Tax
Planning For Your Business
The recent decision to increase the Profits Tax on Corporations
from 16% to 17.5% by the Hong Kong Government has prompted a
number of companies to look for other effective and legitimate
ways to restructure their businesses. One of the choices now open
for consideration is the setting-up of a Macau offshore company in
order to maximise the after-tax earnings.
In October 1999, the Government of Macau SAR has introduced
Offshore Law with the objective to attract foreign companies to
invest in their low operating cost environment.
The law offers a
licensing procedure to Companies (known as Offshore Institutions,
“OI”) who wish to operate an offshore business in Macau.
The authorizing bodies will grant a permit to the OI if the it
satisfies certain criteria.This new regime
has allowed both residents and non-residents to operate offshore
businesses in Macau with numerous tax exemption and incentives.
The
authorizing body for non-financial sector is Macau Trade
and Investment Promotion Institute (Instituto de Promocao do
Comercio e Investimento de Macau “IPIM”). The authorizing body for
financial sector is Macau Monetary Authority (Autoridade
Monetaria de Macau).
Basic Requirements
The basic requirements for operating an offshore service business
in Macau are as follows:
-
the
OI must first obtain a permit from the respective authorised
body;
-
the
OI can only use non-Macau currency for their business
activities;
-
the
OI can only target non-Macau residents as customers;
-
the
OI can only focus on non-Macau markets;
-
the OI must
have at least one director and one shareholder.
An individual
or corporation can be shareholder or director. However, if the
director is a corporation, this corporation has to appoint a
person to carry out the director's duties.
Tax
Incentives
The
OI can enjoy full exemption from the following
taxes:
-
Industrial
tax;
-
Inheritance
and donation tax;
-
Property-transfer
tax;
-
Stamp duty; and
-
Income tax
(see Note below).
Note: In
addition, non-resident managers or specialist technicians of the
OI, who are authorized to reside in Macau SAR, are exempted
from Macau Income Tax (similar to the Salaries Tax in Hong Kong)
for the first three calendar years of their employment with the
OI.
Types of Macau Offshore
Institutions
There are two types of offshore institutions which are classified as follows:-
1.
Offshore Auxiliary Service Institution - it can only provide
services to its holding company; and
2. Offshore Commercial Service Institution (also known as
International Business Company ("IBC") - it can provide services
to any party, including its holding company (see Types of Approved
Offshore Services below).
Types of Approved Offshore Services
-
Commercial
and service agent;
-
Overseas
selling activities;
-
Trade
information dissemination;
-
Management
and administration of ships and aircraft;
-
Documentation
services;
-
Call
centers for customer support;
-
Investigation
and security;
-
Hardware
consultant;
-
Software
consultant;
-
Data
processing;
-
Database
related activities;
-
Research
and development activities;
-
Legal
activities;
-
Accounting,
audit and fiscal consultant;
-
Management
and business consultant;
-
Architectural,
engineering and related activities;
-
Tests
and technical analysis;
-
Packaging;
-
Back
offices;
-
Training
programmes
Fees
for an Operating Offshore Institution An
offshore institution which has been authorised to operate in Macao
SAR must pay IPIM a set-up fee of MOP5, 000 (a one-time fee) and
an operating fee every six months.
These range from MOP5, 000 to MOP15, 000 (these only apply
to the offshore commercial service institutions), or MOP3, 000 to
MOP10, 000 (these only apply to the offshore auxiliary service
institutions).
Operating
Fees for Offshore Institutions are as follows :
|
Offshore
Commercial Service Institution
|
Operating
Fee
|
|
Registered
Capital: MOP25,000 to MOP100,000
|
MOP5,000
|
|
Registered
Capital: MOP100,001 to MOP1,000,000
|
MOP10,000
|
|
Registered
Capital: MOP1,000,001 or above
|
MOP15,000
|
|
Offshore
Auxiliary Service Institution
|
Operating
Fee
|
|
Registered
Capital: MOP25,000 to MOP100,000
|
MOP3,000
|
|
Registered
Capital: MOP100,001 to MOP1,000,000
|
MOP6,500
|
|
Registered
Capital: MOP1,000,001 or above
|
MOP10,000
|
(Note:
USD1.00 is around MOP8.0290)
Why
is a Macau Offshore Company Preferred? Macau
is another gateway into China. Its proximity with Zhuhai and Hong
Kong provides companies who wanted to take advantage of the low
business operating cost in Macau and the low production cost in
China. The advantages for these low costs will enable companies to
become cost competitive to reap their economies scale of the world
market. In
addition, the tax exemption incentives have created
unprecedented business and tax planning opportunities whereby
companies (especially for investors operating in the manufacturing
industries with overseas customers) can maximise their after tax
earnings for their investors. Macau has its established financial
systems to support various international trades and businesses.
Finally, the efficient transportation systems of sea, air and
roads have made doing business easier too. There is a regular
ferries between Hong Kong and Macau every 15 minutes, and also
regular flights between Singapore, Seoul, Bangkok, Manila, Taiwan,
Pyongyang and other major China cities.
Contact us If you wish to explore more about Macau offshore business model
and how to set up a Macau offshore company, please contact:
Gilbert Loke
Partner
Tel: (852) 2391 9224
Email:
gilbert@chanloke-cpa.com
|
