Macau is currently undergoing a crucial phase in its tax reform with the gradual implementation of new Transfer Pricing rules for corporate income tax. These amendments are part of a broader agenda to modernize the tax system, align local standards with international, and enhance the government’s auditing capacity due to increasing global scrutiny of the tax practices of multinational groups.
Regulatory Framework and Entry into Force
On January 1, 2024, the new Profits Tax Law became effective, establishing a more structured, progressive, and transparent tax system. Specifically, formal Transfer Pricing provisions are being introduced for the first time in Macau, which will gradually come into force starting in the 2024 fiscal year and will be reinforced with the full implementation of mandatory documentation by 2025.
The new provisions focus on related-party transactions to ensure that agreed prices are at market conditions (Arm’s Length Principle) and aim to prevent tax base erosion and the artificial shift of profits to lower-tax jurisdictions.
Documentation Requirements and Thresholds
As of the fiscal year 2025, taxpayers subject to the new rules must prepare and preserve Transfer Pricing documentation, which will include both the master and local file, according to the recommendations of the OECD’s Action Plan 13 on BEPS (Base Erosion and Profit Shifting).
The requirements will apply only to taxpayers whose annual turnover exceeds MOP 100 million (approximately USD 12.5 million). Additionally, there is a separate threshold for the obligation to file a country-by-country report (CbCR), applicable to multinational groups with consolidated revenues exceeding MOP 7 billion (USD 875 million), which reflects the global BEPS Pillar 3 standard.
Although the automatic reporting with the tax authorities will not be required initially, they must be available for inspections or formal requests.
Audit Methodologies and Scope
The rules permit the use of any of the five traditional methods recognized by the OECD (Comparable Uncontrolled Price, Cost Plus, Resale Price, Transactional Net Margin, and Profit Split), if supported as the most appropriate for the specific case.
Macau tax authorities can adjust taxable income, even retroactively, if the prices agreed are not at market conditions. In such cases, taxpayers must support that their Transfer Pricing policies are based on solid functional analysis, adequate comparability studies, and sufficient documentation.
In addition, specific provisions on correlative adjustments are incorporated to mitigate cases of double taxation, provided that mutual agreement mechanisms exist with the corresponding jurisdiction.
Implications for Taxpayers
The implementation of these new rules marks a significant amendment in Macao’s tax system, which has traditionally been viewed as a tax haven with fewer restrictions. Taxpayers—especially those belonging to multinational groups—need to take immediate action to demonstrate compliance.
It includes reviewing current Transfer Pricing policies, preparing or updating technical studies, adapting accounting systems, and training internal staff on international taxation. Companies already operating in other jurisdictions with similar regulations can leverage their previous experience to modify their procedures to local requirements.
Final Observations
Due to this reform, Macau is firmly moving toward integration with international tax standards. Implementing Transfer Pricing rules aligned with the OECD responds not only to a global requirement but also to the need to preserve the integrity of its tax base in a context of increasing international competition and transparency.
For companies, this amendment presents both an operational challenge and an opportunity to enhance their tax governance, thereby reducing the risk of penalties or tax disputes. Advance preparation and strict compliance will be key in this new phase of Macao’s tax regime.
Source: IFLR