Developing into an offshore hub

Almost 15 years have passed since the Offshore Law came into force, which revitalised Macau's offshore regime. The Law was based on the determination to develop tertiary services other than gaming and based on opening up to a wide range of activities. The new regime was designed to transform Macau into an international business centre.

Offshore institutions can engage in several activities in Macau, like banking, finance and insurance, trust assets management, commercial activities or offshore auxiliary services. Provided, however, they are not offered to Macau residents, except as it may be essential for its establishment and functioning, and do not use Patacas as trade currency.

Setting up an offshore institution

Both companies incorporated in and outside Macau may apply to become offshore institutions, as a subsidiary or a branch. Entities authorised to create offshore branches will be jointly liable for their operations.

The establishment of an offshore institution to operate offshore financial or trust assets management activities is subject to authorisation by the Macau authorities. The administrative procedure to obtain such authorisation was designed to be smooth and straightforward, and applicants can expect to have a decision within 45 days.

Applicants shall comply with some requirements to obtain the authorisation, such as to act through a single business establishment in the territory, have organised accounting according to the accounting principles commonly accepted and comply with the rules that may be prescribed by the Monetary Authority and the Macau Trade and Investment Promotion Institute.

Offshore financing

Offshore financial entities are entitled to operate banking, insurance, reinsurance and captive insurance activities, as well as other activities identified in the financial institution legal regime. These activities shall have to be confined to offshore customers; exceptionally, the institutions may grant loans and provide guarantees to onshore customers, provided the Chief Executive deems the underlying operation relevant to the interests of Macau.

Offshore financial institutions can privilege their clients with the exemption of stamp duties and taxes on capital gains and deposits' interests. Investors may also expect no restrictions on repatriation of capital and on currency and exchange operations.

Local companies willing to act as offshore institutions must adopt the form of limited companies by shares and issue nominal shares corresponding to, at least, 51% of its share capital.

As Macau has adopted most of the international supervision rules, Macau not only provides guarantees to investors, but also has the trust of international financing entities. Its offshore financing business has, therefore, been considered attractive by foreign entities.

Offshore trust assets management

The Offshore Law also allows the setup of offshore trust institutions. Beyond the establishment and operating fees, these institutions are also liable to constitute a security, either through a pledge deposit, a bank guarantee or an insurance bond.

Special reference is important to the recognition of trust entities incorporated under foreign laws, provided that these jurisdictions recognise trust management as a legal concept and the institution complies with the rules contained in the Macau offshore law.

Among others, offshore trust management is subject to meeting the following requirements: i) not to have per object financial activities; ii) trust manager to be an authorised offshore company or branch; iii) incomes allocated to the trust assets to derive from the exterior or from deposits or other resources attracted by offshore financial institutions; iv) incomes attributed or paid to the trust assets or its beneficiaries must come from the exterior or offshore financial institutions and; v) not to include real estate located in Macau.

The trust founder and beneficiaries' names are confidential and can only be revealed in the context of the execution of Court decisions. Moreover, the decisions of foreign Courts can only be executed in Macau under restricted conditions.

Advantages

The relative simplicity of creating an offshore institution and not having to incorporate new companies to do so, is one of the main advantages the offshore law offers to investors. Once approved, institutions enjoy exemption from taxes of all kinds (complementary, industrial and property taxes) and stamp duty.

The same will happen with respective directors and specialised technicians, who are exempt from professional income tax during the first three years of the institution's activity.

Macau has no restrictions on foreign currency control, importation of capitals, repatriation of earnings and transfer of operating funds. Moreover, no taxation over capital gains or interests is applicable.

Also, Macau has adopted the Basel Banking Supervision Recommendations and, furthermore, is not included in international financial black lists.

Macau being a bridge between China, Europe and growing Portuguese speaking countries such as Brazil and Angola, the continuous implementation of the offshore regime will strengthen Macau's key role on the global market, while promoting local tertiary related services.