Macao provides a level playing field for investors from around the world. At the same time, the series of measures that have been implemented to encourage investment – including the provision of various tax and financial incentives – have gradually made Macao an ideal place for investors.
According to Law No. 1/86/M dated 8th February regarding the Tax Incentives within the Scope of Industrial Policy, tax incentives are offered for investments that are favourable to Macao’s industrial development and cover the following areas:
- Full exemption of urban property tax for properties on Macao Peninsula for a period of up to 10 years, and properties on the islands for a period not exceeding twenty years, applicable solely to income of property leased exclusively for industrial purposes;
- Full exemption of business tax;
- Basic allowance of 50% on corporate income tax;
- For the transfer of properties used exclusively for the operation of industrial activities – including establishments of commercial, administrative and social services – a 50% reduction of stamp duty for property transfer may be available; and
- A 50% reduction of inheritance tax and gift tax for property transfer mentioned above may be available.
The Interest Subsidy Scheme on Bank Loans to Enterprises (Administrative Regulation No. 16/2009), which on 30th May 2011 was amended by Administrative Regulation No. 10/2011, has expanded its coverage to cover more industries and investment projects, simplified the application requirements, and further relieved the burden of benefited enterprises by increasing the allocation of resources.
The scheme helps struggling local enterprises improve their operational conditions with financial support measures thereby adapting to changes in industry structure. Enterprises that benefit from the scheme enjoy a four per cent interest subsidy per year. The maximum period of subsidy is four years, counting from the first day of loan repayments, and the subsidy is calculated according to the outstanding capital of each instalment.
In addition, subsidies are provided to the following investment projects in repayable or non-repayable form, in accordance with Decree-Law No. 49/85/M, Article 11 in particular: manufacturing of a new product involving huge economic risks yet for a worthwhile cause; introduction or initiation of a new investment favourable to Macao’s industrial development; installation of anti-pollution facility that is beneficial to Macao.
One-Stop Service for Investors
IPIM’s One-Stop Service for Investors provides all-round support and assistance to investors throughout the implementation of an investment project. IPIM appoints dedicated staff to support their investments in Macao – all the way from simple consultation to every administrative procedure involved. In addition, free business matching services are offered via a web-based service platform, business negotiations, project matching, promotional activities and publications, helping investors find the ideal business partner.
The Investment Committee – a liaison body comprising IPIM, the Lands, Public Works and Transport Bureau, Macao Economic Services, Labour Affairs Bureau, Macau Productivity and Technology Transfer Centre (CPTTM), Civic and Municipal Affairs Bureau, Financial Services Bureau, Health Bureau, Macao Government Tourism Office, Fire Services Bureau, Environmental Protection Bureau and Human Resources Office – works closely in assisting in receiving and guiding investors and follows up on all the necessary administrative procedures involved in launching and implementing an investment in Macao. The Investment Committee also appoints dedicated public notaries to handle procedures involved in company set-up and business registration, providing comprehensive services to investors.
Macao’s Offshore Law, Decree-Law No. 58/99/M, has been in effect since 1st November 1999. Tax incentives for operating an offshore service business in Macao include exemption from profit tax, business tax and certain stamp duties. In addition, managers and specialised technicians of the offshore institution who are non-Macao residents but authorised to reside in Macao are exempted from personal income tax for the first three years of their employment in the offshore institution.
Offshore institutions are classified by offshore financial industry (approved and supervised by the Monetary Authority of Macao) and non-financial offshore service industry (approved and supervised by IPIM).
Operations of offshore services in Macao must abide by the following rules: 1. Use only non-Macao currency in their transactions and settlements; 2. Target only non-Macao residents as customers; and 3. Focus only on non-Macao markets.
Offshore businesses are permitted in the following eight categories: 1. IT hardware consultancy; 2. IT consultancy and programming; 3. Data processing; 4. Database-related activities; 5. Administrative and archive/filing support; 6. Research and development; 7. Testing and technical analysis; and 8. Operation and management of ships and aircraft.
SME Assistance Programme
Supporting the development of small and medium-sized enterprises (SMEs) has always been a focal point for the Government’s policy. In 2003, in response to the prevailing socio-economic situation, three enterprise-finance programmes were introduced.
SME Aid Scheme
Under the SME Aid Scheme introduced in May 2003, the Government provided enterprises with interest-free loans to improve business, enhance operating capacity and mitigate the impact of SARS.
During the past few years, Macao’s economy has grown rapidly. To meet the increasing demands arising from development, in November 2006 the scheme was revised, with the maximum amount of financial aid increased from 200,000 patacas to 300,000 patacas. Upon a further revision in February 2009, the maximum amount was increased to 500,000 patacas. In March 2012, another revision increased the maximum amount to 600,000 patacas.
Enterprises receiving the loans were primarily engaged in retail, construction and public works, wholesale, restaurants and hotels, real estate, corporate services, and personal services including automobile and motorcycle repair and maintenance, and hair and beauty salons.
SME Credit Guarantee Scheme
The SME Credit Guarantee Scheme was launched in August 2003. The scheme is designed to assist enterprises obtain bank loans for business development. The MSAR Government provides eligible enterprises with credit guarantees of up to 50 per cent of a bank loan of up to 1.5 million patacas. The scheme was revised in June 2009, with the maximum credit guarantee rate raised to 70 per cent, with the maximum credit guarantee amount raised to 3.5 million patacas. Most applicants were from the construction and public works sector, followed by wholesaling, retailing, real estate and company services, import and export, Chinese restaurants, and other restaurants and hotels.
SME Credit Guarantee Scheme Designated for Special Projects
The SME Credit Guarantee Scheme Designated for Special Projects was launched in August 2003. The scheme is designed to assist SMEs in launching specific projects. On the financing front, the MSAR Government will provide eligible enterprises with credit guarantees of up to 100 per cent of a bank loan of up to one million patacas. Of the approved cases, most were from retailing, followed by wholesaling, paper, printing and publishing, imports and exports, textiles, garments and leather manufacturing, construction and public works, transportation and warehousing, and travel agencies.
The “Mainland Factor” in Macao’s Economy
Under the principle of ‘One country, two systems’ the Government actively strengthens economic and trade interaction and co-operation with the provinces and cities of Mainland China through appropriate institutions and mechanisms, further developing Macao’s role as a gateway and bridge.
Mainland China and Macao Closer Economic Partnership Arrangement (CEPA)
The Mainland China and Macao Closer Economic Partnership Arrangement (CEPA) is an arrangement between two separate tariff zones of a single country that is similar to a free-trade agreement, in conformity with World Trade Organization (WTO) rules, with the objective of promoting the joint economic prosperity and development of the Mainland and Macao Special Administrative Region.
The first phase of CEPA was signed on 17th October 2003 and came into effect on 1st January 2004. The Mainland and Macao subsequently signed 10 supplementary protocols to CEPA, such as the CEPA Agreement between the Mainland and Macao on Achieving Basic Liberalization of Trade in Services in Guangdong and CEPA Agreement on Trade in Services under the framework of CEPA, in order to enrich its contents as well as broaden its commitments.
The coverage of CEPA primarily comprises three parts; namely, trade in goods, trade in services, and trade and investment facilitation.
Trade in Goods
The Mainland agrees to apply zero tariffs to all goods of Macao origin, starting 2006, except for goods prohibited from import into the Mainland. To enjoy zero tariff treatment, goods of Macao origin exporting to the Mainland must fulfil the rules of origin stipulated under CEPA and to obtain the specific Certificate of Origin (CO) to qualify as ‘Made in Macao.’
As stipulated in the Supplement II to CEPA, Macao manufacturers can, in line with the relevant application procedures, submit their requests for zero tariff treatment to the Macao Economic Services for verification and certification. Macao Economic Services will enter into consultations with the Customs General Administration on the rules of origin for the products upon confirmation by the Ministry of Commerce.
The two sides will then promulgate the relevant rules of origin prior to 1st June and 1st December each year and the Mainland shall, no later than 1st July of the same year and 1st January of the following year, respectively, apply zero tariff treatment to the relevant imported Macao products.
Trade in Services
On 28th November 2015, the CEPA Agreement on Trade in Services under the CEPA framework was signed in Macao, becoming effective on 1st June 2016. CEPA is the first free trade agreement which liberalises trade in services to the whole of the Mainland with market access provisions for national treatment and the management approach of negative listings.
It also restates the existing liberalisation content under CEPA and its Supplements, signifying full liberalisation of trade in services between the whole of the Mainland and Macao. The number of service sub-sectors from Macao to those national treatments applied under the Agreement is 62, including advertising, photography, conventions, hotels and restaurants, tourist guides, road transportation, and so on. Upon implementation of the Agreement, the Mainland opened up 153 service trade sub-sectors to the Macao services industry, accounting for 95.6 % of the 160 sub-sectors under the WTO Services Sectoral Classification System.
According to the standards of WTO services classification, a basic liberalisation of trade in services has been achieved between the two jurisdictions, with the target of achieving the liberalisation of trade in services in the Mainland for Macao by the end of the National 12th Five-Year Plan period essentially completed.
Trade and Investment Facilitation
For the promotion of trade and investment, the Mainland and Macao agreed to co-operate in 10 relevant areas; namely, trade and investment promotion; Customs clearance facilitation; commodities inspection, inspection and quarantine of animals and plants, food safety, sanitary quarantine, certification, accreditation and standardisation management; electronics; transparency of laws and regulations; co-operation of small and medium-sized enterprises; industrial co-operation; protection of intellectual property rights; co-operation on brand promotion and co-operation on education.
According to the CEPA Agreement on Trade in Services, for the purpose of investment in the liberalised services sectors by Macao Service Suppliers, the establishment of a company and the change of contract/Articles of Association of a company will be subject to filing administration. The adoption of filing administration will be further extended geographically from Guangdong to the whole of the Mainland, improving the relevant management approach of negative listings, leading to a higher level of investment facilitation for Macao investors wishing to access the Mainland market.
Outline Plan for Reform and Development of Pearl River Delta (2008-2020)
The Outline of the Plan for the Reform and Development of the Pearl River Delta 2008-2020 (‘the Outline’), introduced by the National Development and Reform Commission in January 2009, sets out the blueprint to develop the Pearl River Delta into a large metropolitan region of top global competitiveness by 2020; it will primarily be driven by mutual co-operation and synergies among Guangdong, Hong Kong and Macao.