RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q2/MAC/3
21 September 2001
(01-4508)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Replies to Questions Posed by the UNITED STATES1
Regarding the New and Full Notification of MACAU, CHINA2
The following communication, dated 18 September 2001, has been received from the
Economic and Trade Office of Macau, China.
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Q. The following are questions regarding the notification of Macau, China made pursuant
to Article XVI:1 of the GATT 1994 and Article 25 of the Agreement on Subsidies and
Countervailing Measures, in document G/SCM/N/71/MAC, dated 28 February 2001.
While Macau, China reported no subsidies in its Notification, in the Trade Policy
Review of Macau, China, there were several in stances where special incentives, income tax
exemptions or interest subsidies were identified to help encourage investment and promote
export diversification.  For the sake of transp arency, would Macau, China please notify these
incentives, exemptions and other aid so that we will be more fully aware of the programmes
offered and how they may affect exports from Macau, China?
Reply
The Macau, China SAR Government’s incentives, which were stated in the Trade Policy
Review Government Report3 are not operated directly or indirectly to increase exports from, or reduce
imports to its Territory, within the meaning of Article XVI:1 of the GATT 1994.
The incentives bear the following characteristics in nature:
(i) They comply with the National Treatment principle, as they are applicable,
on a non-discriminatory basis, to both local and foreign investors.
(ii) Non-specificity: The Macau, China SAR Government’s incentive schemes do
not target any particular enterprise or industry.  (Article 2.1(a) of the SCM
Agreement).  Furthermore, eligibility to such schemes is automatic and the
criteria and conditions used by the granting authorities are objective, neutral,economic in nature and horizontal in application (Article 2.1(b) of the SCM
Agreement).  Thus, Macau, China is of the view that these incentives do not
                                                     
1 G/SCM/Q2/MAC/2
2 G/SCM/N/71/MAC
3 WT/TPR/G/82G/SCM/Q2/MAC/3
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fall within the notification requirements of Article 25.2 of the SCM
Agreement.
(iii) The underlying objectives of these incentive schemes are to encourage
industrial development and structural diversification of the economy, which
are consistent with Macau, China’s longstanding industrial and economicpolicies as well as the relevant WTO principles and provisions.
Below is a detailed description of the incentive schemes, which include: fiscal incentives (tax
exemptions) and financial incentives.
1. Fiscal incentives in the ambit of industrial policy (Law No. 1/86/M, with supplement
introduced by Decree-Law No. 35/93/M.
Full or partial exemptions may be granted to corporate, industrial, property and consumption
taxes as well as Stamp Duties.  Such exemptions are used to encourage industrial development in the
Territory.  In order to qualify for these exemptions, projects must satisfy at least one of the following
criteria:
1. Promote structural diversification.
2. Contribute to export diversification.
3. Promote a higher added value within their own production chain.
4. Contribute to technological modernization.
5. Create employment opportunities.
The following table contains a description of the fiscal incentives:
Type of tax Exemptions Features
Corporate tax May be reduced by 50% Levied on net profit derived from
any commercial or industrial
business.  Sliding-scale tax,
averaging 15% for revenue overMOP$300,000 (US$37,500) and
varying between 2% and 15% for
income below this level.
Industrial tax Total exemption is possible.  A
50% reduction may be granted for
businesses located on the Islands
of Taipa and Coloane (except foroff-shore banking operations).Charged on all individuals and
companies engaged in any
commercial or industrial business.
This is a fixed annual tax that variesaccording to the nature of the
business.  The usual value is
MOP$300 (US$37.50).  This tax is
applied to each activity that the
company conducts.  Therefore, the
total yearly tax is a cumulative of
the tax for the various activities.
Property tax Full exemption:
For real estate purchasedexclusively for industrial
purposes.The tax is charged at 16% on the
actual rental income or 10% on the
official rateable value if not rented.G/SCM/Q2/MAC/3
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Partial exemption:
For a period of up to five years in
Macau Peninsula and ten years on
the Islands of Taipa and Coloane,
for new real estate rented forindustrial purposes.
Stamp Duty(Property Transfer Tax
and Donations Tax have
been integrated in the
Stamp Duty since
1 August 2001)A 50% to 100% reduction may be
granted for the transfer of real
estate intended purely for
industrial use, including trade,
administrative, off-shore
enterprise, long-term leasing, and
social units.On all property transactions a Stamp
Duty is levied on 3% of the
transaction value.
On donations of property and real
estate (which are above
MOP£350,000), a Stamp Duty is
levied on 5% of the assets (net of
liabilities).
In the first two years of application
of the new Stamp Duty law, real
estate situated in the Islands of
Taipa and Coloane and which is
exempted from Property Tax, issubject to 1% reduction of the
Stamp Duty.
Consumption Tax Fuel supplied to industrial units is
free from tax.Charged on: fuels and lubricants,
tobacco and alcohol.  The tax on
some alcoholic drinks is levied ad
valorem  according to the
CIF/Macau value; on the remainderit is specific.
2. Financial incentives (Decree-Law No. 23/98/M)
Interest rate subsidies
Business operating in Macau, China (local or foreign companies) may apply for interest rate
subsidies on Macau Official Pataca (MOP) bank loans for the following investments: (a) construction
of industrial premises; (b) purchase or hire-purchase of industrial premises; (c) renovation/adaptation
of industrial premises, namely those that contribute to eliminate dangerous or unsafe conditions; (d)
purchase or leasing of new industrial equipment, including software required for operation thereof; (e)purchase or leasing of new goods vehicles.
This scheme aims to promote investment in sectors such as fisheries, manufacturing
industries, wholesalers and commercial operators, cargo handlers, warehousing, transportation and
other related-ancillary operators, IT-related activities, and other business related services.
In order to benefit from such incentives, applicants must satisfy at least one of the following
criteria:
(a) Contribute to diversification and modernization of economic activities;G/SCM/Q2/MAC/3
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(b) Introduce innovation and technological reversion of businesses, with a view to
increase production capacity and improve product quality, strengthen competitiveness
and reduce environmental damage;
(c) Promote modernization of factory premises in terms of operation, safety and/or health
conditions.
The levels of interest rate subsidization are as follows:
Scale I – 4 percentage points (reference rate);Scale II – 5 percentage points (reference rate to be added 1 percentage point) for investments aimed
at:
- Purchase and technological upgrading of equipment and relevant
maintenance systems;
- Purchase or hire-purchase of premises whose Utilization Licences have been
issued after 1 January 1991;
- Concentration of industrial premises, or their transfer, out of urban areas.
Scale III – 6 percentage points (reference rate to be added 2 percentage points) for investments aimed
at:
- Computer aided design and production;
- Installation of control, measuring, testing and quality control equipment;
- Implementation of electronic data transfer systems;
- Improvement of environmental standards and safety conditions in the
workplace.
The above interest rate subsidies may be granted for a maximum period of four years, starting from
the first credit refund.
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