Macau legislation guide
By Bruno Nunes
BN Lawyers
Tel: +853 2833 1808 Fax: +853 2833 3366 Website: www.bnlawmacau.com
Macau was the first European settlement in the Far East, established in the 16th century. Pursuant to an international treaty known as the Sino-Portuguese Joint Declaration, signed on April 13 1987 between the People’s Republic of China (PRC) and Portugal, Macau would become a Special Administrative Region of the PRC. Under the formula ‘One country, Two systems’, China’s socialist economic system is not practiced in Macau. Instead, Macau will enjoy a high degree of autonomy in all matters, except for foreign and defence affairs, for 50 years following the handover on December 20 1999.
Macau officials run Macau through the exercise of separate executive, legislative and judicial powers and its legal system is based largely on Portuguese law or the Portuguese civil law system. It is characterised by its strict adherence to the principles of the rule of law and judiciary independence.
The key legislative developments, approved or in discussion in the last 12 months, likely to have the largest impact on the business activities of current and potential foreign investors are those in the domain of Tax Law.
First and foremost, there is the new Special Stamp Tax Duty legislation that imposes on the sale (in any way) of a residential property in the two years that follow the previous transmission. The tax rates are determined at 20% of the declared value or the tax value of the property, whichever is higher. This is if such transmission occurs in the year that follows the previous sale or at 10% in the year thereafter. It will be due by the seller. This legislative development comes with the intent of tackling the rising price of residential properties in Macau following a public demand for Government intervention to stop speculation. This initiative will impact real estate investment and will be revised after two years following a study of the real estate market at that time. An immediate impact of the initiative is that investors are now looking to commercial properties and to property leases, which has led to an increase in their price.
Another key initiative lies with the proposed Tax Code, which until now was non-existent. With approval of the Code, the main structural change needed is to systemise, in one single legal diploma, the fundamental rules of a tax system. The Code will look to standardise tax law and to provide a new legal framework to relations between the Tax Administration and taxpayers, which until now was fragmented across several individual legal acts or across legal provisions specific to each tax.
Besides filling a void, this diploma aims to raise Macau’s tax system to international taxation standards and, with that, raise investor confidence at a time when economic diversification is a hot topic in Macau.
In this Tax Code, we find matters that are present in a general codification. These include: type and purpose of taxes, ability to pay, taxation of unlawful acts, tax personality, tax base, payment, tax infringement and tax procedure, tax substitution, main and subsidiary liability, and taxpayers’ cooperation duties.
This special focus by the Macau Government on developments with the Tax Law arises from minor revisions of regulations of other taxes. It also stems from contributions and agreements for the exchange of information foreseeably relevant to the administration and enforcement of the internal laws of Macau, Sweden, Norway, Iceland, Greenland, Finland, Faroes Islands, Denmark and Australia. Macau has entered the second protocol to the Convention for the avoidance of double taxation between Macau and the PRC, and the Convention for the same purpose with Mozambique. These conventions, also in place with Portugal, are based largely on the OECD and UN models for double taxation treaties.
With regards to Macau’s crown jewel, its gaming sector, there is one key initiative under discussion in the Legislative Assembly that intends to raise the minimum age to enter a Casino from 18 to 21 years. It also intends to regulate in greater detail the access and expulsion of a person, the request of prohibition of entry to a casino by a person, and the provision that prizes won by those forbidden from entering a casino will revert to Macau’s Government.