Written by José Rodrigues and Paulo Rowett
The current tax regime was primarily established in the 1970’s in the form of several individual laws. In other words, there has never been a consolidated legal framework and unified procedures regulating the entire journey of a taxpayer – one that fully addresses tax needs and requirements in today’s evolving social and economic environment.
As of December 30, 2024, this all changed with the publication of Law No. 24/2024, establishing a new Tax Code (“TC”). The TC comprises a total of 312 articles, divided into the following titles:
• Title I – General Part (Articles 1 to 5)
• Title II – Tax Legal Order (Articles 6 to 15)
• Title III – Tax Legal Relationship (Articles 16 to 54)
• Title IV – Tax Procedure (Articles 55 to 154)
• Title V – Judicial Tax Procedure (Articles 155 to 173)
• Title VI – Tax Enforcement Procedure (Articles 174 to 312)
The Tax Code introduces the following main changes:
• Unified Tax Code: The law consolidates various matters that are regulated in separate tax laws into a single comprehensive tax code, simplifying the legal framework for taxpayers and authorities;
• Transfer Pricing Rules: It introduces transfer pricing regulations, requiring transactions between related parties to follow the arm’s-length principle;
• Advance Pricing Arrangements: The law allows for advance agreements on transfer pricing methodologies, providing certainty for taxpayers;
• Statute of Limitations: Establishes a 15-year limit on tax claims (unless otherwise provided in other tax laws), ensuring clarity and predictability;
• Electronic Tax Platforms: Promotes the use of digital platforms for tax filings and compliance, enhancing efficiency;
• Tax Residency Definitions: Updates on the definitions of tax residency, effective 1 January 2025.
• Tax Agents: Introduces rules for engaging tax agents under specific circumstances.
The purposes of such changes are as follows:
• Alignment with International Standards: Ensures compliance with global tax practices, particularly in areas like transfer pricing;
• Simplification and Clarity: Unifies and clarifies tax rules on procedures to reduce complexity for taxpayers and improve administrative efficiency;
• Enhanced Compliance: Encourages adherence to tax obligations through clear guidelines and modernized procedures;
• Protecting Tax Base: Prevents tax base erosion by addressing profit-shifting practices through transfer pricing regulations;
• Digital Transformation: Facilitates the transition to electronic tax systems, making compliance more accessible and efficient.
It should be noted that, albeit the Tax Code will only fully enter into effect on 1 January 2026, certain provisions have already entered into effect and some, although not yet in effect, demand an immediate attention.
In this regard, the forthcoming articles in this series will provide comprehensive explanations and high-level analyses of the upcoming changes and novelties in the Tax Code.
The present article centres on some of the new provisions that, in our opinion, demand short-term planning or attention from taxpayers and practitioners alike, namely:
1. Judicial tax procedure and the tax enforcement process
The rules concerning the judicial tax procedure and the tax enforcement process are of immediate application, except where their application to ongoing proceedings of taxpayers results in prejudice to the guarantees, rights, and legitimate interests previously established. In this regard, the new Tax Code has clarified the existing doubts regarding the prescription period for tax debts, stipulating that such debts lapse after a period of 15 years (Article 49 of the TC), aligning with the ordinary 15-year limitation period provided under Article 302 of the Civil Code and thereby amending the 20-year period previously set forth in the Tax Enforcement Code (CEF), approved by Decree No. 38,088 of 12 December 1950.
The TC also establishes the lapse of the right to settle taxes if the settlement is not notified to the taxpayer within a period of 5 years.
2. Tax Residency
To determine the taxpayer responsible for the settlement of the tax obligation, the TC introduces the concept of a tax resident. This legal innovation defines tax residents in the MSAR as follows:
• Individuals who have stayed in the MSAR for more than 183 days per year or, if they have stayed for a shorter period, have a residence in the territory under conditions that demonstrate the intention to maintain it as their habitual residence;
• Legal entities that have their headquarters or effective management in the MSAR – whereby having merely a stable establishment in the MSAR is not sufficient.
The tax residency definition, which is already in effect, entails several implications. Amongst other effects, (prospective) taxpayers should keep in mind that:
• Individuals and businesses may face changes in their tax liabilities based on the updated residency criteria;
• Foreign investors may need to reassess their tax strategies in light of the new residency rules;
• The changes could influence decisions regarding investment structures and operations in Macau.
3. Tax Representative
The role of the tax representative arises, serving as the entity responsible for representing the taxpayer before the tax administration and ensuring compliance with their obligations in cases where the taxpayer resides outside the MSAR or, although being a resident, is absent for a period exceeding 183 days – whether consecutively or intermittently.
The amendments and novelties introduced by the TC impose an increased duty of diligence upon both individuals and corporate entities, requiring strict adherence to the revised provisions to ensure full compliance with the evolving legal landscape.
As such, all affected parties are urged to seek timely legal counsel and implement robust compliance mechanisms, thereby safeguarding their interests and ensuring they are not caught unprepared by the dynamic shifts in tax regulation.
For further information on this matter, stay tuned for future episodes of this series on the Tax Code.
José Rodrigues Paulo Rowett
Consultant Legal Counsel
joserodrigues@ccadvog.com rowett@ccadvog.com
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