Macao, a special administrative region of China, is known for its significant gaming and tourism industries. While Macao has a relatively straightforward tax regime, it is increasingly focused on aligning with global tax transparency initiatives, including the OECD’s Base Erosion and Profit Shifting (BEPS) Action 13. However, Macao has not yet formally adopted Country-by-Country Reporting (CbCR) regulations. This guide provides Chief Financial Officers (CFOs) and financial executives with an overview of the current tax landscape in Macao, CbCR applicability, and key considerations for multinational enterprises (MNEs) operating in or through Macao.

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Applicability of CbCR in Macao

Criteria for Reporting:

• Macao does not have domestic legislation requiring multinational enterprises (MNEs) to file a Country-by-Country (CbC) report.
• However, MNEs with operations in Macao and headquartered in jurisdictions that do mandate CbCR (e.g., China, the EU, or other OECD members) may still be subject to CbCR in those jurisdictions, even if no local filing is required in Macao.
• It is crucial for MNEs to ensure that they comply with global CbCR obligations, especially where parent companies are based in jurisdictions that have adopted the OECD BEPS framework.

Relevant Legislation:

• Macao has not implemented specific legislation for CbCR, and there is no public indication of imminent adoption.
• Nevertheless, companies operating internationally should be aware of the potential for future tax reforms, especially as pressure increases for non-OECD jurisdictions to adopt global tax transparency standards.

Reporting Requirements

Information to be Reported:

• Since there is no formal CbCR regime in Macao, there are no specific requirements for submitting financial information under the OECD’s CbCR framework.
• Multinational groups should still prepare CbCR documentation in line with their global tax strategy if they are obligated to file in other jurisdictions. This includes the standard financial data:
  • Total revenues (from related-party and unrelated-party transactions)
  • Profit or loss before income tax
  • Income tax paid and accrued
  • Stated capital and accumulated earnings
  • Number of employees
  • Tangible assets (excluding cash and equivalents)

Form and Submission:

• No local CbCR submission is required in Macao.
• For MNEs subject to CbCR elsewhere, reports will need to be submitted to the appropriate tax authority in the parent company’s jurisdiction, in the prescribed format (typically XML).

Filing Deadlines

• As there is no CbCR requirement in Macao, there are no specific deadlines related to CbCR reporting for MNEs operating in or through the region.
• MNEs should adhere to CbCR filing deadlines in other jurisdictions where they have reporting obligations, which are generally within 12 months of the end of the fiscal year.

Penalties for Non-Compliance

Penalties:

• Given the absence of a formal CbCR regime in Macao, there are no local penalties for non-compliance with CbCR regulations.
• However, multinational groups should be aware that non-compliance in jurisdictions where CbCR is required could lead to substantial penalties, including fines, audits, and increased tax scrutiny in those countries.

Defences:

• In jurisdictions where CbCR is mandatory, MNEs can typically present reasonable cause for delays or omissions, such as technical issues or misinterpretation of regulations. Macao, however, does not have a legal framework for such defences related to CbCR.

Confidentiality and Use of Information

Data Protection:

• Macao currently has no specific regulations for the handling or exchange of CbCR data. However, should it adopt CbCR in the future, it would likely follow international norms, ensuring that data is exchanged only with tax jurisdictions that comply with OECD standards on confidentiality and data security.
• MNEs operating globally should ensure that their CbCR data is protected and shared according to the confidentiality agreements in the jurisdictions where the reports are filed.

Additional Resources

• For more information on Macao’s tax regime and future developments regarding international tax compliance, businesses can refer to the Financial Services Bureau of Macao.
• Multinational enterprises should consult the OECD’s CbCR guidance to ensure they meet global compliance standards.

Conclusion

Although Macao has not yet introduced formal Country-by-Country Reporting obligations, multinational enterprises with operations in Macao must stay vigilant about global CbCR requirements in other jurisdictions. Failure to comply with these obligations in the jurisdictions where CbCR is mandated can result in severe penalties. MNEs should therefore ensure robust tax compliance strategies are in place and monitor any future developments in Macao’s tax laws. Engaging with local tax professionals and maintaining transparency across global operations will help MNEs navigate the complexities of international tax compliance effectively.