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10 January 2013
The economic development of Macau has led to an increase in property speculation, given the limitations on available construction space. In addition, the large influx of labour coming to work in large entertainment complexes in an already crowded city and the massive acquisition of residential properties by foreign investors and large real estate entities has led to increased pressure in the housing market.
The Macau government sought to contain speculation in the housing market by passing Law 6/2011, which imposed a special stamp duty on property or property rights transactions to be collected in the first two years after payment of the tax stamp on the document, paper or act evidencing such transaction (Article 2(1) of Law 6/2011). However, it soon became evident that the limited scope of Law 6/2011 could not curb speculation, mainly because other properties (eg, shops, offices and car parks) were already affected by a speculative bubble. Therefore, new Law 15/2012 seeks to expand the special stamp duty to such property, as well as imposing a new tax on housing transactions concerning legal persons, individual entrepreneurs and non-residents.
The special stamp duty stipulated in Law 6/2011 comprises a 20% duty on the taxable income (as defined by Chapter XVII of the Stamp Duty Regulation) of:
"all documents, papers or acts certificating the transfer or promise to transfer property rights or other personal rights of possession on real estate, or the transfer or pledge of transfer of those powers of use and enjoyment of immovable property are considered sources of transmission of real estate or immovable property rights." (Article 4(1) of Law 6/2011.)
The special stamp duty is to be paid the year after the disbursement of the stamp duty, and a subsequent 10% rate is imposed in the second year after such payment (Article 3 of Law 6/2011) on the transferor of the building unit or property. Real estate acquired free of stamp duty under the budget law is also subject to the special stamp duty if the transmission occurs within two years of the date of issuance of the certificate of exemption by the Finance Services Bureau (Article 2(3) of Law 6/2011). Through Law 15/2012, the special stamp duty is extended to shops, offices and car parks under the same conditions as for housing.
However, Law 15/2012 does not simply expand the scope of the special stamp duty to real estate pertaining to shops, offices and car parks – it also undertakes restrictive fiscal measures regarding legal persons, individual entrepreneurs and non-residents seeking to purchase housing in Macau. Thus, all documents, papers or acts certifying the transfer or promise to transfer property rights or other personal rights of real estate possession regarding the above-mentioned persons are subject not only to the stamp duty under the Stamp Duty Regulation, but also to an additional tax of 10% of the taxable income (Article 2 of Law 15/2012 and Article 53-A of the Stamp Duty Regulation). This additional tax also applies in case of a plurality of purchasers, if one of the purchasers is a legal person, an individual entrepreneur or a non-resident.
As with the exceptions provided by Law 6/2011, new Article 53-A of the Stamp Duty Regulation also excludes from its scope some cases pertaining to family and inheritance law – namely, in case of a plurality of resident and non-resident purchasers, if the latter is either a spouse, a relative or directly related the additional tax will not be applied (Article 53-A(2)(3)). The same applies to documents regarding the acquisition of property or property rights from a spouse as a result of divorce, annulment of marriage or legal separation of assets (Article 53-A(2)(4)).
The entry into force of Law 6/2011 marked a new important legal instrument envisaging to curb real estate speculation in Macau by increasing the tax burden on real estate transactions or rights therein in the first two years after the acquisition through a special stamp duty. Law 15/2012 expands its scope and enforces an even more restrictive framework for legal persons, individual entrepreneurs and non-residents by imposing an additional tax. Given that Article 17 of Law 6/2011 provided for an interim evaluation of law enforcement two years after its entry into force to measure its effectiveness, it can be concluded that the initial remedy was far from satisfactory. Ever-increasing inflation, coupled with economic recovery measures in neighbouring countries, which facilitate the funds needed to purchase real estate, will put the above-mentioned measures to the test – namely, the limits of a two-year special stamp duty timeframe aiming to protect local residents' ability to purchase affordable housing units.
For further information on this topic please contact Pedro Cortés or José Filipe Salreta 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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