WORLD TRADE  
ORGANIZATION  G/SCM/Q2/MAC/5 
4 October 2010 
 (10-5019) 
Committee on Subsidies 
and Countervailing Measures Original:   English 
 
 
 
SUBSIDIES  
 
Replies to Questions from the UNITED STATES1 
Regarding the New and Full Notification  
of MACAO, CHINA2 
   The following communication, dated 30 Septembe r 2010, is being circulated at the request of 
the Delegation of Macao, China.   
 
_______________ 
 
 
Question 1 
 
 It is noted that one of the objectives of the Fisheries Development and Support Fund is 
to develop sustainable fishing operations by  providing interest-free loans and that such 
financing can be used for hull modification a nd repair.  Please explain how hull modification 
and repair related to sustainability of the fishing.    
 Reply
 
  Primitive built wooden fishing boats are common in Macao.  Nowadays, many fishermen and their families are still living on these old design wood en boats, sailing along the coastline of China.  
As the conditions of these wooden boats, in partic ular the structure and space arrangement, are not 
good enough for safety and living conditions compared w ith the modern requirements, there is a need 
to modify or repair these boats in accordance with  the requirements set out by the Macao Maritime 
Administration or the owners' free will.  Therefore,  to improve the operation of local fisheries, the 
Macao SAR Government provides loans to finance th e maintenance of fishing boats, so as to enhance 
the safety conditions of the vessels, as well as the living condition for fishermen living on board.  In 
fact, the maintenance covers every part of the boat, such as, superstructure, wheelhouse, holds, cabins, 
etc.  In particular, the wooden hull of fishing boa ts requires maintenance and repairs every year.  
Some of the modifications or repairs of boats, for example, installing the sails to reduce energy 
consumption, or using the non-toxic paints for anti -fouling system etc., can be beneficial to the 
environment.  Indeed, it would be more appropriate  to use the term "ship modification and repair" 
rather than "hull modification and repair".  To avoid any misunderstanding, the Macao SAR 
Government will make the corresponding adjustme nt in preparing the next notification.  
                                                     
 
1 G/SCM/Q2/MAC/4.   
2 G/SCM/N/186/MAC.   G/SCM/Q2/MAC/5 
Page 2  
 
  Question 2  
 
 According to Secretariat report for Macao's 2007 Trade Policy Review 
(WT/TPR/S/181), the Macao Government provides various tax incentives for projects that "promote industrial diversification, create empl oyment, foster technological development, and 
encourage exports".  The United States understands  it is Macao's position that these incentives 
do not fall within the notifi cation requirements of Article 25.2 of the SCM Agreement.  
Nevertheless, for transparency, would Macao pl ease provide information on the following 2008 
fiscal and financial incentives: 
 
 a. According to the Secretariat TPR report, the Business Registration Tax is a 
"fixed annual tax that varies according to the nature of the business".  Please 
provide all of the various tax rates applied for the different kinds of businesses.  Also, please explain upon what criteria the variations in tax rates depend. 
 Reply
 
  The Business Registration Tax is levied accord ing to the nature of the business, which has 
been implemented through the Law no.15/77/M since 1977.  The objectives of revising this regulation 
at that time were to rationalize and simplify the ta x filing procedures, as well as to increase efficiency 
and reduce costs for either the tax or to taxpayers, so the General Table of Business Registration Tax was drawn up.  This General Table, of which a brie f summary is provided below, is only available in 
Portuguese and can be provided to interested Members upon request.   
 
Summary of the General Table of
 
Business Registration Tax  
 
Sector/Activity Annual tax rate (MOP) 
Agriculture, forestry, hunting and fishing 300 
Manufacture of textiles, apparel and leather products 300 to 500 
Manufacture of wood and cork products 300 
Manufacture of paper, printing, printed matter and 
related articles 300 
Manufacture of coal an d petroleum chemical 
products 300 
Manufacture of non-metallic mineral products 
(except coal and petroleum) 300 
Manufacture of basic metals 300 
Manufacture of fabricated metal products, machinery 
and transport equipment 300 
Electricity, gas and water 300 
Construction and public work 300 to 500 
Wholesale and retail trades, restaurant and hotel 300 to 1500 
Transport, storage and communications 150 to 300 
Financial services 300 to 80000 
Real estate services 500 
Business services 300 
Community, social and personal services 150 to 300 
 
 The adoption of tax fixed rates followed the cr iteria of meeting the economic climate in which 
fair and equitable principles were complied.  The Business Registration Tax is waived temporarily starting from the tax relief measures in 2002.   
  G/SCM/Q2/MAC/5 
 Page 3 
 
 
   b. According to the Secretariat TPR repor t, enterprises benefiting from Macao's 
tax incentives in 2004 were "mainly engaged in garment and textile production and the manufacture of audio and video pr oducts".  These enterprises enjoyed a 
50 per cent reduction in both corporate income tax and stamp duty.  To the extent that these tax incentives continue to apply largely to the garment/textile 
and audio/video industries, please explain why this program was not notified.   
 
Reply
 
  Governed by Law no. 1/86/M of 8 February 1986 (with revision of Decree-Law No. 35/93/M 
of 12 July 1993), the tax incentive program aims to encourage industrial diversification of the 
economy.   
 As the Macao SAR has undergone a rapid transformation from a manufacturing centre to a 
predominantly service-oriented economy, there are only a small number of applications for this 
program.  As shown in Table 1, there were five enterprises, which engaged in garment and textile 
production, manufacture of audio & video products, and printing, granted tax incentives in 2008.  
These enterprises enjoyed a 50 per cent reduction in bo th corporate income tax and stamp duty.    
 
Table 1 – Enterprises granted tax
 
incentives, 2006-2008  
 
Sector/ activity 2006 2007 2008 Total 
Garments and textiles 3 0 3 6 
Manufacture of audio 
& video products 1 1 1 3 
Printing 0 1 1 2 
Manufacture of food 1 1 0 2 
Total 5 3 5 13 
 Source:   Macao Economic Services.   
 
 These tax incentives are consistent with Article 2 of the SCM Agreement in that they are not 
specific.  Article 2.1(a) of the Agreement is not applicable, as this program is available to a very wide 
range of economic activities, and there is no lim itation to the access of the program to certain 
enterprises.  Law no. 1/86/M has set out objective criteria and conditions, governing the eligibility of the applications, as required by Article 2.1(b) of  the Agreement.  This tax incentive scheme is 
applicable to all industrial units that make a beneficial contribution to Macao's industrial 
development, for example by promoting industria l diversification, improving Macao's economic 
environment, introducing modern scientific technologi es, or investing in high added-value products.  
Therefore, they are not selective among manufacturing industries.    The schemes do not subject to Article 2.1(c) as well, because they do not disproportionately 
benefit particular enterprises.  Since the industria l sector in the Macao SAR is mainly dominated by 
the textiles and garments industry, therefore there are more applications in this industry than the 
others.     Macao, China reiterates that th ese incentive schemes do not fall within the terms of Article 2 
of the SCM Agreement.  Thus, these incentives do not  fall within the notification requirement of 
Article 25.2 of the SCM Agreement. 
 
 c. According to the Secretariat TPR report, Macao provides repayable and non-
repayable subsidies for manufacturing of new products that involve high economic risk, research and development projects that further industrial G/SCM/Q2/MAC/5 
Page 4  
 
  development, and more.  Between 2001 a nd 2005, these benefits amounted to P 
30.2 million and largely went to the garments and textiles and fisheries 
industries.  Please explain why these subs idies are not notifiable under Article 
25.2 of the SCM Agreement. 
 Reply
 
  As part of the industrial development policy,  the Macao SAR Government offers payable and 
non-repayable incentives to encourage investment in Macao, in accordance to th e general guideline as 
specified in Decree-Law No.49/85/M.  The Repaya ble and Non-repayable Incentive to Investment 
Project is designed for the entire industrial sector and is not concentrated on specific manufacturing 
industry.     The estimated value of P30.2 million gran ted in the period of 2001-2005 was incentives 
granted under the Government-funded Interest Rate Incentives. Governed by Decree-Law 
no. 23/98/M, and subject to further amendment by Administrative Regulation no. 16/2009, the scheme 
aims to provide incentives to companies' investme nt contributing to:  business diversification and 
modernization;  technological innovation;  business rest ructuring;  improvement of the environment;  
and the betterment of health and safety conditions through the construction, renovation of premises 
and so forth. 
 
 The incentive schemes are consistent with Artic le 2 of the SCM Agreement in that they are 
not specific.  The Government-funded Interest Ra te Incentives cover a number of industries in the 
primary, secondary and tertiary sectors of the economy.   They are available to a very wide range of 
economic activities, and the granting authority does not limit access to a subsidy to certain enterprises, 
as stated in Article 2.1(a) of the Agreement.  In addition, Decree-Law no. 23/98/M has set out 
objective criteria and conditions governing the eligibilit y of applications, as required by Article 2.1(b) 
of the Agreement.    According to the statistics, there was no app lication in 2006. During 2007- 2008, there were 
18 applications for interest incentives in line with the Decree-Law No. 23/98/M, and all of them were 
approved (Table 2). An estimated value of th e incentives for 2007 and 2008 was MOP 3,248,299.98 
and MOP 4,156,671.92 respectively; these benefits amounted to MOP 7,404,971.90.  
 
Table 2 – Interest incentives granted in
 
terms of activity, 2007-2008  
 
Sector/ activity 2007 2008 Total 
Garments and textiles 5 3 8 
Recycling  0 2 2 
Laundry & dry-cleaning services 1 2 3 
Printing & publishing   0 2 2 
Photo printing   0 1 1 
Wholesale  0 1 1 
Information and related service 1 0 1 
Total 7 11 18 
 Source:   Macao Economic Services.   
 
 They are not selective among industries and they  do not disproportionately benefit particular 
enterprises.  As indicated in Table 2, the bene ficiaries of this program in 2007-2008 engaged in 
various sectors, including garment and textiles;  recycling;  laundry & dry-cleaning services;  photo 
printing and wholesale.  Therefore, this program doe s not fall under the provision of Article 2.1(c) of 
the Agreement.    G/SCM/Q2/MAC/5 
 Page 5 
 
 
   Macao, China reiterates that th ese incentive schemes do not fall within the terms of Article 2 
of the SCM Agreement.  Thus, these incentives do not  fall within the notification requirement of 
Article 25.2 of the SCM Agreement.     
__________