Invest Asia Group in Macau
Last Update: 13th September 2020
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Galaxy Hotel in Macau
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Macau is a Special Administrative Region of the People's Republic of China located in the Western Pearl River Delta near Hong Kong and next to the Mainland City of Zhuhai. Famous for its entertainment sectors featuring casinos, the gambling industry is over seven times larger than that of Las Vegas and has resulted in Macau having one of the highest GDP per capita in the world. However, this has also presented severe income inequality among residents and with Macau being one of the most densely populated regions in the world, resulting in other challenges.
With the transfer of Macau back to Mainland China in 1999, it experienced further rapid development as the Mainland Chinese economy experienced double digit economic growth throughout the late 20th and early 21st century. Macau is a highly urbanized area with most development built on reclaimed land - approximately 70% of the total land area of Macau is reclaimed from the sea.
With the transfer of Macau back to Mainland China in 1999, it experienced further rapid development as the Mainland Chinese economy experienced double digit economic growth throughout the late 20th and early 21st century. Macau is a highly urbanized area with most development built on reclaimed land - approximately 70% of the total land area of Macau is reclaimed from the sea.
Macau: Overview
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Macau is located on the Southern Coast of Mainland China, approximately 60 kilometres west of Hong Kong and next to the city of Zhuhai to the North-West. The entire area of Macau is approximately 33 square kilometres but this has increased substantially from the handover in 1999 when it was less than 11 square kilometres in size.
As a capitalist service economy which is heavily reliant on gambling tourism and casino gaming, the vast majority of local government funding is from gambling. With gambling being illegal in Mainland China and highly restrictive in Hong Kong, most visitors to Macau are from either Mainland China or Hong Kong. In recent years, Macau has been connected with Hong Kong and Zhuhai with the development of the Hong Kong-Zhuhai-Macau bridge and integration into the Guangdong-Hong Kong-Macau Greater Bay Area. |
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Regions of Macau
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The Macau Special Administrative Region comprises three different areas as follows:
These are the three different regions of Macau with the Peninsula being the densest and Taipa/Coloane containing a large number of new developments including Casinos and Resorts. |
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Administrative Areas of Macau
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At the conclusion of Portugese rule, Macau was divided into two different municipalities as well as seven civil parishes. Following the handover, the parishes are still officially recognized but only for symbolic reasons. The different municipalities are as follows:
In addition to the municipalities, the seven civil parishes (which are just symbolic nowadays and doesn't include Cotai as it's reclaimed land) include the following:
In addition, the Macau New Urban Zone is a 7.3 square kilometres piece of land currently under land reclamation. It hasn't been assigned any parish for now. |
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Business Operations in Macau
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Operating a business in the Macau Special Administrative Region (SAR) presents multiple opportunities as well as challenges. Aside from obvious business related risks, understanding and working within a foreign system presents numerous challenges to investors.
However, with a relevant strategy, professional advice and local team, these risks can be mitigated. Whilst details are quite complex, we’ve summarized accordingly so readers can gain an understanding of the different options and processes involved in operating a business in Macau, China. |
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Forming a Company in Macau
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Establishing a company in Macau is a relatively straightforward process but is dependent upon specific business type and structure. Normally, we would recommend establishing a Hong Kong company as it's more streamlined and foreign investor friendly. However, if you intend to establish a company within Macau, it's a necessity to establish a Macau company.
There are a few types of business vehicles that can be established in Macau to conduct business in Macau, including the following:
Moreover, the following types of companies can be incorporated within Macau include:
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Company Formation Procedure
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The Company Formation Procedure in Macau is as follows:
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After receiving all forms, the Macau Business Registry will issue the following documentation to each company:
Aside from the above standard procedures to form a company, there are also additional steps required in Macau, depending upon the specific business type - for further details please contact us. |
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Invest Asia Group strongly advises investors to engage either an experienced local consulting company or an international law firm to navigate these processes.
International Investors
Whilst there are certain restrictions, international investors/companies can operate businesses in Macau and overall it's fairly liberal.
Moreover with ongoing reforms, the number of restricted industries that foreign investors are able to operate is continually being reduced on an annual basis. |
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Corporate Taxes
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Macau operates a simplified tax system and is considered a tax haven with corporate tax details as outlined below:
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Where to establish
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This depends upon your business type and goals for doing business in Macau. Due to the very small size of Macau, options are ultimately limited so please advise your business type and specific goals for Macau when contacting our team.
Tax-Friendly Policies
Yes – a number of tax-friendly investment policies exist to encourage investment within specific sectors and industries. Further details can be provided, depending upon your specific inquiry.
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Financial Markets in MacauCurrently, as at August 2020, Macau doesn't have a stock exchange, however, there is speculation that the Macau Monetary Authority in conjunction with Mainland authorities are planning to introduce a Chinese Yuan denominated exchange in Macau in the future. This would be part of the Greater Bay Area goals to incorporate both Special Administrative Regions of Macau and Hong Kong with the Mainland cities but this hasn't yet eventuated.
Ultimately, this would be to structurally change the shape of the economy, which is overly reliant on gambling revenues - approximately 80% of government revenues in Macau are contributed from the gambling industry. |
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MOX - Chongwa (Macao) Financial Asset Exchange Co., Ltd
The Chongwa (Macao) Financial Asset Exchange Co., Ltd (referred to as MOX) has setup a platform for both public and private bond issuance in Macau. It was formally established in October 2018 and provides the following services:
With plans to further introduce financial services into the Macau economy and reduce reliance on gambling revenue, this is an area to stay abreast of in the future for potential opportunities
- Bond Issuance;
- Listing;
- Registration;
- Custody;
- Trading; and
- Settlement;
With plans to further introduce financial services into the Macau economy and reduce reliance on gambling revenue, this is an area to stay abreast of in the future for potential opportunities
Other ways to get exposure to Macau Stocks
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Aside from the Hong Kong Stock Exchange investors have options to gain exposure to Macau companies via investing in ETFs, Index Funds and stocks listed in US markets.
There are a number of different Macau ETFs and listings with exposure including the following:
Some of the US listed stocks with exposure to Macau include the following options:
For further details and advice, please contact our team who can be of assistance to your requirements. |
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Foreign Exchange
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The local currency of Macau is the MOP (Macau Pataca/Macanese Pataca), which is fully backed by Foreign Exchange Reserves of the Hong Kong Dollar (HKD). The Monetary Authority of Macau (AMCM) oversee monetary policy and are obligated to both issue and redeem Macau Pataca against Hong Kong dollars at a Fixed Rate of HKD $1 - MOP $1.03.
The AMCM was established in 1999 following handover of Macau from Portugal back to China and the MOP is both freely convertible and free of foreign exchange controls. Visitors to Macau can use the Hong Kong Dollar as a defacto currency. Macau is used as a gateway (in conjunction with Hong Kong) both to/from Mainland China in terms of inflows and outflows of capital with Macau receiving less scrutiny compared with Hong Kong. |
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Commodities
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Being a service dependent economy, Macau is heavily reliant upon tourism - namely in the form of gambling related tourism. Whilst during the 1970s and 1980s, manufacturing (textiles) was a large part of the economy, this has moved to Mainland China leaving Macau with an economy, totally dependent upon services.
Some of the top commodities Macau imports (albeit on a minuscule scale) include:
However, the vast majority of imports are related to consumer demand/final goods as opposed to raw commodities and these include the following:
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By contrast, exports from Macau are predominantly to Hong Kong (68% of all Macau exports go to Hong Kong) followed by Germany (4.8%) and Mainland China (4.8%) including the following top export products:
To put these numbers into perspective, by contrast, Macau's 'service exports' relating to both personal and business travel reached over USD $40 billion in 2018, further detailing the underlying reliance on gambling for the Macau economy. |
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Cryptocurrency in Macau
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During September 2017, Mainland China banned all ICO (Initial Coin Offerings) from operating in the China Market, resulting in an immediate correction in the bitcoin price and other cryptocurrencies. Whilst miners were still permitted to mine bitcoin within China's borders (and holding bitcoin was allowed), the crackdown on exchanges resulted in an increased presence in Macau. Being a Special Administrative Region and an offshore banking hub, Macau has attracted cryptocurrency platforms via various structures.
The Monetary Authority of Macau has restricted both banks and financial payment providers/institutions from offering both ICOs and cryptocurrency platforms, however, no rules have existed for restricting ICOs within the Macau casino industry. Moreover, the Monetary Authority views cryptocurrency as 'virtual products' and not as a legal currency/financial tool but it hasn't imposed any policies to outlaw it. Macau has a thriving cryptocurrency scene and offers opportunities for savvy cryptocurrency investors. |
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Property in Macau
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Whilst the majority of attention is on Hong Kong's 'world's most expensive' property market as well as Mainland China, Macau is often overlooked among prospective investors. However, unlike both Hong Kong and Mainland China, Macau is the only part of the People's Republic of China that allows freehold land purchases (ensure you check title in advance). The Macau economy is heavily reliant on tourism as opposed to manufacturing/finance but the government continues to focus on developing complementary industries, providing upside opportunity.
Through freehold options and a more cost-effective market (compared to Hong Kong) offers potential opportunity for investors interested in gaining exposure to the Greater Bay through Macau. |
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International Investors & Macau Property
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Yes - foreign investors can purchase property in Macau and depending upon the title, freehold property too (which isn't available in Hong Kong or Mainland China). There are no restrictions on the number of properties that foreign investors own in Macau, however, there is an additional 10% - 20% stamp duty tax (dependent upon property) for foreign investors (compared to locals). Being one of the richest jurisdictions (per capita) within Asia combined with no capital controls, low tax and status as an offshore tax haven, Macau offers an intriguing property market for investors.
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Property Taxes
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The property market in Macau is slightly varied, depending upon the location and property type. Overall, the costs foreign investors should expect to pay (in terms of fees) when purchasing property in Macau include the following:
In terms of taxes - within Macau, rental income is taxed at a flat rate of 10% whilst capital gains are subject to complementary tax levied at progressive rates between 0 - 12%. Inheritance incurs no associated costs in Macau. Aside from these main fixed costs, real estate agent fees and legal fees are also additional costs that investors should be aware of but are negotiable depending upon the provider. |
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Best Locations to Purchase Property
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Due to the small size of Macau, options are limited for where to purchase property but overall there are different districts throughout the four main areas of Macau.
Price declines were experienced in Baixa de Macau, ZAPE, Nape e Aterros de Baia da Praia Grande, Guia and Barra/Manduco. |
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Additional Property Information
For specific details and assistance in regards to property within Macau, please contact our team and we can assist your requirements. Invest Asia Group strongly recommends engaging a local lawyer to ensure due diligence when conducting any housing related transaction within Macau.
Venture Capital/Private Equity in Macau
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Compared to neighboring Hong Kong, Macau is a minnow and largely unknown for its startup scene. However, things are rapidly changing with government support across universities, incubators and events operating within Macau.
Some of the more famous startups in Macau include:
Ultimately, Macau has a long way to go to reach the levels of Hong Kong and Shenzhen but with further investment and support as well as the Greater Bay Area being a Chinese government priority, further opportunities will arise. |
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