Macau is one of the special administrative regions of China and its structural format is quite similar to its neighboring region Hong Kong.
Macau enjoys significant autonomy historically a colony of Portugal, it became the People’s Republic of China (PRC) Special Administrative Region (SAR) on 20th December 1999. While it is under the sovereignty of the People’s Republic of China, Macau enjoys significant political freedom in local affairs with constraints in foreign relations and the military. Now it has its currency, laws, and even border control. This system of using law is completely different from the common law system; instead, it uses code law that is similar to the Portuguese system.
Similar to Hong Kong, Macau is a Free Port with low tax options. The major export destinations are Hong Kong, China, the EU, the United States, and Japan while the major import sources are China, Hong Kong, EU, Japan, United States, and Switzerland.
Macau has closer economic cooperation with mainland China by means of the Closer Economic Partnership Arrangement (CEPA). Macau, similar to the arrangement it has with the MSC comparable to that of HK, signed a similar agreement with the mainland in 2003 improving its integration with the PRC. In this regard, Macau and Hong Kong signed a CEPA in October 2017 to enhance the bilateral economic and commercial connections.
While Macau recognizes the need to diversify its economy, primarily through other sustainable measures, it is currently trying to reduce its dependence on gambling. The strategy of the so-called ‘Diversification Economy of Macau’ depends also among others on the position of a Commercial and Trade Co-operation Service Platform between China and the PALOP and The Greater Bay Area Developments.
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How To Register A Company In Macau
Using Macau as a base for business, investors and foreign entities who want to open a company often opt for a limited liability company by quotas or a branch office.
A Limited Liability Company (By Quotas)
The most popular legal business structure in Macau is a company with limited liability of the members or shareholders.
It is ideal for a small to medium-sized business because it has very limited powers of its own. They are identified in their establishment conditions as lesser in formality than the joint stock, which is intended for large enterprises.
Limited by quotas private companies must have at least two shareholders each of whom must hold at least MOP1,000 and the maximum number of shareholders is 30.
The established amount of paid-up capital is MOP25,000. There are no prerequisites for the director’s place of residence.
The registration steps are as follows.
- Register your company name
- File the memorandum and articles of association
- Register your company
- Apply for taxes
Opening A Branch Office in Macau
A foreign entity that wants to conduct business to make a profit in Macau can register a branch in the country. Primarily, it is a legal entity of a foreign company with its legal office situated in the home country of the firm. A branch office must still be engaged in the same business activities as the headquarters (either entirely or partially).
It is also necessary to have a local legal address in Macau. It is mandatory to have a minimum capital of MOP 25000.
The following documentation must be submitted to open a branch office in Macau:
- Letter of confirmation from the foreign corporation accepted by the representative of the foreign corporation.
- Certified copy of the articles of incorporation or memorandum of association of the foreign corporation
- The minutes of the Board of Directors of the foreign corporation order to establish the branch
- A notarized certificate from the home country indicates that the company is valid and was formed by the law.
What Is The Current Tax System In Macau?
The tax administration authority of Macau is the Financial Services Bureau.
Macau-registered entities (resident entities) are subject to complementary tax on their global income, regardless of their residence or headquarters location and the income’s nature. Rental income from immovable properties in Macau SAR is an exception and taxed separately under the property tax regime.
The current Macau tax regime for non-residents entails taxation of only Macau-source income. Branches are also like subsidiaries and amounts to be paid as taxes in such branches are done at the same rate as well.
In general, if a foreign entity has a business or is involved in business and/or service activities in Macau SAR, a profit generated from the business or services provided will be subject to complementary tax.
Gross taxable income refers to the total income that an entity earns from business income, interest income, or gains from capital assets in a year, while allowable expenses, allowable losses, or tax-exempt income are subtracted from the gross taxable income to arrive at taxable income.
Expenses made in the process of generating taxable income are allowed, except the ones that are classified as nondeductible or those that exceed the specific allowable amount on tax.
Under the Macau Complementary Tax Law, complementary tax rates are progressive, ranging from 3% to 9% for taxable profits up to MOP 300,000, and 12% for profits exceeding MOP 300,000. Taxable profits below MOP 32,000 are exempt from tax.
Under the 2024 Budget approved by the Legislative Assembly, the tax-free income threshold for complementary tax has been raised from MOP 32,000 to MOP 600,000 for income earned in the 2023 tax year. Income above MOP 600,000 is taxed at 12%. These adjustments to the tax-free threshold and brackets require annual approval by the Legislative Assembly unless incorporated into the tax laws.
How FastLane Group Can Help?
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