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11 October 2018
The government recently introduced two new draft laws to increase financial leasing activities in Macau. The new regime will consist of:
Replacing legislation that has been in force for over 20 years(1) and considered a necessary condition for developing financial activity in Macau, the new legal regime will:
In addition to new tax incentives, the new laws intend to create the conditions for growth and specialisation in the financial sector, which currently contributes only 6.3% to the gross domestic product.
The new financial leasing companies regime was generally approved by the Legislative Assembly on 31 May 2018. The law proposes to redefine the legal framework that applies to financial leasing companies and repeals Decree-Law 51/93/M of 20 September 1993.
The purpose of redefining the legal framework is to:
The draft law introduces the concept of 'subsidiaries for the purpose of financial leasing'(2) and permits its incorporation in Macau. It also defines 'financial leasing companies' and 'financial leasing subsidiaries' for financial leasing purposes:
General rental activities of a consumer nature (eg, short-term car rental services) are not considered financial leasing activities and companies which merely conduct general rental activities will not be granted a financial leasing company licence.
The draft law provides that financial leasing companies and financial leasing subsidiaries may conduct only the following activities:
As mentioned, financial leasing companies and financial leasing subsidiaries are no longer considered credit institutions, but mere financial institutions. They are therefore prohibited from receiving deposits or any other repayable funds from the public.
The incorporation of leasing companies in the region will require prior authorisation from the Macau chief executive, to be granted by an executive order, after consultation with the AMCM.
Financial leasing companies may be incorporated in the form of:
Under the new regime, the minimum capital requirement of financial leasing companies is reduced from MPtc30 million to MPtc10 million. Further, the threshold for what constitutes an administrative body has been lowered (they may now comprise only a director).
Only banks and financial leasing companies that are authorised to carry out business in Macau can hold subsidiaries for financial leasing in the region. To establish a subsidiary, companies must send prior written notification to the AMCM.
However, certain general provisions governing financial institutions, provided for in the Legal Framework of the Financial System, continue to apply.
The draft law redefines the penalties which apply to financial leasing companies and subsidiaries. For example, the following fines will apply to administrative offenses subject to different treatment, depending on the level of seriousness of each infringement:
After comparative studies of the support and incentive policies applied to financial leasing companies and their activities in the neighboring territories, the government deemed Law 1/94/ M of 23 May 1994 (tax incentives for financial leasing) to be outdated and insufficient to attract financial leasing companies to set up and develop their activities in the region.
In order to increase Macau's competitive capacity in the financial leasing market, a new tax benefit scheme which maintains the stamp duty exemption for incorporated companies and increases the share capital of financial leasing companies in Macau has been generally approved.
In addition to stamp duty exemption for incorporated companies and increasing the share capital of financial leasing companies, the draft law establishes that the first acquisition by the company of a property exclusively for its sole use (eg, headquarters) is exempt from the stamp duty applicable to goods transfers. The granted exemption lapses if said property is transferred or assigned to another purpose within five years of its acquisition.
The maximum rates of reintegration and amortisation of fixed assets under finance leases, which are considered as deductible tax costs, are increased from double to triple.
Provisions for doubtful debt receivables of companies carrying out leasing activities are accepted as costs attributable to the financial year and can be considered as deductible tax costs, and the respective maximum amounts may be raised to 10% of total receivables.
The 5% income tax rate applies to income obtained through financial leasing activities by financial leasing companies. Income obtained overseas is exempt from this tax only if it was recorded in a Macau company's accounting records.
At this early stage of the new financial leasing companies regime, there are currently only two financial leasing companies in Macau. However, the tax benefits set out in the tax benefit scheme for financial leasing aim to make Macau more attractive to financial leasing companies from mainland China and overseas.
While the new legislation has been generally approved in draft form, the final regime will likely reflect the proposed versions.
For further information on this topic please contact Pedro Cortés or Raquel Sofia Rocha at Rato, Ling, Lei & Cortés Advogados by telephone (+853 2856 2322) or email (firstname.lastname@example.org or email@example.com). The Rato, Ling, Lei & Cortés Advogados website can be accessed at www.lektou.com.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
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