted a law in 1961 to encourage the gambling industry in Macao, the gambling tax has been a major source of revenue for the Macao government. This changed for a brief period of time in the early 1990s when Macao experienced a boom in real estate development. The government collected more revenue from auctioning land than from gambling in 1992. Later, however, the growth of real estate in Macao slowed down and the real estate revenue also dropped.
Currently, there are several types of taxes in Macau:
1. Business tax
- Anyone wishing to do business in Macao must register for paying business tax. The business
tax is not the business license. After paying the business tax, the applicant must also apply for
business license in order to start a business. Job tax This tax is levied on people who earn
income by working. The taxable income includes regular or additional income, direct or
indirect income and income in kind.
2. Housing tax
- It is a direct tax levied on housing derived income. All the housing, whether for renting or for
own use, is subject to this tax.
3. Additional income tax
- It is also known as net profit tax. This tax is collected to ensure that taxpayers with different income can pay tax in a fair and equitable way.
4. Real estate transfer tax
- This tax is collected on the transfer of housing or land right. The tax is collected according to
the higher value of the two prices: the market value of the real estate assessed by the
government or the price of transaction agreed by the seller and purchaser.
The Chinese Government will resume the exercise of sovereignty over Macao on December 20, 1999. According to Articles 104 and 106 of the Macao Basic Law, the Macao Special Administrative Region shall have independent finances and shall not be responsible to the tax department of the Central Government. The Central People Government shall not levy taxes in the Region. The Macao Special Administrative Region shall practice an independent taxation system and shall, taking the low tax policy previously pursued in Macao as reference, enact laws, on its own, concerning types of taxes, tax rates, tax reductions, allowances and expenditures, and other matters of taxation.
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