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07 July 2011
The recent economic growth in Macau, which resulted from the partial liberalisation of the gaming industry, has also led to a sharp rise in housing and office property prices. For this reason, many new buildings have been built, mainly for residential purposes and particularly in order to deal with the speculation resulting from the large influx of skilled labour for Macau's large entertainment complexes (eg, casinos, luxury hotels and resorts). Most of these residential properties have since been bought by foreign investors or large real estate agencies, and it has been feared that the sector would be affected by this market bubble.
To counter the speculation in the housing market and to ensure the healthy and sustainable development of the property market, the government presented to the Legislative Council a bill to stabilise the housing market by adding a special stamp duty to Law 6/2011 on property and property rights transaction within two years of the payment of the tax stamp on the document, paper or act that attests to the acquisition (Article 2(1) of Law 6/2011).
The new law, which entered into force on June 14 2011, states that transactions in relation to which no stamp duty was paid under the law will be subject to special stamp duty regardless of the acquisition and transition period (Article 2(2)). Finally, in respect of housing units that are exempt from stamp duty under the Budget Law, special stamp duty is due if the transaction occurs within two years of the date of issuance of the certificate of exemption by the Finance Services Bureau (Article 2(3)).
The new special stamp duty rates are 20% of the taxable income during the first year following payment of the stamp duty, dropping to 10% in the second year (Article 3). Article 4 of Law 6/2011 explains what is considered a source of transmission of property rights, listing cases that are subject to special stamp duty. In short:
"all documents, papers or acts certificating the transfer or promise to transfer property rights or other personal rights of possession of chattel for housing, or the transfer or pledge of transfer of those powers of use and enjoyment of these goods are considered sources of transmission of property rights over chattel." (Article 4(1)).
Article 5 specifies that the special stamp duty tax burden rests on the transferor of the building unit or property. However, Article 6 stipulates the joint liability for payment of the new stamp duty between the entities stipulated in Article 87 of the Stamp Duty Ordinance, while the buyer responds only residually for payment (Article 7). To safeguard any lack of information, the transferor is required to provide the purchaser with a copy of the document confirming the payment of the Finance Services Bureau. In turn, the Finance Services Bureau can be requested to issue a declaration informing of any obligation of payment of stamp duty by the seller.
Law 6/2011 – which is designed to combat, in the short term, speculative activity in the housing market – necessarily makes exceptions for situations that fall outside this purpose. Thus, Article 9 provides a series of exemptions for transfers made between spouses and family members, as well as those resulting from inheritance, judicial rulings resulting from bankruptcy or insolvency and the repayment of bank debts and resales made by these banks – such entities must still declare the transmission to the tax authority, within the terms of tax payment (Article 8). To ensure effective supervision, Article 11 exempts banks, lawyers, trainee lawyers and solicitors from the duty of confidentiality when the Finance Services Bureau requests information about the payment of special stamp duty from these entities. If the tax is not paid within the prescribed period, the system of penalties (set out in Article 12) consists in a fine of 50% of the special stamp duty, which can be reduced if the payment is made within the next two months. In addition, the crime of forgery of documents (set out in Articles 244 to 246 of the Penal Code) also applies to those who falsify documents or papers required by law, including the changing of dates, to avoid paying the new stamp duty. However, Law 6/2011 will not take legal effect concerning the acquisition of units or rights over them before the entry into force of the law if the liquidation of the special stamp duty is made within 30 days after that (Article 15(1)). The same applies in cases of exemption under the 2011 Budget Law, if they occurred before the entry into force of Law 6/2011, and if a certificate of exemption from stamp duty (up to MOP3 million) is issued by the Finance Services Bureau within 30 days after the entry into force (Article 15(2)).
It is hoped that Law 6/2011 will prevent speculation in the housing market by increasing the tax burden on real estate transactions in the first two years following the acquisition, thus ensuring that the transfer of property has a long-term economic purpose, rather than a purely speculative intention. As the special stamp duty is a special tax, Article 17 provides that an evaluation of its enforcement will be carried out two years after the entry into force of Law 6/2011 in order to measure its effectiveness in guaranteeing the housing market's healthy development and sustainability.
For further information on this topic please contact Pedro Cortés or Frederico Rato at Rato Ling Vong Lei & Cortés Advogados by telephone (+853 2856 2322), fax (+853 2858 0991) or email (firstname.lastname@example.org or email@example.com).
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