Notes for Business Operation

Profits Tax

Profits tax is a type of tax levied on the basis of net profit obtained from industrial and commercial activities. Taxpayers of profits tax are classified into two groups: Group A and Group B.

 

Group A Taxpayers

Definition:

  • Public companies and partnership limited by shares;
  • Companies of any nature, incorporated with not less than MOP 1 million of capital or generating not less than MOP 1 million of taxable profit in average over the past three consecutive years;
  • Companies of any nature that act as an ultimate parent entity;
    * Ultimate parent entity refers to a constituent entity of a multinational enterprise group that also meets the following conditions: it owns a sufficient interest in other constituent entities; it compiles consolidated financial statements in accordance with accounting standards; its aforesaid interest is not directly or indirectly owned by any other constituent entities.
  • Other individuals or collective persons who keep appropriately compiled accounts and have submitted application for inclusion in this category by 31 December of the fiscal year. If the taxpayer starts their business in the last quarter of that year, the application period will end on 31 January in the following year.

Tax declaration method:

Group A taxpayers shall declare profits of the previous fiscal year through an accredited accountant between April and June every year.

 

Group B Taxpayers

Definition:

Non-Group A taxpayers are classified as Group B taxpayers and are generally small and medium-sized enterprises.

 

Tax declaration method:

Group B taxpayers must declare the profits from the previous fiscal year by submitting the Incomes Declaration – Group B M/1 Form between February and March each year.

 

Profits Tax Rate Table

Annual Taxable Profit (MOP)Tax Rate
Up to $32,000Exempted
Portion of profit that exceeds the aforesaid amount 
From $32,001 to $65,0003%
From $65,001 to $100,0005%
From $100,001 to $200,0007%
From $200,001 to $300,0009%
Over $300,00012%

2021 Tax Relief Measures

  • Allowance for the taxable profit in 2020 is MOP 600,000.
  • An additional deduction of up to MOP 300,000.

(For details, please refer to Law no. 27/2020 – the Government Budget of Financial Year 2021, amended by Article 3 of Law no. 3/2021)

 

Profits Tax – Example (With the allowance for annual taxable income set as MOP 600,000)

Annual Taxable Income

(MOP)

Portion of Taxable Income Exceeding MOP 600,000 and Subject to Taxation

(Tax rate at 12%))

Profits Tax PayableRatio of Profits Tax Payable over Annual Taxable Income
600,000 or below000.00%
1,000,000400,00048,0004.80%
2,000,0001,400,000168,0008.40%
3,000,0002,400,000288,0009.60%
5,000,0004,400,000528,00010.56%
10,000,0009,400,0001,128,00011.28%
15,000,00014,400,0001,728,00011.52%
20,000,00019,400,0002,328,00011.64%
100,000,00099,400,00011,928,00011.93%

The example above is for reference only and does not reflect the actual tax levied/assessed by the authorities or the registered accounting practitioners.

 

Note: Taxpayers are required to complete and submit the Incomes Declaration Form within the declaration period even if there has not been any business activity or loss has been recorded in business.

 

Business Tax

Business tax is a type of registration tax levied for industrial and commercial activities performed by individuals or companies. Depending on the nature of business, the tax is MOP 300 per year for most of the activities and MOP 80,000 per year for commercial banks together with an additional 5% stamp duty.

 

Obligations

In any of the following cases, taxpayers must notify the Financial Services Bureau within 15 days by submitting the completed New Registration/Amendment Form – Form M/1:

  1. The company’s capital increases;
  2. The company name, taxpayer’s address or business location is changed;
  3. New business activities are added;
  4. Certain business activities are deregistered.

2021 Tax Relief Measures
Exemption of business tax

 

Salaries Tax

Commencement/Termination of employment

  • The employer must register resident and non-resident employees at the Financial Services Bureau (DSF) upon employment.
  • Within 15 days of employment, the employer must submit the completed Salaries Tax Registration Form – M/2 to DSF.
  • If employment is terminated, the employer must submit the completed Termination of Employment Form – M/2A to DSF by the end of the month following the termination.

 

Withholding

  • The employer should withhold salaries tax for resident and non-resident employees on a monthly basis.
  • Withholding tax should be paid by 15th of January, April, July and October.
  • Withholding tax shall be declared and paid using the Revenue – Payment Slip of Salaries Tax.

 

Annual income declaration

  • The income of all employees (including resident and non-resident) over the previous year must be declared.
  • Declaration should be made in January and February each year (declaration is required even if there is no employee or zero income).
  • The completed M3/M4 List of Employees/Part-timers must be submitted for declaration purposes.
  • In case of business closure, the employees’ income must be declared within 15 days of the cessation date.

 

Salaries Tax Example (Simulation calculation for annual salaries tax of the year 2021, with the deduction rate for annual salaries tax being 30% and the allowance for annual taxable income being MOP 144,000)

 MOP
Annual Taxable Income200,000.00
FromToTax RateTaxable IncomeTax Amount for Each TierCumulative Tax Amount
0.00144,000.000%144,000.000.000.00
144,000.01164,000.007%20,000.001,400.001,400.00
164,000.01184,000.008%20,000.001,600.003,000.00
184,000.01224,000.009%16,000.001,439.994,439.99
224,000.01304,000.0010%0.000.000.00
304,000.01424,000.0011%0.000.000.00
Above 424,000.0012%0.000.000.00
 
A. Annual tax amount calculated based on the statutory tax rates4,439.99
B. 30% deduction of salaries tax according to the tax relief measures announced in the government budget of the relevant fiscal year (A x 30%)1,331.99
Annual salaries tax payable (A – B)3,108.00

The calculation results are for reference only.

 

Registration and Contribution to the Social Security Fund

Applicability

  • Under the General Regime of Labour Relations, Macao SAR residents who work under the authority and instruction of an employer in return for remuneration, including Macao SAR residents employed to work in a foreign branch or agency of an enterprise registered in the Macao SAR;
  • Public administration staff in any form of appointment, excluding in-service public administration staff who have already enrolled in the Retirement, Widow and Orphans’ Pensions Scheme.

 

Registration of employer

  • To fulfil the obligation to make contribution, all employers, who establish labour relations with others, must complete the employer registration with the Social Security Fund (FSS) in the contribution month (viz. January, April, July and October) that immediately follows the commencement of labour relations in order to fulfil the contribution obligation.
  • Registration is required only once and the employer will be assigned a permanent registration number.
  • (Example) If a local permanent employee is hired in August, the employer must enrol them at FSS in October.

 

Enrolment for the employee as a beneficiary

(For local employees who have never enrolled as a beneficiary at FSS)

– Employers must enrol their employees in the Obligatory System and pay relevant contributions in the contribution month that immediately follows the commencement of labour relation relations.

  1. (Example 1) If a local full-time employee is hired in August, the employer must enrol him/her and pay contributions on his/her behalf through the Obligatory System in October;
  2. (Example 2) If a local permanent employee is hired on 28 September, even though the employee has worked for less than 15 days in the first month of employment and no contribution is needed, the employer still has to enrol his/her and pay relevant contributions through the Obligatory System in October;
    • Enrolment is required only once and the enrolled person will be endowed with the identity of a beneficiary and will also be assigned a lifetime FSS beneficiary number.

     

    Contribution amounts

    As stipulated in the Chief Executive Order, with effect from 1 January 2017, the contribution amounts are as follows:

    • Permanent employee: MOP 90 per month (employer’s contributions: MOP 60, employee’s contributions: MOP 30);
      In the first or last month of employment, contributions must be made if the employee has worked for 15 days or above; otherwise no contribution is needed.
    • Casual worker:
      i)  MOP 90 per month for each casual worker who works 15 days or more in the month (employer’s contributions: MOP 60, employee’s contributions: MOP 30);
      ii) MOP 45 per month for each casual worker who works less than 15 days in the month (employer’s contributions: MOP 30, employee’s contributions: MOP 15);
    • In accordance with Law No. 4/2010, employers can deduct the employees’ portion of contributions from their wages.

     

    Payment of contributions

    • Permanent employee: The contributions for the preceding quarter are payable quarterly in January, April, July and October.
    • Casual worker: The contributions are paid in the month that immediately follows the working month of the employee. For instance, if an employee works in January, his/her contributions should be paid in February.

     

    Points to note

    The obligatory system does not apply to the following situations:

    1. Employee who is the spouse or common-law spouse of the employer, or who a relative up to the second degree of relationship who co-habits with the employer;
    2. Employee with relations established under a contract of apprenticeship training or through a vocational training system that aims to integrate the trainee into the employment market;
    3. In-service public administration staff already enrolled in the Retirement, Widow and Orphans’ Pensions Scheme.

    The above information is for reference only. For details, please refer to Law No. 4/2010 – “Social Security System” of the Macao SAR.

     

    Basic working conditions

    Minimum wage for employees

    Scope of applicability

    The minimum wage regime is applicable to employees in all sectors, except for domestic helpers and employees with disabilities.

    Composition of minimum wage

    Minimum wage refers to the basic remuneration as stipulated in Article 59 of the Labour Relations Law, excluding overtime remuneration, extra pay for working at night or on roster, thirteenth month pay or other periodic benefits of a similar nature.

     

    Minimum wage amount

    Single calculation method     Minimum wage amount

    Monthly wage                  MOP 6,656 per month

    Weekly wage                  MOP 1,536 per week

    Daily wage                  MOP 256 per day

    Hourly wage                  MOP 32 per hour

    Piece rate wage or on commission basis     MOP 32 per hour on average

    The above information is for reference only. For details, please refer to Law No. 5/2020 – “Minimum Wage for Employees” (effective from 1 November 2020) of the Macao SAR.

     

    Labour contracts

    Types of labour contracts

    Labour contracts can be divided into two types:

    1.  Term Contract
      • Only under the circumstances prescribed by law can the employer conclude a term contract with a resident employee, and the contract must be concluded in writing with the grounds justifying the term agreed upon by an employer and an employee.
      • A term contract can be established only to satisfy temporary needs of an enterprise, for instance, starting a new task for an uncertain period, undertaking contracted construction works or public works, performing seasonal work or replacing an absent employee.
      • If a contract does not fulfil the legal requirements for term contracts, even though it is renewed each year with a specified period, it is still considered as an indefinite contract instead of a term contract.
      • A fixed-term contract cannot be renewed more than twice and its period (including renewals) must not exceed 2 years,; otherwise, it will be converted into an indefinite contract.

    2.1 Fixed term contract
    A fixed term contract specifies an employment period or a period required to complete the object of the contract (e.g. one year).

    2.2 Variable term contract: The contract ends after the task is completed.

    •  

    Working hours regulations

    • Normal work hours must not exceed 8 hours per day and 48 hours per week.
    • Employers should arrange a rest break of 30 consecutive minutes every 5 working hours for their employees. Employers should also ensure that their employees have at least ten consecutive hours and no less than 12 hours in total for rest every day.

     

    Remuneration

    1. For employees who are paid monthly, their monthly remuneration includes the remuneration for weekly rest days, mandatory holidays, annual leaves and absence due to sickness or accidents (6 days per calendar year). Employers are not required to pay additional remuneration to this type of employee.
    2. For employees who receive daily/hourly/piece-rate remuneration or commissions, their remuneration includes the remuneration for weekly rest days, but does not include the remuneration for mandatory holidays, annual leave and absence due to sickness or accidents (6 days per calendar year). Employers are obliged to pay this type of employee the additional remuneration corresponding to the number of days.

     

    Overtime work

    Scenario 1
    If the employee has agreed with the employer in advance to work overtime and such consent is recorded, the employee is entitled to 20% extra pay in addition to the normal pay for working overtime.

    (For example, remuneration for one-hour overtime work* Monthly basic salary MOP 16,000 ÷ 30 days ÷ 8 hours × 1.2 = MOP 80 for overtime work) *Based on normal working time of eight hours daily.

    Scenario 2

    In the event of any circumstances stipulated by law (such as force majeure events, significant losses or unexpected increase of workload faced by the employer), employers can require their employees to work overtime, and the employees are entitled to 50% extra pay in addition to normal pay for working overtime.

    (For example: remuneration for one-hour overtime work*  Monthly basic salary of MOP 16,000 ÷ 30 days ÷ 8 hours × 1.5 = MOP 100 for overtime work)

    *Based on normal working time of eight hours daily.

     

    Legal holidays for employees

    1. Weekly rest
      It may be taken in 2 ways:
      i) 1 fixed rest day per week, or
      ii) 4 days (consecutive or not) for every 4 weeks set by the employer at least 3 days in advance.
    2. Mandatory holidays in Macao (10 days)
      – New Year’s Day (January 1)
      – Lunar New Year (the first, second and third day of the first month of the Lunar Year)
      – Cheng Ming Festival
      – Labour Day (May 1)
      – The day after the Mid-Autumn Festival
      – National Day of the People’s Republic of China (October 1)
      – Chong Yeong Festival
      – Macao Special Administrative Region Establishment Day (December 20)
    3. Annual leave
      – After completing 1 year of service, employees are entitled to the annual leaves of at least 6 working days in the following year.
      – Annual leaves shall be scheduled by agreement between employers and employees.
      – When no agreement is made, the annual leave shall be arranged by the employer at least 30 days in advance.
      – Annual leaves may be accumulated for up to 2 years by agreement of both parties.

    (Example: The employee is hired in 2020 and the annual leave can be taken in 2021. The annual leave may be accumulated until 2023 at most by agreement between both parties.)

     

    Compensation for working on mandatory holidays

    1. Compensation methods for monthly-rated employees (extra remuneration is not required for compensatory rest)
      Option 1: Remuneration of the month + one-day extra basic remuneration + one-day compensatory rest
      Option 2: Remuneration of the month + two-day extra basic remuneration
      Option 3: Remuneration of the month + two-day compensatory rest
    2. Compensation methods for daily-rated / hourly-rated / piece-rated employees (extra remuneration is required for compensatory rest)
      Option 1: Remuneration of the day + one-day extra basic remuneration + one-day compensatory rest
      Option 2: Remuneration of the day + two-day extra basic remuneration
      Option 3: Remuneration of the day + two-day compensatory rest

    Notes:

    – The compensation must be arranged within 3 months.

    – Employees and employer decide the date of the compensatory rest by agreement.

    – In the case that no agreement on it is made. The employer must designate it and notify the employee of it at least 3 days in advance.

    The above information is for reference only. For details, please refer to the Labour Relations Law of the Macao SAR.

     

    Notes for hiring non-resident workers

    To ensure that Macao residents are prioritised in regard to employment and protect their employment rights and interests, non-resident workers can hired as a supplementary workforce on a temporary basis only when appropriate or sufficient human resources are not available locally under the conditions of equal cost and efficiency. Non-resident workers must comply with relevant laws and obligations when working in Macao.

     

    Working legally

    An employment permit issued by the Labour Affairs Bureau is required for hiring non-resident workers according to Law No. 21/2009 – “Law on Employment of Non-Resident Workers” of the Macao SAR. After the employment permit is granted, the employer concerned or the legal representative thereof must file an application at the Public Security Police Force for the “Authorisation to Stay for Non-resident Workers” (the stay permit). Non-resident workers are not allowed to work in Macao until they are granted the stay permit, and they must only serve the position stated on the Non-resident Worker’s Identification Card.

     

    Employment fee for non-resident workers

    Employers who hire non-resident workers must pay the employment fee at FSS each quarter. The employment fee for each non-resident worker is MOP 200 per month, fully paid by the employer.

     

    Remuneration

    • The monthly remuneration cannot be less than the amount stated in the employment permit granted to the employer and should be paid in MOP.
    • The monthly remuneration must be paid through a deposit to an account owned by the non-resident employee at a bank in Macao.

     

    Other important note

    1. Indefinite contract
    An indefinite contract does not specify any employment period; it is also known as permanent employment.
    • Non-resident workers should be provided with free lodgings or a monthly housing subsidy of at least MOP 500.
    • The cost of transportation to the employee’s place of habitual residence should be paid upon cessation of the labour relations.
    • If the employee resigns before the expiry of the term of the contract, he/she will not be granted a new work permit within 6 months, except for resignation with just cause.