Government exempted from income tax on investments in mainland

Government Information Bureau

2019-11-28 18:41

Signing ceremony of the Fourth Protocol to the Arrangement between the Mainland and the Macao SAR on the Avoidance of Double Taxation and Prevention of Evasion of Income Tax is held at the Government Headquarters of Macao.
The Chief Executive, Mr Chui Sai On, and the Commissioner of the State Taxation Administration, Mr Wang Jun, sign the Fourth Protocol to the Arrangement between the Mainland and the Macao SAR on the Avoidance of Double Taxation and Prevention of Evasion of Income Tax, during a ceremony held at the Government Headquarters of Macao.

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The Government of the Macao Special Administrative Region (SAR) will be exempted from income tax when investing in the mainland, once a new protocol under the Mainland-Macao agreement to avoid double taxation comes into effect.

The Fourth Protocol to the Arrangement between the Mainland and the Macao SAR on the Avoidance of Double Taxation and Prevention of Evasion of Income Tax, exempts from income tax those investments made by the Macao SAR Government in the mainland, namely via the Guangdong-Macao Cooperation and Development Fund.

The protocol was signed today by the Chief Executive, Mr Chui Sai On, and the Commissioner of the State Taxation Administration, Mr Wang Jun, during a ceremony held at the Macao Government Headquarters.

Once the Fourth Protocol comes into effect, investments made by the Guangdong-Macao Cooperation and Development Fund would be exempted from an income tax estimated at approximately 800 million renminbi. Currently, a 10-percent income tax is levied on investments made in the mainland by the Guangdong-Macao Cooperation and Development Fund.

The measures in the new protocol clearly demonstrate the strong support from the country in advancing Macao’s effort for adequate economic diversification. The measures can effectively: reduce the fiscal costs related with the Macao SAR Government's investments in the mainland; increase the profitability of such investments; diversify the investment portfolio and enhance the value appreciation of the Macao SAR fiscal reserve; and contribute to boosting the development of the local financial services industry.

In order to align with the “Action Plan on Base Erosion and Profit Shifting” produced by the Organization for Economic Co-operation and Development, the Fourth Protocol contains a number of updates to the Arrangement on the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income, such as provisions on minimum requirements, so as to reflect the latest development in the international taxation system.

Currently, the Guangdong-Macao Cooperation and Development Fund has completed its scheduled injection of capital. Based on relevant terms – in addition to the guaranteed return of 3.5 percent on the actual investment – the Macao SAR Government would be entitled to extra returns if the fund’s returns exceed a certain threshold.

The Arrangement between the Mainland and the Macao SAR on the Avoidance of Double Taxation and Prevention of Evasion of Income Tax, was first signed in 2003, with subsequent updates – namely the First Protocol Second Protocol, and the Third Protocol – in 2009, 2011 and 2016 respectively.