G/SCM/Q2/MAC/13  
 
20 October 2021  
(21-7950) Page: 1/2 
Committee on Subsidies and Countervailing Measures  Original: English  
 
SUBSIDIES  
REPLIES TO THE QUESTIONS POSED1 BY THE UNITED STATES  
REGARDING THE NEW AND FULL NOTIFICATION OF MACAO, CHINA2 
The following communication, dated and received on 19 October 2021, is being circulated at the 
request of the delegation of Macao, China.  
 
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Question 1  
 
The United States notes that Decrees 23/98/M and 49/85/M are not included in Macao, 
China's most recent notification of subsidy programs to the WTO.  
 
Decree 23/9/M appears to call for significant industrial subsidies, including interest rate 
subsidies to industrial stakeholders. Further, this measure appears specific as it appears 
limited to specific companies supporting industrial diversification, technological 
innovation, and corporat e facility modernization.  
 
Decree 49/85/M appears to lay out the industrial policy of Macao, China, which, based on 
the 2020 Investment Climate Statement issued by the US  Department of State, we 
understand may include several subsidy programs.  
 
Please expl ain why the above -referenced subsidy programs were not included in your 
notification to the SCM Committee.  
 
Reply : 
 
Decree -Law No. 23/98/M has now been replaced by Administrative Regulation No. 7/2021, which 
establishes the Subsidy Scheme for Encouraging Enterprise Upgrading and Development to offer 
interest rate subsidy or financial lease rental subsidy to enterprises investing in Macao, China. All 
locally registered enterprises, regardless of the sector, are eligible to the scheme as long as they 
fulfil the objective eligibility criteria and conditions set out in the said Administrative Regulation.  
 
Decree -Law No. 49/8 5/M establishes the framework of Macao, China’s industrial development policy , 
which aims to facilitate industrial activities, promote industrial modernization and foster industrial 
diversification . 
 
Therefore, Macao, China is of the v iew that the above me ntioned regulations do not have the 
specificity defined in Article 2 of the SCM Agreement, and thus are not subject to notification.  
 
Question 2  
 
Based on the US  State Department's 2020 Investment Climate Statement, we also 
understand that in 2019 the Government of Macao, China put forward an enhanced tax 
 
1 G/SCM/Q2/MAC/11.  
2 G/SCM/N/372/MAC . G/SCM/Q2/MAC/13  
- 2 - 
 
  deduction for research and development (R&D) expenditure incurred for innovation and 
technology  projects by companies whose registered capital reached USD  125,000, or 
whose average taxable profits reached USD  62,500 per year in three consecutive years. 
The tax deduction amounts to 300  percent for the first USD  375,000 of qualifying R&D 
expenditure a nd 200  percent for the remaining amount, subject to a limit of 
USD 1.9 million in total. Please explain why this program was not included in your 
notification to the SCM Committee.  
 
Reply : 
 
The taxable income deduction for qualified R&D expenditure is not specific to any enterprise or 
industry or group of enterprises or industries. It also has  eligibility criteria and conditions that are 
applicable to all companies irrespective of their sectors. Therefore, we are of the view that the 
measure in question does not fall within the meaning of subsidies notifiable under Article 25.2 of the 
SCM Agreement.  
 
Question 3  
 
Based on the US  State Department's 2020 Investment Climate Statement, we also 
understand that Macao, China maintains a corporate income tax exemption for income 
received from Portuguese -speaking countries.  
a Please provide additional details on this measure, including whether the 
income tax exemption applies to revenue derived from exports to 
Portuguese -speaking countries?  
 
Reply : 
 
Revenues obtained from or generated in Portuguese -speaking countries, whether by means of trade, 
investment  or any activities, are not subject to profits tax in Macao, China only if they have been 
taxed in those countries. This measure prevents double taxation of the same revenue by, and fosters 
tax cooperation between Macao, China and Portuguese -speaking count ries. In order to prove the 
revenue has been taxed in a Portuguese -speaking country, the taxpayer must present supporting 
document to Macao, China’s tax authority for review.  
 
It is worth noting that the revenue derived from  export s cannot actually benefit  from this measure. 
This is because according to international practice, profits tax on exports is usually levied by the 
exporting country/region rather than the importing  country/region, which means that the exporter 
is unable to provide Macao, China’s ta x authority with the proof of tax payment issued by the relevant 
authorities of the Portuguese -speaking country and must therefore pay profits tax in Macao, China.  
 
b. Please explain why this program was not included in your notification to the 
SCM Committ ee. 
 
Reply : 
 
As the measure in question is granted only to revenues that have already been taxed in 
Portuguese -speaking countries and is intended to prevent double taxation,  it does not fit in to any 
of the definitions of a subsidy set out in Article 1 of the SCM Agreement and is therefore not subject 
to notification.  
 
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