Tax Guide for US Expats Living and Working in Macau
Who Is Liable For Income Taxes in Macau
Individuals are subject to tax on income arising in or derived from Macau. Macau observes a territorial basis of taxation. Consequently, the concept of tax residency has no significance in determining tax liability, except in limited circumstances.
Income subject to tax. Professional tax is imposed on employment and self-employment income arising in Macau. Complementary tax is imposed on business income arising in Macau. For a table outlining the taxability of income items.
Employment income. Income from employment is subject to professional tax. For purposes of the tax, taxpayers are divided into employees and professional practitioners (see Self-employment and business income).
In general, all income from employment, including benefits in kind and directors’ fees, is subject to professional tax.
Self-employment and business income. Professional practitioners are subject to tax on self-employment income. Sole proprietors are subject to tax on business income.
Investment income. Property tax is levied annually on the owners of real property in Macau. Actual rental income derived from real property is taxed at a rate of 10%. For property that is not rented, the tax is levied at a rate of 6% on the deemed rental value of the property as assessed by the Macau Finance Department. A deduction of up to 10% of the rent or rental value of the property is allowed for repairs, maintenance and other expenses.
For 2011, a property tax deduction of up to MOP 3,500 is granted for each property unit.
The following buildings are exempt from property tax:
- Industrial buildings occupied for industrial purposes by the owners
- New residential or commercial buildings during the first six years after construction for buildings located on Coloane and Taipa islands, and during the first four years after construction for buildings located in other parts of Macau
- New industrial buildings during the first 10 years after construction for buildings located on Coloane and Taipa islands, and during the first 5 years after construction for buildings located in other parts of Macau
- Buildings occupied by nonprofit educational and charitable organizations
Exempt income. Employers’ contributions to medical and related schemes and to approved pension schemes are not included in taxable income.
Taxation of employer-provided stock options. Stock options granted by employers with respect to employees’ services in Macau are subject to professional tax. The taxable stock option amount is calculated as follows:
Taxable stock option income = (market value on exercise date – option price) x number of shares exercised
Employers are required to notify the Macau tax authorities within 30 days after granting a stock option.
Capital gains. Macau does not levy capital gains tax.
Purchasers of real property must pay stamp duty, which is levied on the sales price or assessable value of the property at the rates.
Deductions
Personal deductions and allowances. A 25% exemption and a personal allowance of MOP 144,000 may be deducted from employment income.
Business deductions. Expenses incurred wholly and exclusively for the purpose of producing taxable income are deductible in Macau.
Relief for losses. Employees may not carry back or carry forward losses. However, an individual carrying on a business as a sole proprietor may carry forward and deduct losses from assessable profits in the following three years if he or she is a Class A taxpayer or a professional practitioner with proper accounting records.
B. Estate and gift taxes
Effective from 1 August 2001, estate and gift tax was abolished. However, a de facto gift tax is charged as a stamp duty at a rate of 5% on transfers of real or personal property without consideration. Assessment is based on the value of the property transferred.
C. Social security
Employers must contribute monthly to a government social security fund in the amounts of MOP 30 for every resident worker and MOP 200 for every nonresident worker. Resident workers must each contribute MOP 15 per month. No ceiling applies to the amount of wages subject to social security contributions. Macau has not entered into any social security totalization agreements with other countries.
Double tax relief and tax treaties
Macau has entered into double tax treaties with Mainland China, Mozambique and Portugal. Macau-source income is taxable in Macau, regardless of whether foreign tax is paid on the income.
To learn more about the history, culture, economy and other information about Macau
We have been preparing US income tax returns for US Citizens and permanent residents living in Macau for over 15 years. As a US Citizen or permanent resident (green card holder) you are required to file a US return each year regardless of the fact that you file and pay taxes in your residence country. The expatriate earned income exemption ($100,800 for 2015) can only be claimed if you file a timely tax return. It is not automatic if you fail to file.
We have scores of clients located in Macau and know how to integrate your US taxes into the local income taxes you pay. Any income tax you pay there can be claimed as a dollar for dollar credit against the tax on your US return on the same income.
As an expat living abroad you get an automatic extension to file until June 15th following the calendar year end. (You cannot file using the tax fiscal year for US tax purposes). You must pay any tax that may be due by April 15th in order to avoid penalties and interest. You can get an extension to file (if you request it) until October 15th.
There are other forms which must be filed if you have foreign bank or financial accounts; foreign investment company; or own 10% or more of a foreign corporation or foreign partnership. If you do not file these forms or file them late, the IRS can impose penalties of $10,000 or more per form. These penalties are due regardless of whether you owe income taxes or not.
There are certain times you may wish to make elections with respect to your Corporation or Investment Company which will give you US tax benefits. There are other situations where forming a US corporation to receive your business income may be more advantageous than using a corporation in your resident country. We can help you with these decisions.
If you are self-employed while working, you will have to pay US self-employment taxes (social security). If you are a bona-fide employee you do not have to worry about paying US social security on your wages earned in Macau.
We have helped hundreds of expats around the world catch up because they have failed to file US returns for many years. Unfortunately, unlike India, Canada, UK, etc. you must also file so long as you are a US citizen or resident. You can if you follow proper IRS and State Department procedures surrender your US Citizenship and therefore cut off your obligation to pay US taxes in the future. You must surrender that Citizenship for non-tax avoidance reasons and then can usually not return to the US for more than 30 days per year for the subsequent ten years.
Let us help you with your US tax returns, US tax planning and other US tax and legal concerns. Download our expat tax questionnaire or request a consultation by phone, skype or email