Draft law on tax benefits for activities dedicated to scientific and technological innovation

Introduction
Key points
Comment

Introduction

The government has issued a draft law on tax benefits for undertaking activities dedicated to scientific and technological innovation. This draft law is a consequence of the Macau Special Administrative Region (MSAR) Policy Address for the Fiscal Year of 2019, particularly in relation to innovation in the areas of technology and smart-city development, and aligns with the goal of transforming the Guangdong-Hong Kong-Macau Greater Bay Area (GBA) into an international centre of science, technology and innovation.

The draft law was first introduced to the MSAR Legislative Assembly on 6 November 2020 and has been assigned to its First Standing Committee for consideration.

Key points

The draft law aims to provide incentives for scientific and technological innovation to individual entrepreneurs and collective entrepreneurs (companies). The proposed tax benefits concern stamp duty, property tax, complementary income tax and professional tax, among other things.

Definition of STI
Under the draft law, 'scientific and technological innovation' ('STI') is defined as the innovation and invention, or activities that involve the application of, scientific knowledge, technology or artesian in an innovative manner when manufacturing a product or in the provision of services – particularly activities that involve new-generation IT, AI, integrated circuits, biomedicine, traditional Chinese medicine, energy conservation and environmental protection, marine engineering or nutrition – as well as innovation and inventions relating to those areas.

Tax benefits
The draft law prescribes the following incentives:

• an exemption from paying stamp duty when purchasing one piece of real estate for office use;
• an exemption from paying property tax in relation to such real estate for five years from the year of acquisition;
• an exemption from paying complementary income tax for three years from the year in which taxable income arises. Such exemption applies only to income which originates from the exercise of STI (ie, other activities are not covered);
• an exemption from paying complementary tax on profits or dividends distributed to shareholders; and
• for employees recruited to provide for the administrative management and development of scientific and technological investigations, an exemption of double the amount granted to other employees within three years from the application's date of deferral.

Application process
To apply, qualifying individuals or companies must:

• have completed their commercial registration;
• have been dedicated to undertaking activities of scientific and technological innovation for more than one year; and
• be classified as a complementary income tax Group A taxpayer.

Applications must be submitted to the Macau Finance Bureau (MFB) and include:

• a project outline;
• a report; and
• other supporting documents.

In turn, the MFB will submit the application to an evaluation committee for its consideration of whether the applicant meets the requirement of undertaking STI. The director of the MFB is competent to decide whether to grant the incentives.

Comment

The draft law aims to provide tax incentives to STI entrepreneurs in order to boost innovation in the areas of technology and smart-city development and transform the GBA into an international centre of science, technology and innovation. It may also be seen as a tool to diversify the Macau economy, which is currently dependent on gaming and tourism – areas which have been hugely affected by COVID-19.

For further information on this topic please contact Pedro Cortés or Calvin Tinlop Chui at Rato, Ling, Lei & Cortés Advogados by telephone (+853 2856 2322) or email (cortes@lektou.com or chui@lektou.com). The Rato, Ling, Lei & Cortés Advogados website can be accessed at www.lektou.com.