IPIM asked the 355 offshore companies what they intended to do, and 292 were silent, waiting to make a decision. There are still those who believe there will be changes in the law coming into force a year from now.
In the year that the law revoking the offshore operation in Macau came into force, 2018, no company expressed interest in adhering to this legal regime, which dates back to the Portuguese (Decree-Law 58/99).
We have to go back to the first half of 2017 to find the last offshore company to be registered in Macau.
By contrast, in those two years, before the new law, almost 50 companies closed their doors.
That is, one cannot properly speak of surprise when the government – pressured by OECD to improve taxation standards – approves Law No. 15/2018, which entered into force in December and determines that from January, 2021 there can be no offshore companies in Macau.
There is another problem: what to do to the 355 companies that, at the time of the decree, were registered with IPIM?
IPIM declined to collaborate with this work of Macau Business, but last March the reply to Deputy Lei Chan U, Trade and Investment Promotion Institute revealed “concern about the impacts on society, especially local businesses and workers.”
The IPIM president, Irene Lau, clarified to the deputy that this body has been providing “appropriate support to companies and workers in need, especially for offshore institutions that wish to continue to develop business in Macau”, and they need to become general companies.
The law tries to entice these companies to change their name and corporate purpose by exempting them from paying their taxes and fees.
But – as argues local lawyer Manuela António to Macau Business – this is too little to prevent the bulk of the 355 from leaving Macau.
She was one of the people who over the past year advocated the need to revise the law to solve the problems the decree creates. “Unfortunately, no amendments were introduced in the draft of the bill that has been under discussion in the Legislative Assembly, despite all the criticism that was made to the same, and so I got the impression that a good opportunity to effectively promote the maintenance of the operations of those 355 offshore companies in Macau has been lost.”
Still, this seasoned lawyer “would not give for granted that nothing will be done or cannot be done in this regard, as I still believe that the new Government may look at this problem and adopt some measures to amend the revocation of the offshore regime. Let’s see what the future will tell.”
“A new financial center for China”
Lawyer Manuela António still believes in a turnaround.
First, because she’s “quite sure that offshore companies did play an important role in the Macau economy diversification, and it is also important to reckon that the 355 offshore companies currently registered with IPIM are an immeasurable asset that Macau economy currently hold.”
More importantly: “this could be used to leverage the diversification of the local economy, if the strategy to attain that goal is indeed for Macau to become a new financial center for China.”
Interviewed by Macau Business, Ms António states that “to achieve that ambitious goal, it will be critical that Macau politicians be wise and put in place the right policies at the right time.” She also notes that part of these offshore companies “belong to big and important business groups from across different industries and jurisdictions, and some of them are listed in the Hong Kong and Shanghai stock exchanges.”
In the first quarter of 2019, IPIM visited all the 355 offshore licensed institutions to explain what the law says, but also, according to Irene Lau, “to encourage companies to continue to operate and expand their business in Macau.”
The latest available results – which IPIM declined to update – show that only 43 companies said they would continue, while 20 informed them they would close down in the meantime.
There are 292 companies that are unwilling to compromise and to whom IPIM promises “due follow up”.
These numbers do not surprise Manuela António, who has several customers among the 355 licensees. “In general terms, the clients are concerned about this matter, and particularly sensitive to the idea of seeing their earnings deriving from its activities in Macau being charged from one year to the other at 12 per cent rate. It seems to me that they are holding a decision and will wait until January 2021 to consider all the available options for the future of their companies.”
Ms António regrets, in this conversation with Macau Business, all the time she spent among her clients, “mainly highlighting all the advantages of maintaining the operations of their companies in Macau. I have been notably emphasizing the simplicity and generosity of the Macau tax system, which is indeed one of the most competitive in Asia, the privileged geopolitical status of Macau, and the existence of a quite flexible labor law.”
The Monetary Authority publishes twice a year the list of offshore companies that have closed down – the second half of 2019 figures should be coming out in an official bulletin.
But AMCM explains “offshore commercial services institutions were overseen by the IPIM. Hence, the AMCM doesn’t have the most updated list of non-financial offshore companies.”
On the other side, the DSEC does not collect information on commercial offshore companies since the first quarter of 2017.
That is, it is all in the hands of IPIM, who simply are not available to inform us.