Global Forum On Transparency and Exchange of Information For Tax Purposes: Peer Reviews: Global Forum On Transparency and Exchange of Information For Tax Purposes Peer Reviews: Macao, China 2011

GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE OF INFORMATION FOR TAX PURPOSES
Peer Review Report Phase 1 Legal and Regulatory Framework

MACAO, CHINA
Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews: Macao, China 2011
PHASE 1
October 2011 (reflecting the legal and regulatory framework as at June 2011)
This work is published on the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the OECD or of the governments of its member countries or those of the Global Forum on Transparency and Exchange of Information for Tax Purposes. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.
Please cite this publication as: OECD (2011), Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews: Macao, China 2011: Phase 1: Legal and Regulatory Framework, Global Forum on Transparency and Exchange of Information for Tax Purposes: Peer Reviews, OECD Publishing. http://dx.doi.org/10.1787/9789264126626-en
ISBN 978-92-64-12661-9 (print) ISBN 978-92-64-12662-6 (PDF)
Series: Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews ISSN 2219-4681 (print) ISSN 2219-469X (online)
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OECD 2011
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TABLE OF CONTENTS 3
Table of Contents
About the Global Forum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Information and methodology used for the peer review of Macao, China . . . . . .11 Overview of Macao . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Recent developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Compliance with the Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 A. Availability of information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A.1. Ownership and identity information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A.2. Accounting records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A.3. Banking information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 23 47 52
B. Access to information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 B.1. Competent Authoritys ability to obtain and provide information . . . . . . . . 56 B.2. Notification requirements and rights and safeguards. . . . . . . . . . . . . . . . . . 62 C. Exchanging information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C.1. Exchange of information mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C.2. Exchange-of-information mechanisms with all relevant partners . . . . . . . . C.3. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C.4. Rights and safeguards of taxpayers and third parties. . . . . . . . . . . . . . . . . . C.5. Timeliness of responses to requests for information . . . . . . . . . . . . . . . . . . 65 66 72 73 75 76
PEER REVIEW REPORT PHASE 1: LEGAL AND REGULATORY FRAMEWORK MACAO, CHINA OECD 2011
4 TABLE OF CONTENTS Summary of Determinations and Factors Underlying Recommendations. . . . 79 Annex 1: Jurisdictions Response to the Review Report . . . . . . . . . . . . . . . . . . 83 Annex 2: List of all Exchange-of-Information Mechanisms in Force. . . . . . . . 85 Annex 3: List of all Laws, Regulations and Other Relevant Material . . . . . . . 86
ABOUT THE GLOBAL FORUM 5
About the Global Forum

The Global Forum on Transparency and Exchange of Information for Tax Purposes is the multilateral framework within which work in the area of tax transparency and exchange of information is carried out by over 100 jurisdictions, which participate in the Global Forum on an equal footing. The Global Forum is charged with in-depth monitoring and peer review of the implementation of the international standards of transparency and exchange of information for tax purposes. These standards are primarily reflected in the 2002 OECD Model Agreement on Exchange of Information on Tax Matters and its commentary, and in Article 26 of the OECD Model Tax Convention on Income and on Capital and its commentary as updated in 2004. These standards have also been incorporated into the UN Model Tax Convention. The standards provide for international exchange on request of foreseeably relevant information for the administration or enforcement of the domestic tax laws of a requesting party. Fishing expeditions are not authorised but all foreseeably relevant information must be provided, including bank information and information held by fiduciaries, regardless of the existence of a domestic tax interest or the application of a dual criminality standard. All members of the Global Forum, as well as jurisdictions identified by the Global Forum as relevant to its work, are being reviewed. This process is undertaken in two phases. Phase 1 reviews assess the quality of a jurisdictions legal and regulatory framework for the exchange of information, while Phase 2 reviews look at the practical implementation of that framework. Some Global Forum members are undergoing combined Phase 1 plus Phase 2 reviews. The Global Forum has also put in place a process for supplementary reports to follow-up on recommendations, as well as for the ongoing monitoring of jurisdictions following the conclusion of a review. The ultimate goal is to help jurisdictions to effectively implement the international standards of transparency and exchange of information for tax purposes. All review reports are published once approved by the Global Forum and they thus represent agreed Global Forum reports. For more information on the work of the Global Forum on Transparency and Exchange of Information for Tax Purposes, and for copies of the published review reports, please refer to www.oecd.org/tax/transparency.
EXECUTIVE SUMMARY 7
Executive Summary
1. This report summarises the legal and regulatory framework for transparency and exchange of information in Macao, China (hereinafter Macao). The international standard, which is set out in the Global Forums Terms of Reference to Monitor and Review Progress Towards Transparency and Exchange of Information, is concerned with the availability of relevant information within a jurisdiction, the competent authoritys ability to gain timely access to that information, and in turn, whether that information can be effectively exchanged with its exchange of information (EOI) partners. 2. Macao, a Special Administrative Region under the sovereignty of the Peoples Republic of China, has a small and vibrant economy. It hosts an international free port providing an important link between the mainland Chinese and global markets. Macaos gaming industry is one of the most important in the world. 3. Macao first endorsed the OECD standard for exchange of information in 2005. In 2009, Macaos Legislative Council passed the Exchange of Information for Tax Purposes Act, which regulates the exercise of the competent authoritys access powers for international exchange of information (EOI) purposes. Since then, Macao has actively sought to expand its EOI network. In 2011, Macao has concluded 8 TIEAs and 1 DTC Protocol providing for EOI to the standard. These are in addition to the 5 DTCs concluded in the previous years. Macanese authorities have informed the Global Forum that they are also in contact with about 10 other jurisdictions, including OECD members, GF members and Macaos main trading partners, to conclude agreements to the internationally agreed standard on exchange of information. 4. Companies and partnerships formed under Macaos Commercial Code are required to file identity and ownership information with the commercial register. Identity and ownership information is also kept by notaries, who are involved in the formation of such companies. The same information is available for offshore institutions as for domestic companies. Some, but not all, foreign companies with a nexus to Macao are required to have ownership information available to authorities. Trusts cannot be formed under the
8 EXECUTIVE SUMMARY
laws of Macao. The offshore and AML/CFT laws ensure that information is available concerning the settlor, beneficiaries, and trustees of offshore trusts and foreign trusts having as trustee a service provider based in Macao. Ownership and identity information is equally available with respect to all foundations. Enforcement provisions are in place to ensure all relevant entities provide information to government authorities as required under the various laws and maintain information prescribed under the Commercial or the Civil Code. 5. While there are only 72 active public companies which may currently issue bearer shares, further action should be taken to either ensure that robust mechanisms are in place to identify the owners of bearer shares or amend the legislation to eliminate such shares. It is also recommended that Macao clarify the scope of foreign incorporated companies including the branches licensed as offshore institutions that are subject to registration requirements in Macao and ensure that all foreign companies with a sufficient nexus to Macao have full ownership and identity information available to the authorities. 6. Macaos laws require accounting information and underlying documentation to be kept for a minimum of five years for relevant entities and arrangements, with the exception of foundations that are not persons of public interest and foreign companies which are not performing commercial or industrial activities in Macao. The exact scope of the underlying documentation requirements applicable to all entities and arrangements is unclear and should be further clarified. Bank information on transactions and the identity of customers is made available through Macaos AML laws, supported by some relevant obligations in commercial and financial sector laws. 7. Macaos tax authorities have the necessary access powers, which include the power to conduct inspections at the taxpayers premises, but not the power to search and seize. Under the 2009 EOI law, the competent authority is required to gather all information necessary to answer an EOI request. The EOI Act expressly allows the competent authority to collect information held by banks and other financial institutions, including offshore institutions. Such information can be exchanged provided that the request is made under an international tax agreement and there is reciprocity. No domestic tax interest is required. The requirement to notify the request to the holder of the information and to any other interested person can be waived when the counterparty so requires. 8. Macao is actively seeking to extend its network of EOI agreements and is currently signatory to agreements that provide for exchange of information with 13 jurisdictions, 3 of which are in force. The three agreements that are currently in force all provide for exchange of tax information to the international standard. All but one of the remaining agreements concluded by Macao provide for exchange of tax information to the international standard.
EXECUTIVE SUMMARY 9
Macaos network of agreements covers almost all Portuguese-speaking jurisdictions and its main trading partner, namely mainland China. It is recommended that Macao continue its efforts to establish agreements to the standard with all its relevant partners1 and bring them into force expeditiously. 9. Macaos response to the determinations, factors and recommendations in this report, as well as the application of the legal framework to the practices of its competent authority, will be considered in detail in the Phase 2 Review, which is scheduled for the first half of 2013.
1.
Overall, Macaos main trading partners are, in order: the United States; mainland China; the European Union; and Hong Kong, China (imports), and, Hong Kong, China; mainland China; and the United States (exports).
INTRODUCTION 11
Introduction
Information and methodology used for the peer review of Macao, China
10. The assessment of the legal and regulatory framework of Macao, China (hereinafter: Macao) was based on the international standards for transparency and exchange of information as described in the Global Forums Terms of Reference to Monitor and Review Progress Towards Transparency and Exchange of Information For Tax Purposes, and was prepared using the Global Forums Methodology for Peer Reviews and Non-Member Reviews. The assessment was based on information available to the assessment team including the laws, regulations, notices and exchange of information mechanisms in force or effect as at June 2011, Macaos responses to the Phase 1 questionnaire and supplementary questions, information supplied by partner jurisdictions, and other relevant sources. 11. The Terms of Reference breaks down the standards of transparency and exchange of information into 10 essential elements and 31 enumerated aspects under three broad categories: (A) availability of information; (B) access to information; and (C) exchange of information. This review assesses Macaos legal and regulatory framework against these elements and each of the enumerated aspects. In respect of each essential element a determination is made that: (i) the element is in place; (ii) the element is in place, but certain aspects of the legal implementation of the element need improvement; or (iii) the element is not in place. These determinations are accompanied by recommendations for improvement where relevant. A summary of the findings against those elements is set out on pages 79-81 of this report. 12. The assessment was conducted by a team, which consisted of two expert assessors and one representative of the Global Forum Secretariat: Ms. Helen Ritchie, from the Strategic Risk Unit of HM Revenue & Customs (the United Kingdom); Ms. Mary Antoinette Musilek, Co-ordinator of International Fiscal Affairs for the Ministry of Economy and Finance (Spain); Ms. Francesca Vitale and Ms. Maria Francisca Villaman from the Global Forum Secretariat. The assessment team examined the legal and regulatory
12 INTRODUCTION
framework for transparency and exchange of information and relevant exchange of information mechanisms in Macao.
Overview of Macao
13. Macao, a Special Administrative Region under the sovereignty of the Peoples Republic of China, is situated in the southern coast of China, on the western side of the Pearl River delta. Macao consists of a peninsula bordering the Guangdong province and two islands (Coloane and Taipa) which are now connected by an area of land reclaimed from the sea (Cotai). The island area is linked to the mainland peninsula by three bridges. Macao has an area of approximately 29 square kilometres, almost entirely urbanised, and a population of about 556 000.2 Chinese and Portuguese are the two official languages, although English and other languages are also spoken. The Peoples Republic of China resumed the exercise of sovereignty over Macao previously administered by Portugal on 20 December 1999. 14. Macaos economy is small and vibrant, with an average growth of 14% in real terms annually between 2000 and 2008. In 2009, Macaos gross domestic product (GDP) was about USD 22 billion (EUR 15.15 billion) and the per capita GDP topped USD 39 000 (EUR 26 850), one of the highest in Asia.3 Macao provides an important link between the mainland Chinese and global markets. The 2004 Mainland and Macao Closer Economic Partnership Arrangement (CEPA) ensures a strict link between China and Macao as regards trade in goods, services and investment facilitation.4 15. A founding member of the World Trade Organisation (WTO), Macao pursues an open economic policy and applies a zero tariff on all imports.5 Together with Hong Kong, China, it is one of two international free ports in China allowing free movement of goods, intangible assets, and capital.6 The main exported goods are clothing and textile products, whereas imports
2. 3. 4. 5. Government portal, http://portal.gov.mo/web/guest/info_detail?infoid=86423, accessed 1 July 2011. Government portal, http://portal.gov.mo/web/guest/info_detail?infoid=86423, accessed 1 July 2011. Government Printing Bureau: http://bo.io.gov.mo/edicoes/en/dse/cepa/, accessed 1 July 2011 WTO, Trade Policy Review of Macao 2007. Accessed 1 July 2011 at www.wto.org/ english/tratop_e/tpr_e/tp281_e.htm. Macao SAR Statistics and Census Service, www.dsec.gov.mo/getAttachment/96629968-b01e-41e7-a9ec-f9d40bf3eadc/E_ CE_FR_2011_M06.aspx, accessed 12 August 2011l. Under the Basic Law, Macao is expressly allowed to maintain its status of free port and not impose any tariff unless otherwise prescribed by law (Art.110).
6.
INTRODUCTION 13
are more diversified. Whilst previously based on export and particularly re-export7 trade, Macaos economy is nowadays largely dominated by the tourism and the gaming industry. The gaming industry is currently the main source of government revenue, with about 65% of total government revenue coming from gaming-related taxes.8 After liberalisation of casino concessions in 2002, competition between gaming operators has stimulated massive private investment in casinos, hotel resorts and other tourist facilities. Macaos visitor arrivals in 2009 were more than 21 million, of which the majority came from mainland China (10.99 million), Hong Kong, China (6.73 million), Chinese Taipei (1.29 million) and Japan (0.38 million). Foreign investments in Macao mainly originate in Hong Kong, China, the United States and mainland China. Overall, the main trading partners are, in order: the United States; mainland China; the European Union; and Hong Kong, China (imports), and, Hong Kong, China; mainland China; and the United States (exports).9 16. The financial sector has developed steadily in the last decade. As at the end of 2010, the total assets of the banking sector amounted to MOP 641 billion (EUR 55.1 billion), with a year-on-year growth of 35.3%. As at the end of March 2011, the total international assets of the Macao banking sector grew 36% to MOP 505.6 billion (EUR 43.48 billion). The financial industry accounts for roughly 8% of GDP. The Macao Pataca is the national currency of Macao. It is pegged at 1.03 to the Hong Kong dollar.10 As of 1 July 2011, MOP 1 = EUR 0.086.11
General information on the legal and tax system

17. The fundamental principles concerning Macaos autonomous status, its relationship with the Central Peoples Government, the political structure and the institutional framework, as well as the fundamental rights and duties of Macaos residents are contained in the Macao Special Administrative Region Basic Law. The Basic Law was adopted by the eighth National Peoples Congress of the Peoples Republic of China on 31 March 1993 and
7. 8. 9. 10. 11. In 2005, the exports of goods and services were equivalent to 96% of GDP. WTO, Trade Policy Review of Macao 2007. Accessed 1 July 2011 at www.wto.org/english/tratop_e/tpr_e/tp281_e.htm. Government portal, http://portal.gov.mo/web/guest/info_detail?infoid=86423, accessed 1 July 2011. WTO, Trade Policy Review of Macao 2007. Accessed 1 July 2011 at www.wto. org/english/tratop_e/tpr_e/tp281_e.htm. Monetary Authority of Macao. www.amcm.gov.mo/currency/Currency.htm, accessed 1 July 2011. www.xe.com/, accessed 1 July 2011.
14 INTRODUCTION
entered into force on 20 December 1999, when the Peoples Republic of China resumed sovereignty over the region. 18. Under the Basic Law (BL), Macaos pre-1999 system is preserved for 50 years, i.e. until 2049 (Art.5). During this period, Macao enjoys a high degree of autonomy in all matters except defence and foreign affairs. Macao also maintains its free port status as a separate customs region, and determines its own taxation policy. 19. Pursuant to Macaos Basic Law (BL), only Macaos permanent residents can be part of Macaos executive authorities and legislature (Art.3). The Chief Executive is simultaneously Macaos highest-ranking officer and the head of the government. He is appointed for a five year term (renewable once) by the Central Peoples Government of the Peoples Republic of China following the outcomes of local consultations (Arts.45 and 47). He shares his executive powers with the Executive Council, which comprises five Secretaries appointed by the Chief Executive, namely the Secretary for Administration and Justice, the Secretary for Economy and Finance, the Secretary for Security, the Secretary for Social Affairs and Culture and the Secretary for Transport and Public Works. The Legislative Council, Macaos legislative body (Art.67), has 29 members of which 12 are elected directly, 10 indirectly, and 7 are nominated by the Chief Executive. 20. The Basic Law vests Macao with independent judicial power. Courts in Macao are the Primary Court (with general jurisdiction at first instance, including the Criminal Instruction Tribunal), the Administrative Court (with jurisdiction at first instance in administrative and tax disputes), the Court of Second Instance and the Court of Final Appeal. Macaos legal system is based on the continental tradition of civil law. 21. The Basic Law overrides all the other Macanese laws (Art.11(2) BL). In the hierarchy of laws, the Basic Law is followed by laws, administrative regulations, resolutions of the Legislative Council, executive orders, executive rulings (Despacho) from the Chief Executive and rulings from major government officials. Laws, regulations and other normative acts in force in Macao prior to 20 December 1999 maintain their legal value, subject to any amendments, except for any part that contravenes the Basic Law (Art.8). 22. After the entry into force of the Basic Law in 1999, Macanese laws are passed by the Legislative Council after consultation with the Executive Council and are announced by the Chief Executive. All laws enacted by the legislature are reported to the Standing Committee of the National Peoples Congress for the record (Art.17(2) BL). Such reporting does not affect the entry into force of Macaos laws. If the Standing Committee, after consulting the Committee for the Basic Law of Macao, considers that a law enacted by the legislature does not conform with the provisions of the Basic Law, the
INTRODUCTION 15
Standing Committee can return the law in question and it is immediately invalidated (Art.17(3)). Executive orders and executive rulings are issued by the Chief Executive (Art.50); enforceable rulings are issued by major officials (Art.64) and each government department is authorised to issue enforceable notices and circulars. 23. The Basic Law lays out when and how Macao can negotiate and conclude certain international agreements on its own, or participate in certain international organisations (Arts.8. 106, 135 and 136). Macao can on its own, using the name Macao, China conclude and implement agreements with foreign states and regions and relevant international organisations in the relevant fields (Art.136). Besides, the application to Macao of international agreements to which the Peoples Republic of China is a member or becomes a party is decided by the Central Peoples Government, in accordance with the circumstances and needs of the Region, and after seeking the views of the government of the Region International agreements to which the Peoples Republic of China is not a party but which are implemented in Macao may continue to be implemented in the Macao Special Administrative Region (Art.138). 24. Macaos Government is solely responsible for the implementation of Macaos tax agreements. The Chief Executive is responsible for signing international agreements including DTCs and TIEAs. Draft DTCs and TIEAs agreed by the Macanese government and its counterparty are brought forward to the PRC government for comment. Pursuant to Law No.2/2003, when, due to the application of foreign tax laws, the taxpayer is subject to double taxation, the Chief Executive is competent to adopt necessary regulatory tax measures and to conclude regional or international double taxation agreements (Art.1). In 2011, the Law Reform and International Legal Affairs Bureau (DSRJDI) was established to handle affairs in relation to international treaties. 25. It is not necessary to incorporate international law into domestic law for its effective application. Once international agreements are published in the Official Gazette of Macao, pursuant to the 1999 Publication of Laws Act (Arts.3(6) and 5(1)), they immediately and automatically become part of Macaos legal order. In the event of a conflict between international agreements and domestic law, international agreements applicable to Macao take precedence (Art.1(3) Civil Code). A complete list of all the relevant legislation and regulations is set out in Annex 3.
Tax system
26. Pursuant to the Basic Law, Macao practises an independent taxation system (Art.106) and its government is empowered to enact laws concerning all matters of taxation. Macao levies: industrial tax (business registration
16 INTRODUCTION
tax), complementary tax (profits tax), professional tax (salary tax), urban property tax, gaming tax12, franchise tax13, consumption tax (excise tax), motor vehicle tax, tourism tax and stamp duty. The tax year and the calendar year coincide. The major sources of government revenue are the gaming tax, the complementary tax and the professional tax. 27. Industrial tax is a kind of annual registration fee for business activities. It ranges from MOP 150 to MOP 80 000 (EUR 13 to 6 930), depending on the nature of the activity. As a tax incentive, its payment has been suspended since 2002. However, all companies operating in Macao including foreign incorporated companies operating therein on a stable basis still need to fulfil the obligations prescribed in the registration procedure (Arts.8 and 9 Industrial Tax Regulation). 28. The complementary tax is governed by Law No.21/78M, as amended (CTL). It is levied on total net income derived in Macao at a progressive rate from 3% to 12% (Art.2). Non-residents are subject to tax in Macao upon receipt of any income derived from business services or activities in Macao. Resident companies are subject to taxation on their worldwide profits, irrespective of whether such profits arise from business activities in Macao. A company is regarded as resident in the place where it is incorporated. As such, a company is resident in Macao only if it is incorporated in Macao. Foreign companies i.e. companies that are incorporated in regions outside Macao and are not considered as residents are subject to tax in Macao and have to fulfil tax obligations, including filing of annual tax returns. Companies may choose to deduct dividends from taxable corporate profits. Such dividends represent taxable income for the shareholder. Dividends that have not been deducted from the distributing companys taxable base are not subject to taxation in the hands of shareholders (including non-residents). Capital gains arising from the disposal of business assets are subject to complementary tax in the same way as ordinary income. Taxable persons for complementary tax purposes are divided into Groups A and B. Group A taxpayers are separate legal entities whose liabilities are limited by shares, or other companies with a share capital of at least MOP 1 million (EUR 86 641) or average annual profits for the past three years of MOP 500 000 (EUR 43 955). Group B taxpayers are those who do not meet Group A criteria. The distinction is relevant for accounting keeping purposes, as Group B taxpayers are only required to keep sales and purchases daybooks (see section A.2 below). Besides the professional tax, there are no withholding taxes in Macao.
12. 13. Gaming tax is tax levied on revenues of the gaming industry. Franchise tax is a special tax paid by companies or institutions in return for a contract with the government that gives special permission to the companies or institutions to operate a particular type of business, commonly public services.
INTRODUCTION 17
29. Pursuant to the CTL, the following types of income are exempt from Complementary Tax (Art.9): income generated from the capital of co-operative bodies; income of recognised religious organisations; income of individuals or entities subject to a special tax regime and which have been specifically exempted from complementary tax; rental income from properties owned by commercial or industrial enterprises which are subject to property tax; primary and subsidiary income derived in Macao by international air transportation businesses of foreign enterprises with residence or management offices in Macao and where official mutual exemption recognition agreements have been concluded with the respective countries; and, individual income derived solely from employment subject to professional tax. 30. Various tax incentives are available under the CTL to attract investments to Macao. These include a 50% reduction in complementary tax for certain new establishments, expansions, restructuring and transformation of the operations of industrial businesses for a period of one to three years. Profits derived by offshore companies from approved offshore service-related activities (see paragraphs 42-45) are exempt from all forms of taxes, including complementary tax, industrial tax and stamp duties. Upon application, the executives and staff at supervisory level are exempt from professional tax for the first three years of the companies operation. 31. Casino sub/concessionaires are taxed at between 35 and 40% of gaming revenues. Franchise Tax is imposed on regulated businesses, generally including gaming, telecommunications and public transportation. Tax is levied on a contractual basis with the amount imposed determined by the government according to the nature of operations of the business. A tourism tax of 5% is a tax levied on consumption by consumers at classified hotels, restaurants and entertainment entities. Salary tax is levied on all employees and self-employed professionals at progressive tax rates from 7% to 12%. Finally, stamp duty is charged on certain activities (e.g. house leasing) or documents (e.g. licenses). Stamp duty is levied at a fixed rate, depending on the type of activity or document. The transfer of property is also taxed under the stamp duty scheme, at a progressive rate from 1% to 3%. 32. Macaos tax administration agency is the Financial Services Bureau. The Financial Services Bureau is the competent authority with the right to receive, deliver and execute the EOI requests. It is also responsible for negotiating EOI agreements, while the signing authority rests with the Chief Executive. Pursuant to the Information Exchange Act (Law No.20/2009), the Chief Executive of Macao is ultimately responsible for international exchange of tax information.
18 INTRODUCTION
Overview of the financial sector and relevant professions Financial sector

33. Macaos financial sector has been developing steadily over the past 10 years. The Monetary Authority of Macao (AMCM) is the main regulatory and supervisory authority, exercising the functions of a quasi-central bank with the power to regulate and supervise all financial institutions in Macao, including banks, securities companies, money changers, cash remittance houses, insurance companies, insurance intermediaries and other financial institutions. 34. Banks are authorised institutions under the Financial System Act (FSA, approved by Decree-Law No.32/93/M) or under Offshore Sector Law (OSL, approved by Decree-Law No.58/99/M). As of April 2011, there are 28 banks in Macao, of which 12 are locally incorporated (including the postal savings office) and 16 are branches of overseas banks. With the exception of two offshore banks, all the banks in Macao are retail banks with full banking licenses. In addition, there is a finance company, with restrictive banking activities, and a non-bank credit institution, which issues and manages electronic money stored value card services. As of January 2011, there are 11 money changers in Macao involved in purchases and sales of notes, coins and travellers cheques and two cash remittance companies. Authorised exchange counters can also be found in the casinos. 35. The authority for supervision, co-ordination and inspection of insurance activity rests with the Chief Executive and is carried out by AMCM through its Insurance Supervision Department. Insurance companies can either carry out life or non-life insurance business. The insurance industry is made up of 23 insurance companies; 11 life insurance companies and 12 nonlife. Of these, 8 are local companies and 16 are branches of overseas companies. At the end of April 2011, there were 2 964 insurance intermediaries, comprising 2 028 individual agents, 53 local corporate agents, 13 overseas corporate agents, 852 salesmen, 12 overseas brokers and 6 local brokers. 36. Purchase or sale on behalf of third parties of securities and other instruments in the money, financial or foreign exchange markets are authorised operations which can only be provided by banks or securities companies. As of January 2011, there are two securities companies authorised to carry out business in Macao. Both are branches of securities companies licensed in Hong Kong, China. Macao has no stock exchange but companies can seek listing on the Hong Kong stock exchange.
Relevant professions
37. Regulated professional service providers include lawyers, notaries, other independent legal professionals and accountants.
INTRODUCTION 19
38. In Macao, there are 202 registered lawyers in practice and 129 lawyers in training. Lawyers and other independent legal professionals are subject to supervision by the Macao Lawyers Association. Notaries and registrars are supervised by the Legal Affairs Bureau. 39. As of March 2011, there were 154 registered accountants, 106 registered auditors and 12 registered auditing firms in Macao. The Committee for the Registry of Auditors and Accountants, a regulatory body under the supervision of the Financial Services Bureau, has powers to assess professional qualifications, accept registrations and recommend disciplinary actions against accountants, auditors and fiscal consultants. 40. There are 59 notaries in Macao, 55 of whom are in private practice, and four registrar officers. These professionals, supervised by the Legal Affairs Bureau, give full faith and credit to non-judicial documents (notaries-public) and register all eligible transactions (registrar offices). 41. Company service providers provide services such as the incorporation of companies and company secretarial services. These providers are under the supervision of the Macao Economic Services. Gaming activities are under the supervision of Gaming Inspection and Coordination Bureau.
Offshore sector
42. In an effort to raise Macaos profile as an international service centre, the Macao Offshore Legislation was introduced and became effective on 1 November 1999, offering both financial and non-financial offshore services and providing a package of incentives and exemptions on taxes. DecreeLaw 58/99/M of 18 October 1999 (Offshore Sector Law, OSL) provides the legal framework for all Macaos offshore activities. Pursuant to the OSL, an offshore activity is any economic activity dedicated to foreign markets, to be pursued exclusively with non-residents and by means of transactions in currencies other than the pataca (Art.2(1)(a)). 43. Offshore banking licenses are granted subject to authorisation of the Chief Executive of Macao, granted on advice of the AMCM (Art.23(1) OSL). There is no express definition of offshore bank, but it can be derived from the definitions of the terms credit institution and offshore financial institution contained in the FSA and the OSL, respectively. Pursuant to the OSL, Offshore Financial Institutions (OFIs) also include insurance, re-insurance, captive insurance (Art.2(1)f). 44. In addition to OFIs, Macaos offshore sector comprises Offshore Commercial Services Institutions (OCSI), Offshore Auxiliary Services Institutions (OASI) and Offshore Trust Management (OTM). OCSI and OASI can carry out only the commercial and auxiliary activities indicated in a table
20 INTRODUCTION
approved by decision of the Chief Executive, and published in the Official Gazette (Arts.2(1)(g), 2(1)(h), 4(1)(c) and 4(1)(d) OSL): hardware consultancy; software consultancy; data processing; database-related activities; back office activities; research and development activities; testing and technical analysis activities; and management and administration of ships and aircraft. Offshore trust management activities can be carried out only by a trustee who is a collective person licensed to operate in Macaos offshore sector (Art.2(1)(m)). 45. All these entities need to obtain prior authorisation from Macaos authorities (Art.3 OSL). Offshore financial institutions and offshore trust management institutions are regulated and supervised by the AMCM, while the Macao Trade and Investment Promotion Institute (IPIM) is responsible for licensing and supervision of non-financial offshore institutions (commercial and auxiliary services).
AML/CFT framework
46. Administrative Regulation 7/2006 (AML/CFT Regulation) regulates the criminal offences of money laundering and financing of terrorism and establishes the supervisory system for compliance with Macaos AML/CFT framework. The AML/CFT Regulation establishes the obligations inter alia for the identification of clients, identification of their transactions and record keeping. Pursuant to the AML/CFT Regulation, supervising authorities can issue enforceable guidance and instructions specifying the AML/CFT obligations of the supervised entities. The supervising authorities also perform inspections and institute administrative proceedings for administrative sanctions when there is failure to comply with the preventive measures. Macaos authorities have reported that all AML/CFT laws, administrative regulations and guidelines are being reviewed in accordance with the recommendations in the APG/OGBS Mutual Evaluation Report on Macao, adopted on 27 July 2007.14
Recent developments
47. Macao endorsed the OECD standard for the exchange of tax information in 2005. To date, Macao has signed 8 TIEAs, 5 DTCs and 1 DTC Protocol. The 8 TIEAs and the DTC Protocol have been all concluded in 2011. Three of these agreements are in force. The 3 agreements that are in force are all in line with standard. Nine of the 10 agreements that are not yet in force are also in line with the standard.
14. www.apgml.org/documents/docs/17/Macao%20ME2%20-%20FINAL.pdf, accessed 1 July 2011.
COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 21
Compliance with the Standards
A. Availability of information
Overview
48. Effective exchange of information requires the availability of reliable information. In particular, it requires information on the identity of owners and other stakeholders as well as accounting information on the transactions carried out by entities and other organisational structures. Such information may be kept for tax, regulatory, commercial or other reasons. If information is not kept or the information is not maintained for a reasonable period of time, a jurisdictions competent authority may not be able to obtain and provide it when requested. This section of the report assesses the adequacy of Macaos legal and regulatory framework on availability of information. 49. Macaos legal framework for corporate entities requires the registration of all forms of legal persons established pursuant to the Commercial Code, Commercial Registration Code or the Civil Code, including companies, partnerships and foundations. 50. Companies formed under Macaos Commercial Code are required to file identity and ownership information with the commercial register upon incorporation. Identity and ownership information is also kept by notaries, who are involved in the formation of such companies. Private companies are required to file with the Commerce and Movable Property Registry all changes in their shareholdings. Changes in the shareholdings of public companies need to be promptly recorded in the companys register of shareholders. Offshore institutions have to provide and maintain the same identity and ownership information as domestic companies.
22 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

51. Foreign incorporated companies including the branches licensed as offshore institutions carrying on permanent activity in Macao are subject to the same registration requirements applying to domestic companies. The term permanent activity is not further defined in the law, but is interpreted in connection with the definition of commercial enterprise, which requires an element of stability. For tax purposes, foreign companies subject to registration and filing obligations are those carrying on an industrial or commercial activity in Macao. As for the term permanent activity, there is no legal definition of the term industrial or commercial activity activity, nor are these concepts further specified in Macaos practice. It is not clear that these thresholds include all foreign companies with a sufficient nexus to Macao. As a consequence, it cannot be determined whether ownership information is available to the authorities for all such companies. 52. Macao public companies can issue bearer shares. There are 72 active public companies which may currently issue bearer shares and some limited mechanisms are in place where the identities of persons holding bearer shares would have to be established. 53. Partnerships formed under Macaos Commercial Code are subject to the same registration requirements applicable to companies. Identity and ownership information on domestic partnerships is filed with the Commerce and Movable Property Registry or with a notary and is therefore normally available. Identity and ownership information on foreign companies carrying on an industrial or commercial activity in Macao is also available. 54. Trusts cannot be formed under the laws of Macao. Offshore trusts are nonetheless recognised in Macao, provided that they are managed by a company (trustee) licensed by Macaos Monetary Authority. The offshore and AML/CFT laws ensure that information is available concerning the settlor, beneficiaries, and trustees of offshore trusts and foreign trusts having as trustee a service provider based in Macao. 55. Foundations and associations are non-profit entities which may be formed pursuant to Macaos law. Foundations are registered and under an obligation to disclose the identity of the founders and foundation council members. Pursuant to Macaos laws, foundations do not normally have beneficiaries. 56. Enforcement provisions are in place to ensure all relevant entities provide information to government authorities as required under the various laws. There are also enforcement provisions ensuring companies maintain information prescribed under the Commercial Code, Commercial Registration Code or the Civil Code. 57. As concerns accounting records, domestic entities are generally required to keep comprehensive accounting information under either company
or tax law. However, such accounting obligations do not seem to apply to foreign companies other than those which are carrying on commercial or industrial activity in Macao. Foundations that are not public interest entities are not expressly required to keep accounting records. In addition, for all relevant entities, the obligation to keep full underlying documentation is not clearly stated in the legislation. 58. In respect of banks and other financial institutions, the anti-money laundering/counter-financing of terrorism regime ensures that information related to customer due diligence and transactions is available for at least five years. This is supported by some record keeping obligations in the commercial and financial sector laws. Anonymous accounts cannot be opened in Macao.
A.1. Ownership and identity information

Jurisdictions should ensure that ownership and identity information for all relevant entities and arrangements is available to their competent authorities.
Companies (ToR 15 A.1.1) Types of companies

59. The Commercial Code (CC) is the central piece of legislation governing the establishment and management of corporations in Macao. Any person, regardless of his nationality, residence or location of head office, may form a company in Macao. Pursuant to the Commercial Code, there are four basic types of companies in Macao (Art.174): general partnerships [sociedades em nome colectivo]; limited partnerships [sociedades em comandita]; private companies [sociedades por quotas]; and public companies [sociedades annimas]. 60. All these companies are considered commercial enterprises for the purposes of the Commercial Code. A commercial enterprise is any organisation of productive factors for the exercise of an economic activity aimed at production for systematic and lucrative exchange (Art.2). The concept includes industrial activity for the production of goods or services, activity of intermediation in the circulation of goods, transport activity, banking
15. Terms of Reference to Monitor and Review Progress Towards Transparency and Exchange of Information.

and insurance activity, activities auxiliary to the above mentioned ones. Commercial activities may also be exercised by sole proprietors or individual entrepreneurs. This section of the report deals with private and public companies, whilst the remaining forms of commercial enterprises are dealt with in Section A.1.3 on Partnerships. 61. The capital of a private company is broken down into shares and the shareholders are jointly and severally liable for the payment of all shares (Art.356 CC). Shares cannot be embodied in negotiable instruments. A private company cannot have more than 30 shareholders and cannot have capital lower than MOP 25 000 (EUR 2 167). Any individual can create a private company the capital of which, consisting of a single share, he is initially the single holder (Art.390). 62. Public companies can only be created by a minimum of three shareholders and their capital cannot be lower than MOP 1 000 000 (EUR 86 724). The capital is divided into shares, all of the same nominal value, which cannot be lower than MOP 100 (EUR 8.6). The liability of a shareholder is limited to the value of the shares he subscribes. Public companies cannot be created without the full subscription of the company capital and the payment of at least 25% of it. The payment of capital due in kind and, if it exists, the payment of a premium of issue, cannot be delayed. Public companies may issue ordinary or preference shares. They can also issue bonds provided they do not exceed the amount of the paid-up and existing capital. 63. A public company may be created through public subscription (Art.398ff. CC). The creation of a company through public subscription is initiated by one or more promoters, individuals or collective persons, who are jointly and severally liable until the registration of the company. The promoters themselves must subscribe and pay, in money, shares which have a nominal value of at least MOP 1 000 000 (EUR 86 724) or 20% of the capital, whichever is higher, and the shares cannot be transferred or charged before the approval of the accounts of the third accounting period. In companies created through public subscription there can only be ordinary shares of a single category. A company can only be created if at least 75% of the shares offered to the public are subscribed. As there is no stock exchange in Macao, Macaos laws do not specify which companies are eligible for listing. Macanese public companies, however, may be listed on Hong Kongs stock market. 64. Firms including companies registered outside Macao are admitted to carry on business in Macao subject to evidence of such registration in the place of origin. In order to be allowed to carry on business in Macao, companies also need to ensure they do not use a name used by companies already registered in Macao (Art.19 CC).
65. Macao laws also provide for civil societies. Pursuant to the Civil Code, civil societies are legal persons formed by members who contribute assets and services for the common exercise of a certain economic activity in order to share the profits resulting from that activity or to maintain savings (Art.184(1)). Civil societies may or may not have the exercise of a commercial business as their objective (Art.184(2)). Whilst societies that do not have a commercial objective can be assimilated to charities, societies with a commercial objective are in everything similar to the commercial companies. Commercial societies are subject to the rules ordinarily applying to companies under the Commercial Code (Art.185(1)). 66. In 2010, 2 991 new companies have been incorporated in Macao, an increase of 18.3% compared to 2009.16 As at the end of 2010, there were 303 public companies and 32 470 private companies.
Offshore institutions
67. Offshore institutions must take the form of a company incorporated according to Macao law or of a branch of an institution incorporated abroad. Offshore institutions, other than branches, can be incorporated and subsist with any number of shareholders (Art.5 OSL). Offshore institutions must operate in Macao through a single office (Art.9 OSL). 68. Offshore financial institutions (OFIs) are required to take the form of public limited companies, and at least 51% of their respective shares must be nominal (Art.16 OSL). The board of directors, administrative board and management of an OFI must have a minimum of three persons and at least one of them needs to be resident in Macao (Art.21 OSL). 69. OFIs can set up offshore financial subsidiaries or branches. Offshore subsidiaries are required to maintain in Macao an amount equal to 50% of the minimum share capital required by the OSL. Such allocation of funds is not compulsory for offshore branches (Art.19). In the case of a subsidiary the majority of the shares must be held by a financial institution having share capital not lower than that legally required for the type of similar institution authorised to do business with residents (Art.17(1)(b) OSL). For subsidiaries of financial institutions not incorporated in Macao, the Monetary Authority (AMCM) must receive notification from the supervisory authority in the State or territory of origin identifying the persons that are responsible for the subsidiary and the type of transactions it intends to carry out. Similar requirements apply to the branches of an OFI (Art.18). 70. Offshore commercial services institutions (OCSI) and offshore auxiliary services institutions (OASI) taking the form of a company must be
16. IPIM, www.ipim.gov.mo/business_macao_detail.php?tid=3483.

incorporated and maintained with the minimum share capital required under the Commercial Code (Art.63 OSL). They may adopt in their documents and correspondence the expression International Business Company or IBC (Art.64). An OCSI or OASI is specifically forbidden to engage in any activities restricted by law to credit institutions, investment companies, financial intermediaries and insurance companies, and it cannot provide services to third parties other than the institution of which it is a subsidiary or branch (Art.65). As at the end of June 2011, 483 OCSI and OASI had been approved by Macao Trade and Investment Promotion Institute (IPIM). At the same date, AMCM had issued 2 financial offshore bank licenses.
Information provided to government authorities

71. Companies are required to register in the commercial register kept by the Commerce and Movable Property Registry of the Legal Affairs Bureau within 15 days from the date of the act of incorporation (Art.187 CC). The commercial register is intended to make public the legal situation of entrepreneurs and commercial enterprises, its purpose being the security of legal commerce (Art.61 CC). Following the registration of its act of incorporation, the company acquires legal personality (Art.176). Upon registration, all shareholders need to present valid identification documents or certificates that can confirm their identities (Art.179). As confirmed by Macaos authorities, this also applies to shareholders that are foreign companies. It is the obligation of the company to have the signatures and identity documents of its shareholders authenticated by notary. 72. Changes in companies shareholding also need to be filed with the Commerce and Movable Property Registry. In particular, the Commercial Registration Code (Decree Law No. 56/99/M) requires all transfers of shares or parts in private companies be filed with the Registrar (Art.5(1)c). Macaos authorities have reported that any new shareholders are required to present their valid identification copies or certificates that can confirm the identities. Registration has to be completed within 15 days from the day that the event occurs (Art.15 Commercial Registration Code). Registered documents are filed in an appropriate folder and kept within the Commerce and Movable Property Registry (Art.56). For public companies, changes of shareholdings are also recorded in a specific register (Art.417 CC: see para.89 below). 73. A shareholder who reaches the position of dominant shareholder must communicate this fact to the company by means of a letter to the companys board of administration, which in turn must communicate it to the supervisory board or single supervisor. A dominant shareholder may be an individual or it may be a collective person who, by himself or together with other companies of which he is also the dominant shareholder, or with other shareholders to whom he is connected by agreements outside the company,
obtains a majority of the company capital, or controls more than half of the votes, or has the power to elect the majority of the members of the board of administration (Art.212 CC). The identity of dominant shareholders must be published as part of the companys annual report. Similar provisions apply where the shareholder ceases to be a dominant shareholder. 74. In addition to these requirements, gaming companies are required to issue public notice to two local newspapers of the list of shareholders who possess 5% of their shares or above (Art.31 Law No.16/2001). Only public companies incorporated in Macao may be licensed to exercise gaming activities (Art.7 Law No.16/2001). 75. All companies which exercise permanent activity in Macao are subject to the legal provisions on business registration (Art.178(1) CC), including the obligation to file changes in the companies shareholdings. The law does not specify the meaning of the term permanent activity. Macaos authorities, however, have indicated that this term must be interpreted in connection with the definition of commercial enterprise, and therefore covers all companies carrying on business in Macao on an ongoing basis and in a systematic way (Art.2 CC). Companies which exercise a permanent activity in Macao and have their registered office or main place of administration abroad must appoint a representative with permanent residence in Macao, set aside capital for their activities in Macao and register the respective resolutions (Art.178(2)). It is not clear whether the permanent activity threshold includes all companies with a sufficient nexus to Macao. 76. Tax authorities need to maintain up-to-date records on Macaos taxpayers, including companies (Art.12(1)a of the Organic Law of the Financial Services Bureau and Art.19 of Industrial Tax Regulation). Pursuant to the Industrial Tax Regulation (ITR), any company that wishes to conduct business activities (including financial activities) in Macao has to register for industrial tax and submit to the Financial Services Bureau an M/1 form with a signature authenticated by a notary. The M/1 form must be submitted to the Financial Services Bureau 30 days before starting business operations (Art.8). Another M/1 form must be submitted to the Financial Services Bureau within 15 days after the company performs one of the following operations: increase of business capital; change of company name, logo, address and place of operations; start (or conclusion) of new (or existing) business activities; or, reconstruction or enlargement of the business facilities. Macaos authorities have indicated that, when submitting the M/1 form, companies will commonly submit the copy of the commercial registration certificate by the Commerce and Movable Property Registry, or the acts of incorporation and company by-laws as published in the Official Gazette of the Government of Macao; and the copy of identity documents of all the shareholders and their legal representatives or the power of attorney of the authorised persons for

the purpose of applying the registration. However, this appears to be a mere practice which is not supported by Macaos laws. 77. The obligations to register with the tax authorities and submit the M/1 form apply both to domestic companies and to those foreign companies which are carrying on industrial or commercial activity in Macao. The ITR does not further specify when a foreign company is considered to carry on industrial or commercial activity in Macao. Special rules apply to foreign companies providing certain types of consultancy services to a local company (civil engineering or related services concerning studies and researches which would require scientific and technical assistance). These companies are always required to register for industrial tax purposes; the local client is responsible for ensuring the registration of the foreign company (Art.9). For foreign companies that do not provide consultancy services to a local company, the exact scope of the industrial or commercial activity threshold is unclear. 78. Companies operating in Macao are also required to submit annual tax returns under the Complementary Tax Law. Information filed with the tax authorities includes ownership information. In particular, companies are required to submit the following documents (Art.10(3) CTL): private companies (sociedades por quotas): name and address of the partners and participation in the profits; and public companies (sociedades annimas): when dividends have been approved and distributed. the name and address of the shareholders who received them. 79. Such disclosure obligations also cover foreign companies carrying on an industrial or a commercial activity in Macao. Like the ITR, the CTL does not define the term commercial and industrial activity. Macaos practice does not specify the scope of these provisions either. As a consequence, it cannot be determined whether ownership information is available to the authorities for all foreign companies with a sufficient nexus to Macao.
Offshore Companies
80. Applications to incorporate or establish an OFI must be submitted to the AMCM accompanied by the information required by the general or special law applicable to the relevant kind of institution (Art.22 OSL). For entities carrying on offshore commercial and auxiliary services, authorisation by IPIM is granted as long as there is no evidence which could indicate the intention of using the structure to cover up illegal business or assets or products illegally obtained or held (Art.62).
81. When submitting an application for financial or non-financial offshore service licenses, entities must provide ownership information to the AMCM or the IPIM. In particular, the OSL requires entities applying for a financial offshore licence to file their complete identification details, together with a declaration by the auditor or auditing firm that certifies or intends to certify the accounts of the company or branch and, when applicable, a draft of the company agreement (Art.38(1)). AMCM may request from the applicants or from other public bodies any additional information that it deems necessary, namely in terms of the suitability and technical capacity of the applicants (Art.38(2)). These provisions also apply to the requests for a commercial offshore licence filed with the IPIM (Art.69). Entities offering offshore commercial and auxiliary services have to incorporate and start business operation within six months from the receipt of the notice approving their licence (Art.67). 82. Whilst specifically exempted from filing income tax returns (provided that their income is generated only through the engagement in offshore activity), offshore entities are required to comply with reporting obligations established for industrial tax purposes and file the M/1 form (Art.12 OSL). As detailed above, however, information filed by these entities under the ITR does not include ownership information. The entities empowered to handle licensing procedure under the OSL must notify the Financial Services Bureau of licenses granted to operate in Macaos offshore sector (Art.13L).
Information held by companies

83. Under the Commercial Code, each company which includes public and private companies is required to maintain its own act of incorporation (Art.179). Besides the records and accounting books that the law declares compulsory, companies are required to maintain at their registered office (Art.252): a book of minutes of the general meeting; a book of minutes of the administration; a book of minutes of the supervisory board, if it exists; a book of registration of liens, charges and guarantees; a book of registration of shares; and a book of registration of bond issues. 84. The books may be kept in any other location within Macao, provided this location has been communicated for this purpose to the Commerce and Movable Property Registry (Art.252(3)). The books are available for

consultation by the shareholders or by any interested party. Any such shareholder or interested party may obtain copies of any minutes or entries in books in the shortest time possible for a fee of no more than MOP 1 (EUR 0.08) for each 100 words (Art.252(8)). 85. Entries in the books that are no longer up-to-date are cancelled by the company secretary, if existing, or by the directors, in a clearly visible manner, which however shall not prevent the reading of the entry (Art.252(6) CC). 86. For public companies, the book for registration of shares consists of separate sections for each type and category of shares. Each section must contain details on the name and address of the first holder of each share, as well as on transfers of nominative shares and the respective date. Shares owned by the company are also mentioned in a separate section of the book. When these records are modified, entries need to be initialled by the company secretary or by an administrator. (Art.417 CC) 87. Branches of foreign companies with a permanent activity in Macao are subject to the same registration requirements applying to domestic companies (Art.178 CC). Under the Commercial Code, however, they are not expressly required to keep books and registers. Equally, the OSL does not require offshore institutions to keep specific registers.
Information held by directors and officers

88. There are no specific obligations on directors and officers of Macanese companies to maintain ownership and identity information in Macao. 89. Gaming companies under concession contracts with the Government of Macao SAR are required to have a managing director who is a Macao permanent resident and maintains 10% shareholdings within the company (Art.19(b) Law 16/2001).
Information held by service providers Information held by notaries

90. Companies are created by means of a written document. The act of incorporation must be signed by a number of shareholders equal at least to the minimum legally required for each type of company.17 While notaries are not required to draft every companys act of incorporation, they always need to authenticate the signatures of the shareholders. For this reason, the Commercial Code provides that a copy of the act of incorporation, together
17. The minimum number of shareholders is 1 for private companies and 3 for public companies. There is no minimum number of shareholders for offshore institutions.
with the articles of association, must be filed with a notary (Art.179(2)). The act of incorporation must mention, inter alia, the identity of the shareholders and of their representatives, if any, and the capital subscribed by each shareholder (Art.179(3)). Private companies must specify in their articles of association the share of capital held by each shareholder. Notaries also need to record the owners of nominal shares in the company register (Art.366). 91. Under the Notaries/Registrars AML/CFT Guidelines,18 notaries are required to identify contracting parties wishing to establish a legal person.
Information held by other service providers

92. Like notaries, lawyers involved in the formation of legal persons are subject to customer due diligence (CDD) requirements.19 More generally, service providers are required to identify their customers under Law 2/2006 and Law 3/2006 and the AML/CFT Regulation and its implementing Notices and Instructions.20 Financial institutions under the supervision of the AMCM, OCSI, OASI, registrars, lawyers, solicitors, accountants and auditors are
18. 19. 20. Guidelines by the Legal Affairs Bureau (DSAJ) On Money Laundering And The Financing Of Terrorism, effective 12 November 2006. Instruction 1/2006 adopted by the Macao Lawyers Association, effective 12 November 2006. Instruction 2/2006 Offshore Preventive Measures issued by Macao Trade and Investment Promotion Institute on anti-money laundering and combating the financing of terrorism in respect of offshore business activities for commercial offshore services institutions and auxiliary offshore (www.gif.gov.mo/web1/doc/ IPIM/AML-CFT_e.pdf ); Guidelines issued by Legal Affairs Bureau on money laundering and financing of terrorism in respect of notaries and registrars (www. gif.gov.mo/web1/en_law.html); Instruction 1/2006 Lawyers instructions issued by Macao Lawyers association on the procedures to be adopted in order to comply with duties regarding the prevention of money laundering and financing of terrorism in respect of lawyers and trainee lawyers (www.gif.gov.mo/web1/doc/ Lawyer/2006Advogados_e.pdf ); Solicitors Guideline issued by the independent commission for the exercise of the disciplinary power over solicitors on antimoney laundering.(www.gif.gov.mo/web1/doc/CIEPDSS/EN.pdf ); Accountants instructions issued by financial services Bureau and enforced through Registry of Auditors and Accountants, on prevention and suppression of money laundering and financing of terrorism for auditors, accounts and tax consultants. (www.gif.gov.mo/ web1/doc/DSF/e_aviso_STR.pdf ); Circular N33/B/2010 Guideline on Provision and Distribution of Financial Products DSB/AMCM (www.amcm.gov.mo/ rules_and_guidelines/rules.htm); Notice 11/2006 AMCM Anti-Money Laundering and Combating the Financing of Terrorism Guideline on Cash Transactions (www. amcm.gov.mo/rules_and_guidelines/rules.htm), accessed 1 July 2011.

subject to a legal obligation to carry out customer due diligence (CDD) measures for AML/CFT purposes. CDD obligations include the identification of customers and contracting parties; and the identification of the nature, purpose, source of funding and amount of the transactions performed. These service providers must refuse transactions when no adequate CDD information is available. They have to keep records and report suspicious transactions (Art.7 Law 2/2006 and Arts.3 to 5 AML/CFT Regulation). In addition, financial institutions are required to identify the beneficial owners of their customers (Guideline for Financial Institutions, para.6.1). 93. With reference to offshore commercial business, service providers are required to identify their customers whenever there is a suspicion 21 the operation performed may relate to money laundering or financing of terrorism or when the value of the operation exceeds certain thresholds (s.3.1.1 IPIM Circular 01/DSO/IPIM/2006). For business activities involving cash, the thresholds are MOP 20 000 (EUR 1 731) for individual operations and MOP 250 000 (EUR 21 642) for aggregate operations. For non-cash business activities, the threshold is MOP 500 000 (EUR 43 955).
Nominees
94. The Terms of Reference requires that jurisdictions ensure that information is available to their competent authorities that identify the owners of companies and any bodies corporate. Owners include legal owners, and, in any case where a legal owner acts on behalf of another person as a nominee or under a similar arrangement, that other person, as well as persons in an ownership chain, to the extent that it is held by the jurisdictions authorities or is within the possession or control of persons within the jurisdictions territorial jurisdiction. 95. Nominee shareholdings are not expressly regulated under Macaos commercial laws. Under the Commercial Code, notaries are required to identify every owner/shareholder of the company when authenticating their signatures on the companys act of incorporation (Art.179(2)). They also need to record the owners of nominal shares in the company register (Art.366). 96. The Guideline for Financial Institutions requires banks and other financial intermediaries22 to establish systematic procedures for verifying
21. 22. Pursuant to the IPIM Circular, operations might appear suspicious because of their nature, complexity, the amounts involved, volume or non-habitual occurrence, relative to the activity of the client. For the purpose of the Guideline, the term financial institution refers to the following: credit institutions with headquarters in Macao; Macao branches of credit institutions with headquarters abroad; overseas establishments of credit
the identity of new customers and beneficial owners. The term beneficial owner is defined as the natural person(s) who ultimately owns or controls a customer and/or the person on whose behalf a transaction is being conducted. It also incorporates those persons who exercise ultimate effective control over a legal person or arrangement (para.6.1). The Guideline requires enhanced verification procedures for accounts or business relationships with higher risks including, amongst others, trust, nominee and fiduciary accounts (para.8). In particular, financial institutions should establish whether customers are acting on behalf of other persons as trustees or nominees. If they are so acting, institutions should obtain satisfactory evidence of the trustees or nominees and of the persons on whose behalf they are acting, as well as details of the nature of the trust or other arrangements in place (para.8.1.1). 97. Although the guidelines for notaries, lawyers, solicitors, accountants and auditors do not expressly require these professionals to identify the beneficial owners of their customers, these professionals have an obligation to identify their customers, even when they are acting as nominees, and are subject to related record keeping requirements. 98. This means that under the various AML/CFT laws, guidelines and instructions noted previously with respect to financial institutions, notaries, registrars, lawyers, solicitors, accountants and auditors, three possibilities arise: if the nominee is a financial institution, it must know the beneficial owner; if it is a professional (notary, lawyer, solicitor, accountant or auditor), it must know the legal owner; if none of the above apply, there is no explicit requirement. It is not clear whether non professional nominees, who would comprise primarily persons performing services gratuitously or in the course of a purely private non-business relationship, are significant in terms of numbers and the assets they hold. In addition, it can be expected that, in performing their duties as nominees, both professionals (who are only required to identify the legal owner) and non-professionals (who are not legally required to identify their customers) will establish a business relationship with a financial institution. Financial institutions will then be required to record and keep information on the nominees beneficial owner. The materiality of these gaps in practice will be further examined in the course of Macaos Phase 2 review.
institutions with headquarters in Macao; financial intermediaries with headquarters in Macao; and Macao branches of financial intermediaries with headquarters abroad; finance companies; investment funds and investment fund management companies domiciled in Macao; offshore financial institutions, excluding those institutions engaging in insurance activities;money changers; institutions authorised to carry out cash remittance activities in Macao; financial leasing institutions; institutions carrying out venture capital and asses management activities.
Bearer shares (ToR A.1.2)

99. Public companies (including public companies licensed as offshore institutions) and partnerships may issue bearer shares. The holders of bearer shares can exercise all of the rights incorporated in the shares. In addition, the transfer of the rights incorporated in a bearer share occurs with the transfer of the bearer title or with the acquisition of its ownership (Art.1093 CC). Shares must be nominal if they are not fully paid, if they cannot be transferred by reason of a legal provision, or if the shareholders have a right of pre-emption under the terms set in the articles of association. 100. Companies that intend to issue bearer shares need to state this in the incorporation documents filed with the Commerce and Movable Property Registry (Art.411 CC). In addition, the first holder of a bearer share may be required to sign the articles of association and therefore could to be identified (Art.179(5)). The articles of association are filed with a notary (Art.179(2)). No information needs to be filed or kept when bearer shares are transferred. 101. In August 2011, the Commerce and Movable Property Registry examined the incorporation documents of the 303 public companies. The incorporation documents for 87 Macao public companies allow for issuance of bearer shares. None of these companies is an offshore company, as currently no offshore company in Macao is incorporated as a public company. However, within this group of 87 public companies, 15 have been cancelled in terms of tax registration (i.e. they are inactive). Macaos authorities have indicated that no bearer shares have in fact been issued by these companies so far and no instances of bearer shares were found in the course of the review. 102. Ownership information would be available in respect of bearer shares held by dominant shareholders, as the identity of dominant shareholders must be communicated by the shareholder to the company and by the company to the supervisory entity. This information must also be disclosed in the companys annual report (Art.212 CC: see para.72 above). 103. Finally, whenever a service provider would be involved in the transfer of bearer shares, that service provider is obliged under the AML/CFT laws, regulation, guidance and instructions to identify the persons involved in the transaction. However, there are no provisions requiring that a service provider be involved in the transfer of bearer shares.
Conclusion
104. Companies formed under Macaos Commercial Code are required to file ownership and identity information with the Commerce and Movable Property Registry, which is open to public inspection. Ownership information is also kept by notaries, who are involved in the formation of such
companies. Private companies need to file with the Commerce and Movable Property Registry any transfer of their shares. Changes in the shareholdings of public companies need to be recorded in the companys register of shareholders. The same information available for domestic companies is available for offshore institutions incorporated as domestic companies, including those that are branches of foreign companies, as well as for foreign incorporated companies with permanent activity. Foreign companies carrying on a business or a commercial or industrial activity in Macao will also have to file some identity information. It is not clear, however, whether the scope of these provisions is broad enough to ensure that all foreign companies with a sufficient nexus to Macao have ownership information available to the authorities. Financial institutions under the supervision of the AMCM, OCSI, OASI, notaries, registrars, lawyers, solicitors, accountants and auditors are subject to a legal obligation to identify their customers including companies for AML/CFT purposes. Financial institutions must also identify the beneficial owners of legal persons which are their customers. While Macaos authorities have indicated that a limited number of companies are currently able under their incorporation documents to issue bearer shares, public companies may issue bearer shares and there are limited mechanisms that would ensure information on the holder of such shares is available.
Partnerships (ToR A.1.3) Types of partnerships

105. Macaos law provides for the creation of general partnerships and limited partnerships (Arts.24-25 CC). Pursuant to Macaos commercial code, both types of partnerships are considered commercial companies (Art.174). 106. In a general partnership, each partner is subsidiarily liable in relation to the partnership and jointly and severally liable with the other partners for the obligations of the partnership, even if these have been contracted prior to the date when he joined (Art.331 CC). General partnerships must be formed by at least two partners, who contribute capital or industry (Art.332). 107. A limited partnership can be created as a simple limited partnership or as a partnership limited by shares (Art.348 CC). A limited partnership combines some elements of a general partnership and some elements of a company: it has both general partners, who are jointly and severally liable for the liabilities of the company with their entire property, and silent (limited) partners, who are only liable up to the amount of their contributions and cannot contribute with industry. Silent partners of a partnership limited by shares have the status of shareholders. Private companies and public companies can be general partners (Art.349).

108. A transfer inter vivos of a participation in a general partnership requires the consent of all the partners (Art.337 CC). For limited partnerships, the transfer of the participation of a general partner requires the unanimous assent of the other general partners, as well as a resolution approved by the majority of the votes of the silent partners. The transfer inter vivos of the participation of a silent partner of a simple limited partnership requires a resolution passed by the majority of both the general partners and the silent partners (Art.354).
Information provided to government authorities

109. Both general and limited partnerships are considered commercial companies and are therefore subject to the same Commercial Code requirements detailed above in respect of Macaos companies. 110. Like companies, partnerships need to register with the commercial register held by the Commerce and Movable Property Registry of the Legal Affairs Bureau within 15 days from the date of the act of incorporation (Art.187 CC). Upon registration, all partners need to present valid identification documents or certificates that can confirm their identities. This also applies to partners that are foreign companies or entities. Partnerships are considered commercial companies and therefore acquire legal personality upon registration of their act of incorporation with the Commerce and Movable Property Registry (Art.176). Pursuant to the Commercial Registration Code, partnerships need to file with the Commercial Commerce and Movable Property Registry any transfers of their parts of shares. (Art.5(1)(c) for transfer of shares held by limited partners and Art.5(1)(d) for transfers of shares held by general partners of both limited and general partnerships). Foreign partnerships exercising a permanent activity in Macao are subject to the same registration requirements as domestic partnerships. The exact scope of the term permanent activity which is not further defined in the law is unclear (see also section A.1.1. above on foreign companies). 111. Firms including partnerships registered outside Macao are admitted to carry on business in Macao subject to evidence of such registration in the place of origin. In order to be allowed to carry on business in Macao, companies also need to ensure they do not use a name used by companies already registered in Macao (Art.19 CC). 112. Tax authorities need to maintain up-to-date records on Macaos taxpayers, including companies (Art.12(1)a of the Organic Law of the Financial Services Bureau and Art.19 of Industrial Tax Regulation). Pursuant to the industrial tax regulation (ITR) partnerships, including foreign partnerships, that want to conduct industrial or commercial activities (including financial activities) in Macao have to register for industrial tax and submit the M/1 form to the Financial Services Bureau under the same conditions
as companies. Partnerships operating in Macao are also required to submit annual tax returns under the Complementary Tax Law. Information filed with the tax authorities includes ownership and identity information (Art.10(3) CTL). The exact scope of the industrial or commercial activity threshold will be further analysed in the Phase 2 review.
Information held by the partnership or partners

113. Except if there is a stipulation in the articles of association to the contrary, all general partners are administrators, whether they have created the partnership or acquired that capacity later (Arts.345 and 353 CC). Persons who are not partners can be elected as administrators by means of a unanimous resolution of the partners. All administrators have the rights and obligations to access the information of the partnership. In the absence of a supervisory board or a single supervisor, the supervision of a general partnership is a competence of all partners (Art.345(6). Administrators do not need to be resident in Macao. 114. Besides the general right to information provided for the Commercial Code, a partner who is not an administrator has the right to be informed of the state of business and the patrimonial situation of the partnership. He is expressly allowed to inspect the property of the partnership and to consult, at the registered office, the accounting, books and documents and make copies thereof (Art.336 CC). 115. General partnerships and limited partnerships need to maintain information regarding anyone who, not being a shareholder, allows his name or business name to appear in the business name of the general or limited partnership. Pursuant to the Commercial Code, such person is in fact jointly liable with the partners for the obligations of the partnership (Arts.24-25 CC).
Information held by service providers Notaries

116. Partnerships are created by means of a written act of incorporation, that must be signed by a number of partners equal at least to the minimum legally required for each type of partnership. The signatures of the partners must be certified. The articles of association of a general partnership are specifically required to mention the complete name of each partner (Art.333 CC). The articles of association of a limited partnership need to indicate separately the silent partners and the general partners and must indicate whether the partnership is created as a simple limited partnership or as a partnership limited by shares (Art.350). A copy of the act of incorporation, together with the articles of association, must be filed with a notary (Art.179(2)).

117. Under the Commercial Code, a copy of the contracts that have as object the transfer of the ownership or enjoyment of a commercial enterprise including commercial enterprises that take the form of a general or limited partnership as well as the creation of property rights of enjoyment or guarantee over it need to be filed with a notary (Art.103(2) CC). 118. Under the Notaries/Registrars AML/CFT Guidelines,23 notaries are required to identify contracting parties wishing to establish a legal person.
Information held by other service providers

119. Lawyers involved in the formation of legal persons are also subject to CDD requirements.24 More generally, Financial institutions under the supervision of the AMCM, OCSI, OASI, notaries, registrars, lawyers, solicitors, accountants and auditors are subject to a legal obligation to carry out CDD measures for AML/CFT purposes (see para.90). CDD obligations include the identification of customers and contracting parties; and the identification of the nature, purpose, source of funding and amount of the transactions performed. These service providers may refuse transactions when no adequate CDD information is available.
Conclusion
120. Identity and ownership information on domestic partnerships is filed with the Commerce and Movable Property Registry and with a notary and is therefore normally available. Identity and ownership information is also available for foreign partnerships carrying on an industrial or commercial activity in Macao.
Trusts (ToR A.1.4) Types of trusts

121. It is not possible to form a trust under Macaos law and there is no domestic trust legislation. Macao has not ratified the Hague Convention on the Law Applicable to Trusts and their Recognition.25 Under Macaos laws, there are no restrictions preventing a resident of Macao to act as trustee, protector or administrator of a trust formed under foreign law.
23. 24. 25. Guidelines by the Legal Affairs Bureau (DSAJ) On Money Laundering And The Financing Of Terrorism, effective 12 November 2006. Instruction 1/2006 adopted by the Macao Lawyers Association, effective 12 November 2006. www.hcch.net/index_en.php?act=conventions.text&cid=59, accessed 1 July 2011.
122. Whilst Macanese authorities reported that no trust service providers have been established in Macao, the offshore legislation expressly regulates the provision of offshore trust management services. Pursuant to the Offshore Sector Law (OSL), offshore trust management activity is defined as activity involving administration and investment (Art.2(1)(m)): carried out by a person licensed to operate in Macaos offshore sector, called a trustee; of a specific asset, called a trust, transferred to the trustee and placed under his control by an act inter vivos or mortis causa by a nonresident legal person called the settlor; and aimed at pursuing a specific goal or to benefit one or more beneficiaries who may be the settlor, the trustee or non-resident third parties. 123. This means that only a person licensed by AMCM can be a trust management institution and act as a trustee of an offshore trust. Trust management institutions must take the form of a company incorporated according to Macaos laws, the branch of an institution incorporated abroad or a foundation (Art.33(1)). 124. The OSL further specifies that, within the scope of Macaos offshore sector, trust management deeds established under a foreign jurisdiction allowing this grant shall be recognised, so long as the provisions in this law are observed (Art.43). The OSL outlines a number of requirements concerning the residence of the trust settlors and beneficiaries, as well as the form and content of the trust deed (see paras.122-123 below). 125. In order for a foreign trust to be recognised under Macaos OSL, the activity which is the object of the trust management cannot be a financial activity. Whilst the trustee must be a company or a branch authorised under OSL, trust income must originate outside Macao or from deposits and other resources received by offshore financial institutions. Equally, income to be paid into the trust or to the trust beneficiaries must originate outside Macao or come from the business activities of Macaos OFIs. In addition, the trust fund cannot include real estate located in Macao (Art.44 OSL). 126. The trust deed must be in writing and must be signed by the settlor. The settlors signature must be authenticated by a notary or, when the deed is made outside Macao, authenticated in the manner provided for by the law governing the trust management (Art.45 OSL). If the trust management is established in Macao, trust deeds that are not authenticated are not valid under Macaos laws. If the trust management is established outside Macao, then the trust deeds must be authenticated under the requirements of the law of the place in which it was established (Art.45(2)).

127. The trust deed must inter alia26 contain the complete identification of the settlor, the trustee and the beneficiaries/category of beneficiaries. Identification of the beneficiaries may be done by means of describing the circumstances allowing this (Art.46 OSL). This means that, when the trust beneficiaries are identified by reference to a category, it must be clear from the deed who the class of beneficiaries comprises. 128. In addition, the trust instrument may also include information on the designated trustees and beneficiaries substitutes, rules and restrictions of accumulating income in the trust (Art.47 OSL). The settlor may reserve himself certain prerogatives and the possibility to change the law applied to the trust. Unless otherwise provided for by the law regulating the trust, the deed may allow arbitration to be used in order to address and resolve issues arising between the settlor, the trustee and the beneficiaries, or between the trustee and third parties. In the absence of such a clause, the General Jurisdiction Court of Macao will be deemed competent (Art.47(3)).
26. All of the following information must be in the trust deed: complete identification of the settlor, the trustee and the beneficiaries, although the identification of the beneficiaries or a category of these may be done by means of describing the circumstances allowing this; an express statement declaring the intention to constitute the trust management; an express statement of the law regulating the trust management; the aim and type of trust management; the name given to the assets in the trust management, for respective identification; identification and description of the property included in the trust assets; the classification and distribution of property included in the trust assets; the procedure for appointing, retiring and dismissing the trustee and the requirements for engaging in his duties and for transferring these; the rights and duties of trustees in the case of there being more than one; the relationship between the trustee and the beneficiaries, including the trustees personal liability towards the latter; the powers given to the trustee to acquire property for the trust and to administer, dispose of or burden the property contained in the trust, specifying the terms under which the trustee can make investments or established reserves with the income; the trustees duty to provide management accounts; the date and the place where the trust was constituted; and the duration of the trust, which can never be for more than 99 years.
Information to be provided to government authorities

129. Offshore trust management institutions may be formed as companies incorporated under Macaos law, branches of institutions incorporated abroad or foundations. They will be subject to the rules applicable to the type of entity they have chosen. Such institutions are required to submit a bond to guarantee exact and punctual compliance with the commitments given by the trust managers (Art.40 OSL). In addition, like all offshore institutions, offshore trust management institutions need to obtain a license by AMCM (Art.30). When applying for a license, offshore trust management institutions need to submit the following (Art.38): complete identification of the applicants; a declaration from the auditor or auditing company that certify or intend to certify the accounts of the company or branch; and draft of the company partnership agreement, when applicable. 130. The AMCM may request any additional information that it deems necessary for assessing the application, from the applicants or from other public bodies, namely in terms of the suitability and technical capacity of the applicants (Art.38(2) OSL). 131. In addition, the deed of an offshore trust constituted for more than one year needs to be registered with the Commerce and Movable Property Registry (Art.52 OSL). Registration must be requested by the trustee within six months from the date on which the deed has been signed or three months from the date the deed is modified or terminated (Art.54). Details provided upon registration include the property included in the trust assets, the name and head office of the trustee, the powers given to the trustees and the law regulating the trust (Art.55). Persons who can require the registration of such details are the trust managers, the settlor, the beneficiaries, and other persons qualified under the governing law of the trust (Art.56). 132. Information on trustees resident in Macao is also available when such trustees do not operate in the offshore sector. Pursuant to the Financial System Act, entities wishing to conduct financial intermediary activities (the category in which AMCM includes trust activities) have to submit an application to the Monetary AMCM. The application is to be accompanied by documents containing the full identification of the applicants, as well as the partners or shareholders, their respective holdings and, in the case of corporate body, a copy of the existing or drafted memorandum and articles of association and the full identification of the persons in charge of the management of the company (or of the trust) and the respective professional curricula (Art.119 FSA). Macaos authorities, however, reported that so far, no

application for setting up a financial intermediary company to conduct trust activities has been received.
Information to be held by trustees and service providers

133. Recognition of offshore trust management is conditional upon the trust deed having the form and minimum content required by the OSL, including the complete identification of the settlor, the trustees and the beneficiaries (Art.46). The trustee is expressly required to keep the deed pertaining to the property included in the trust (Art.48). He must maintain the trust fund completely separate from his own assets and those of third parties (Art.48(1)(a)). Such obligations apply to all entities providing offshore trust management services. 134. These obligations are complemented by the CDD obligations arising from IPIM Circular 01/DSO/IPIM/2006. In addition, pursuant to the AML/ CFT Instructions issued by Macao Economic Services under the AML/CFT Regulation, all entities in Macao acting as trustees of foreign trusts are required to comply with CDD obligations (Part II(d) and III). Similar obligations apply to notaries and lawyers involved in the formation or management of a trust under the respective AML/CFT Guidelines and Instructions (see above paras.91 and 92). As a result of these AML/CFT obligations, professionals acting as trustees in Macao are obliged to identify their clients. The Guidelines do not contain an express reference to the trusts settlor or beneficiaries.
Conclusion
135. In essence, the Offshore Sector Law and the Financial System Act, coupled with AML/CFT obligations on service providers, ensure that information is available concerning the settlor, beneficiaries, and trustees of offshore trusts and foreign trusts having as trustee based in Macao.
Foundations (ToR A.1.5) and Other relevant entities and arrangements

136. Macao law provides for the establishment of legal persons in the form of associations and foundations. Associations are non-profit-making organisations, while foundations are defined as legal persons with a social purpose (Arts.154 and 173 Civil Code). They can hold assets and property, but must use it as the basis for the purpose of social interest they are bound to pursue (Art.173). The law does not specify the meaning of the term social purpose and whether it may include carrying out of a business. However, Macaos authorities clarified that the term social purpose refers to any activity not being carried out not for an economic purpose or benefit. They
also confirmed that entities registered as foundations or associations cannot carry out a business activity27 and that no specific individual or beneficiary can benefit from the foundations assets (see ToR A.1.5). 137. The constitution of an association is signed by the founder and must indicate the assets or services contributed by the associates, as well as the name, purpose and statutory seat of the association (Art.156(1)). The statutes of an association may also indicate, inter alia, the rights and duties of the associates, conditions for their admission or exclusion, and other operation rules (Art.156(2)). 138. The act of constitution of a foundation must indicate the aim of the foundation and specify the assets contributed thereto (Art.175(1)). The founder may also indicate in the act of constitution or in the statutes, inter alia, the statutory seat of the foundation, its structure and operation rules (Art.175(2)). 139. Associations and private foundations established for a charitable or benevolent purpose may be recognised as entities of public interest under Law 11/96/M on Public Interest Entities (Art.2(1)). Macaos authorities have reported that the majority of associations or private foundations of public interest in Macao are involved with cultural or sporting activities. Entities established for such purposes may be declared of public interest immediately after constitution (Art.3(1)). 140. Associations and foundations established for other purposes may apply to be classified as public interest entities after three years of activity (Art.3(2) Law 11/96/M). The application is subject to the approval of the Chief Executive, on a case by case basis, after scrutiny and on the basis of opinions from interested entities (public and private) regarding the nature, activity and purposes of the applicant (Art.5). Entities of public interest benefit from certain tax exemptions (Art.10).
Information held by government authorities

141. Associations are considered legal entities when constituted while foundations acquire legal personality upon recognition of their social purpose and the adequacy of their assets by Macaos Chief Executive, which is the competent authority (Arts.141, 177(1) and (2) Civil Code). The competent authority must recognise the foundations constitution and approve its statutes (Art.178(1) and (2)). The same procedure applies to changes to the foundations constitution and statutes (Art.178(3) and (4)). The act of constitution of an association or a foundation must be published in the Official Gazette (Arts.157(3) and 174(6)).
27. All associations and foundations established in Macao are listed in the Government website: http://en.io.gov.mo/Priv/categories/Default.aspx.

142. Associations and foundations need to be registered with the Identification Services Bureau (ISB). According to the Organic Law of ISB, (Decree Law No.31/94/M and 39/98/M), ISB is required to keep a register of the persons having a social purpose and maintain the records up to date (Arts.2(e) and 10(1)(c)).) 143. The activities and aims of an association or a foundation that wants to be classified as an entity of public interest are checked according to the requirements of Macao legislation (Law No. 2/99/M and the Civil Code). For persons of public interest, registration records include the declaration to form a legal person of public interest; the act of constitution; statutes and changes thereto; and records on the election, appointment, or deposition of board members and of other legal representatives (Art.9(1) and (3) Law No.11/96/M). Macaos authorities have indicated that such records are available to all government authorities. .
Anti-money laundering legislation

144. Macao has not issued any guidance to non-profit organisations (NPOs), including associations and foundations, regarding the collection, retention, or reporting of specific information related their domestic or international activities. Any guidance to the NPO sector stems from the registration requirements and those associated with their accounting obligations. 145. NPOs are regulated by Laws 2/2006 and 3/2006. They are indirectly supervised by the Identification Services Bureau, the Financial Services Bureau, and other supervisors in accordance with NPO registration legislation and guidelines for financial institutions and designated non-professional businesses and professions issued under Administrative Regulation 7/2006. 146. Financial institutions under the supervision of the AMCM, OCSI, OASI, notaries, registrars, lawyers, solicitors, accountants and auditors are subject to a legal obligation to carry out CDD measures for AML/CFT purposes (see para.90). CDD obligations include the identification of customers and contracting parties; and the identification of the nature, purpose, source of funding and amount of the transactions performed. These service providers must refuse transactions when no adequate CDD information is available. Service providers must therefore identify the owners of associations and foundations which are their customers.
Conclusions
147. Information on the founders and management bodies is available for all foundations. Under Macaos laws, foundations are non-profit entities and do not normally have beneficiaries.
Enforcement provisions to ensure availability of information (ToR A.1.6) Company, partnership and trust laws
148. Macaos laws provide for a system of penalties for non-compliance with key obligations to maintain ownership and identity information. 149. The Commercial Code provides for fines for unlawful refusal to provide information and the provision of false information. An administrator or company secretary who refuses (or causes the refusal of) the consultation of documents that the law requires to be made available to interested parties for the preparation of company meetings, or refuses to send documents for such purpose, when required by the law, or sends such documents without satisfying the conditions and the time limits stated in the law, is punishable with imprisonment up to three months and a fine of up to 60 days.28 An administrator or company secretary who refuses or causes the refusal by another person, in a session of a company meeting, of information that he is obliged to provide in accordance with the law, or, in other circumstances, information he is legally obliged to provide and that has been requested in writing, is punishable with a fine of up to 90 days (Art.481). This provision also covers failure to keep company registers or books. In addition, the non-registration or the late registration of acts subject to it, or the lack of maintenance in order and updating of the company books are considered serious breaches of the duties of administration that can lead to the dismissal of the administrator (Art.389(4) and (5) CC). 150. Whoever is obliged by law to provide information on the activity of the company, and provides it in an untruthful manner, is punishable with imprisonment up to three months and a fine of up to 60 days (Art.482). These penalties also apply to partnerships. 151. Pursuant to the Financial System Act, all acts which violate the rules of this Act and regulations contained in notices or circulars from AMCM, or which disturb the credit system or intentionally alter the normal running of the money, financial and foreign exchange markets are punishable contraventions (Art.122(1)). Certain acts, including failure to observe registration duties refusal to provide information or send compulsory data to AMCM;
28. Under Macaos Criminal Code, fines are fixed in days. As a rule, fines range from a minimu of 10 to a maximum of 360 days; each day of fine corresponds to an amount between MOP 50 and MOP 10 000 (EUR 4.3 to 860). The Court determines the amount of days of fine on the basis of economic and financial situation of the offender. When the economic and financial situation of the offender justifies it, the court may authorise the payment of the fine within a period not exceeding one year, or allow payment by instalments (Arts.45 and 65(1) and (2)).

submitting or showing AMCM any false information or documents, constitute especially serious offences (Art.122(2)), 152. Penalties for such offences are: fine; suspension of the voting rights of any shareholder for a period of one to five years; prohibition from holding any board position or carrying out management or directorship duties in any institution under AMCMs supervision for a period of six months to five years. These sanctions may be applied concurrently. The default fine ranges between MOP 10 000 and 5 000 000 (EUR 860 to 493 858). In the case of a repeated offence, the minimum and maximum limits for the fine shall be twice the originals. When the economic benefits gained by the offender exceed half of the maximum limit, the fine may be increased to the value of twice the benefits (Art.128). 153. Entities engaging in offshore activities without the authorisation prescribed under OSL face penalties ranging from MOP 100 000 to 500 000 (EUR 8 783 to 43 955). Offshore institutions engaging in operations which are specifically forbidden under the same OSL are subject to a fine of MOP 75 000 to 300 000 (EUR 6 593 to 26 374). Failure to register offshore trusts is punished with a penalty of MOP 1 000 to 5 000 (EUR 88 to 440).
AML/CFT regulations, instructions and guidelines

154. Non compliance with CDD obligations under the AML/CFT Regulation constitutes an administrative offence, punishable with a fine of MOP 10 000 to 500 000 (EUR 879 to 43 955) for a natural person or MOP 100 000 to MOP 5 000 000 (EUR 8 783 to 439 858) for or legal person (Art.9). When the economic benefit obtained by the offender exceeds half of the maximum fine provided for by the AML/CFT Regulation, the fine imposed is double that benefit (Art.9(3)).
Tax law
155. Failure to comply with tax registration and reporting requirements is also an offence. Failure to comply with the registration requirements provided for in the Industrial Tax Regulation is punished with a penalty ranging between MOP 200 and MOP 100 000 (EUR 17.5 to 8 783), depending on the seriousness of the case (Arts.37 to 47 ITR). Failure to submit a tax return under the Profits Tax Regulation will trigger a penalty ranging between MOP 500 and MOP 5 000 (EUR 44 to 440). If the taxpayer intentionally refuses to submit the tax return documents, or submits documents that are incorrect or incomplete, the penalty is between MOP 1 000 and MOP 20 000 (EUR 88 to 1 758) (Arts.64 to 66). These penalties apply to both companies and partnerships.
156. The effectiveness of the enforcement provisions which are in place in Macao will be considered as part of the Phase 2 Peer Review.
Determination and factors underlying recommendations
Phase 1 determination The element is in place, but certain aspects of the legal implementation of the element need improvement. Factors underlying recommendations Macaos laws do not clearly identify that all foreign companies with a sufficient nexus to Macao are required to keep ownership and identity information. It is open to public companies to issue bearer shares. While such shares may not be in circulation currently, there are insufficient mechanisms in place to ensure the availability of ownership information in all circumstances. Recommendations Macao should ensure that ownership and identity information is kept with respect to all foreign companies with a sufficient nexus to Macao. Macao should ensure that robust mechanisms are in place to identify the owners of bearer shares or should abolish bearer shares.
A.2. Accounting records

Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements.
157. A condition for exchange of information for tax purposes to be effective, is that reliable information, foreseeably relevant to the tax requirements of a requesting jurisdiction is available, or can be made available, in a timely manner. This requires clear rules regarding the maintenance of accounting records. The obligations to maintain reliable accounting records are found in most of the laws governing the various types of entities covered by this report, and in the tax legislation.
General requirements (ToR A.2.1) Commercial laws

158. Pursuant to Macaos Commercial Code (CC), individuals and legal persons carrying out a commercial enterprise which includes companies and partnerships are required to have organised bookkeeping, adequate to his enterprise, in order to enable chronological knowledge of all his

operations, as well as the periodic preparation of balance sheets and inventories (Art.38). This includes a book of inventory and balance sheets (Art.39). 159. The CC also requires all commercial entrepreneurs to keep books, correspondence, documentation and other items recording the exercise of his enterprise (Art.49). 160. Annual accounts are prepared in accordance with the Accounting Standards contained in Annex 1 of Administrative Regulation 25/2005. At the end of each accounting period, the administrators of the company or partnership are required to organise the annual accounts and, except if all shareholders are administrators and the company does not have a supervisory board or single supervisor, prepare a report on the accounting period and a proposal for the apportioning of the results (Art.254 CC). Such annual accounts are then handed to the supervisory board or single supervisor, who analyse them and prepare a report and an opinion to be submitted to the shareholders (Art.256). 161. These requirements apply to all companies incorporated in Macao, including companies not operating there and investment holding companies. Foreign companies with permanent activity in Macao are expressly subject to the legal provisions governing the registration of domestic companies, but not to the provisions on accounting keeping (Art.178 CC). These companies, however, are required to keep accounting records under the tax law (see below). 162. The CC also contains an enforcement procedure in case the administrators fail to prepare the companys or partnerships annual accounts. If the annual accounts and the report of the administration are not presented to the shareholders up to three months after the end of the accounting period, any shareholder can request the court to set a time limit, of no more than 60 days, for its presentation. If such presentation does not take place within the set time limit the court can order the termination of the functions of any one or more administrators and appoint a judicial administrator with the task of preparing the annual accounts and the report of the administration covering all the time elapsed since the last approval of the accounts (Art.259). 163. Pursuant to the OSL, offshore institutions must keep their accounts organised according to generally accepted accounting principles and, when applicable, in accordance with the plan set for their respective business sector (Art.6). When incorporated as Macao companies (Art.5(1)(a) OSL), offshore institutions are subject to the same accounting record keeping requirements detailed above. In addition, offshore commercial and auxiliary institutions are required to send their annual report and accounts, together with the relevant auditors report, to the IPIM (Art.66). Failure to comply with this duty is punished with a fine of MOP 20 000 to 100 000 (EUR 1 720 to 8 783) (Art.70(1)d).
164. Trustees of offshore trusts are specially bound to provide administration accounts, management accounts and deeds of application of the trust (Art.48(1)(c) OSL). Offshore Trust Management companies are required to submit their annual report and accounts, together with a written opinion made by their external auditor or supervisory board, to the AMCM (Art.37). In addition, trustees incorporated as Macanese companies (Art.44(1)(b)) are subject to the same accounting records keeping requirements detailed above. 165. Foundations are not subject to specific accounting obligations under the Civil Code. Foundations that are declared public interest entities are under an obligation to present their annual report or previous operating accounts (Art.11 Law 11/96/M).
Tax laws
166. Under the Complementary Tax Law, taxpayers are divided into two main categories with different accounting obligations. Taxpayers with accounting properly organised belong to Group A, whilst the other taxpayers belong to Group B (Art.4 CTL). The following persons are always considered Group A taxpayers: sociedades annimas (companies with a share capital), em comandita por aces (partnerships limited by shares) and cooperativas (cooperatives); and any company with separate liability whose capital is above MOP 1 000 000 (EUR 86 724) or whose taxable profits in the last three years have been on average above MOP 500 000 (EUR 43 955). 167. Taxpayers other than those listed above may also opt to be part of Group A provided that they have organised accounting records (Art.4(2) (c) CTL). After 3 years, they may seek the authorisation of the Tax Director to opt out of Group A and become part of Group B (Art.4(6)(R)). 168. Group A taxpayers must keep all required books of company, documents, or other accounting information, whilst Group B taxpayers must at least keep books to register purchases, sales (for retail sales, the global figure per day) and services rendered (Art.18 CTL). Group A taxpayers are required to attach their annual accounts to the income tax return (Art.13 CTL).29 Group A taxpayers are subject to a fine of MOP 100 to 20 000 (EUR 8.6 to 1 720) if they do not possess appropriately compiled accounting records or do not arrange them according to the requirements contained in the CTL (Art.65(1)a CTL). There is a fine of MOP 100 to 3 000 (EUR 8.6 to 258) for a delay of more than 90 days in recording transactions in the relevant accounting records and a fine
29. See 359 Form www.dsf.gov.mo/download/complementar/DSF_Mod_359.pdf.

of MOP 1 000 to 20 000 (EUR 86 to 1 720) in case of refusal to exhibit the books or related documents and also for concealment, destruction, falsification and vitiation of such books and documents (Art.65(1)b and c). For Group B taxpayers, the fine for not keeping the prescribed accounting records is MOP 100 to 500 (EUR 8.6 to 440). They are also subject to a fine of MOP 500 to 10 000 (EUR 44 to 860) for refusing to exhibit to authorised civil servants the books and documents which they should possess as well as their rendering void, concealment, destruction, falsification and vitiation (Art.65(2)). 169. The obligation to file tax returns applies to anyone who is performing any commercial and industrial activity in Macao (Art.3(2) CTL). Thus, companies incorporated outside Macao are subject to tax filing obligations as long as they conduct commercial or industrial activity in Macao and may be categorised as Group A or Group B taxpayers depending on their legal form and turnover (Arts.1, 2, 3, 4 and 18 CTL and Executive Ruling 102/96). Macaos laws, however, do not specify when companies can be considered foreign companies conducting commercial or industrial activity in Macao. Therefore, it is not clear whether all companies having a sufficient nexus with Macao are covered by the accounting record keeping requirements contained in the CTL (see also section A.1.1 above).
Conclusion
170. Under the Commercial Code, companies and partnerships formed under Macaos laws are required to maintain accounting records which: (i) correctly explain all transactions; (ii) enable the financial position of the company to be determined with reasonable accuracy at any time; and (iii) allow financial statements to be prepared. The same holds true with respect to offshore trusts. Foreign companies and partnerships conducting commercial or industrial activity in Macao are subject to the same accounting obligations as domestic companies and partnerships. Foundations that are not public interest entities are not subject to accounting requirements.
Underlying documentation (ToR A.2.2)

171. The Commercial Code requires each commercial entrepreneur to keep books, correspondence, documentation and other items recording the exercise of his enterprise (Art.49). Macaos authorities reported that the reference to items in Article 49 of the Commercial Code covers all necessary records of transactions, both domestic and international. 172. The Offshore Preventive Measures for commercial offshore services institutions and auxiliary offshore services30 require these entities to keep
30. Circular 01/DSO/IPIM/2006, www.gif.gov.mo/web1/doc/IPIM/AML-CFT_e.pdf, accessed 1 July 2011.
verifiable identification documents of clients and operations carried out (Para.3.2). The IPIM has reported that verifiable records also comprise written information concerning each operation regarding, inter alia, its nature, object, amount and methods of payment employed, and written information about customers backgrounds, country of residence, transactions, the nature of services rendered and profession and that retention of this information will be sufficient to form verifiable records for the reconstruction of transactions. 173. Pursuant to the CTL, accounting books and related documents must be kept for five years (Art.18(4)). The term related documents is not further defined in the law. 174. Macaos authorities reported that the reason for not further defining the details of related documents in the law is that entities are required to keep all supporting documents in relation to their business transactions. Under this respect, the term related documents used by the CTL corresponds to the term items used by the Commercial Code (Art.49) and, according to Macaos authorities, covers all necessary records of transactions, both domestic and international. 175. Both the Commercial Code and the tax laws require companies and other relevant entities to keep underlying documents that support their business transactions and accounts. However, the exact scope of these requirements is unclear. As a result, it cannot be determined whether they cover the full range of underlying documentation referred to in ToR A.2.2.
The 5-year retention standard (ToR A.2.3)

176. Companies and partnerships formed under the Commercial Code are obliged to keep their accounting books and records for five years from the last entry made in the books (Art.49) The termination of the business does not terminate the responsibility to maintain records for the prescribed period. 177. Pursuant to the Complementary Tax Regulation, accounting records and related documents also need to be kept for five years (Art.18). The Financial Services Bureau keeps records on the tax returns documents filed by taxpayers. Such records must be kept permanently (Art.1 Order 94/88/M). 178. The Offshore Sector Law does not contain specific or additional retention requirements for accounting documents kept by offshore institutions. As a consequence, offshore institutions incorporated as Macao companies will be subject to the minimum retention period in the Commercial Code. For the remaining offshore institutions i.e. those that are branches of companies incorporated abroad (see para.67), it is not clear whether they can be considered foreign companies conducting commercial or industrial

activity in Macao and thus it is not clear whether they are covered by the retention requirements contained in the CTL.
Phase 1 determination The element is in place, but certain aspects of the legal implementation of the element need improvement. Factors underlying recommendations Macaos laws do not require all foreign companies with a sufficient nexus to Macao to keep accounting records, including underlying documentation. Foundations that are not public interest entities are not expressly required to keep accounting records. Recommendations Macao should ensure that comprehensive, reliable accounting information is kept for all relevant entities, including foundations and foreign companies with a sufficient nexus to Macao, for a minimum of five years.
For all relevant entities, record keeping Macao should ensure that comprehenrequirements do not clearly cover the sive underlying documentation is kept full range of underlying documentation. for all entities for a minimum of 5 years.
A.3. Banking information

Banking information should be available for all account-holders.
Record-keeping requirements (ToR A.3.1)

179. Banks and savings houses are financial institutions and therefore subject to Macaos anti-money laundering regime, as well as to obligations under commercial and financial sector legislation. The supervisory authority for banks in respect of the AML obligations is AMCM. 180. Anonymous accounts are prohibited in Macao. Pursuant to the FSA, a customer account can be opened only when the relevant information about the customer such as name, address and proof of identity has been obtained (Art.106). Under the Guideline for Financial Institutions, if the bank is unable to obtain the required customer information on a timely basis, accounts should not be opened, or business relations should not be commenced, or transactions should not be performed (s.5.4). Institutions should never establish a business relationship with a customer who provides a fictitious name or insists on anonymity. Where a numbered account is requested in order to protect the identity of the account holder, the identity should be known to a sufficient number of staff to exercise proper due diligence. The guideline goes on to state that such
accounts should in no circumstances be used to hide the customers identity from an institutions compliance function or from AMCM (para.6.3). 181. Under the AML/CFT Regulation, all financial institutions are required to keep for at least five years identity documents obtained in the course of conducting customer due diligence (CDD) and written information concerning certain operations (Art.6). Records need to be kept for operations that might indicate the commission of the crimes of money laundering or financing of terrorism (due to inter alia, the operations nature, object, amount and the methods of payment employed), operations exceeding the amounts set by the AMCM and operations in respect of which there are grounds for suspicion that the contractor, client or patron is not acting on his own (Art.3). 182. Paragraph 12 of the Monetary Authoritys Anti-Money Laundering and Combating the Financing of Terrorism Guideline for Financial Institutions provides that institutions should keep all records of customer information, including entries of the accounts, details of transactions involving fund transfer, record of findings on all complex, unusual large transactions and all unusual patterns of transactions, which have no apparent economic or visible lawful purpose at least five years from the date of completion of the transactions, notwithstanding that the customers may have terminated the account relationship with the institutions subsequent to the transactions. Institutions should also keep records of the identification data obtained through the CDD process, account files and business correspondence for at least five years after termination of the business relationship. 183. Additional specific obligations apply in respect of cash transactions (AML/CFT Guideline on Cash Transactions, para.4.1.1).31 For cash transactions related to cross border and domestic wire transfers/remittances of an amount equal to or exceeding MOP/HKD 8 000 (EUR 703) and for any other cash transactions in amount equal to or exceeding MOP/HKD 20 000 (EUR 1 757), banks are specifically required to keep information on the transaction details, which include the name, address or account number of the remitter and of the beneficiary (paras.4.1.1.(c) and 4.1.2.(c)). Institutions are required to exercise
31. Notice 010/2009-AMCM of 24.07.2009, www.amcm.gov.mo/rules_and_guidelines/ rules.htm. Cash transactions include transactions where deposits and withdrawals are made in cash or by cheques in any currencies; transactions where money is exchanged or remitted in cash or by cheques in any currencies; transactions that are made frequently in short periods of time and accompanied by exchange or remittance in cash or by cheques in any currencies; transactions where large amount of small denomination coins or bills in any currencies are exchanged or remitted; and any other transactions which involves receipt or payment in cash or cheques including encashment of travellers cheques, money/postal orders, bank drafts or other monetary instruments in any currencies (para.3).

reasonable measures to verify the identity of the customer by reference to the identification documents. Institutions should also understand whether the cash transactions are realised by a customer on behalf of some other persons. In such case, the identification information of all the persons involved in the transactions should be recorded. All records, business correspondence if any and the required customer information should be kept for at least five years from the date of completion of the transactions (paras.4.6 and 5.1.4.). 184. Banks are also required to keep customer identity information with respect to financial products (Guideline on Provision and Distribution of Financial Products,32 Appendix 1 B.3). The term financial product means any bond, stock, warrant, mutual fund, unit trust, futures contract, contract or arrangement for the purposes of foreign exchange trading, contract or arrangement for the purpose of leveraged foreign exchange trading, structured instrument linked to foreign exchange or equity and any such other product as the AMCM may prescribe as financial product (para.5(c)). 185. Banks are commercial enterprises and as such are also subject to the provisions of the Commercial Code. Under Article 49 of the CC, all commercial entrepreneurs are required to keep books, correspondence, documentation and other items recording the exercise of their enterprise (Art.49). Whilst Macaos authorities confirmed that the reference to items in Article 49 of the Commercial Code covers all necessary records of transactions, both domestic and international, the scope of this provision is not clearly provided. 186. The Financial System Act, which defines the legal framework for Macaos financial sector, further requires credit institutions to record the identity of all customers having significant transactions (Art.106). The term significant transaction is not further defined by the law. Article 6 of Administrative Regulation No.7/2006 requires financial institutions to keep the identity documents for customers and written information concerning the operation of customers concerning, inter alia, their nature, object, amount and the methods of payment employed for five years. 187. In essence, Macanese laws ensure that detailed records of customer due diligence and all transaction records are kept by financial institutions.
Phase 1 determination The element is in place.
32.
Circular No.033/B/2010-DSB/AMCM of 17.09.2010, www.amcm.gov.mo/rules_ and_guidelines/rules.htm.
COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION 55
B. Access to information
Overview
188. A variety of information may be needed in a tax inquiry and jurisdictions should have the authority to obtain all such information. This includes information held by banks and other financial institutions as well as information concerning the ownership of companies or the identity of interest holders in other persons or entities, such as partnerships and trusts, as well as accounting information in respect of all such entities. This section of the report examines whether Macaos legal and regulatory framework gives to the authorities access powers that cover relevant persons and information, and whether the rights and safeguards that are in place would be compatible with effective exchange of information. 189. Macaos tax authority has the necessary powers to obtain relevant information from any institution or person who holds the information and has measures to compel the production of such information. This includes information on companies and other relevant entities held by Macaos Registrars and information on bank accounts and offshore institutions held by the Monetary Authority. In most cases, this power is exercised by issue of a written request to produce the information, where non-compliance can be sanctioned with significant penalties. The competent authority can also conduct inspections at the taxpayers premises, but has no search and seizure powers. 190. Macaos 2009 EOI Act regulates the exercise of the competent authoritys access powers for international exchange of information (EOI) purposes. Under this law, the Financial Services Bureau (FSB) is required to gather all information necessary to answer an EOI request. The EOI Act expressly allows the FSB to collect information held by banks and other financial institutions, including offshore institutions. Such information can be exchanged provided that the request is made under an international tax agreement and there is reciprocity.
56 COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION

191. No domestic tax interest is required, but there is a need to notify the holder of the information of the request or to notify the taxpayer of the purpose, source and content of the information requested. The prior notification requirement can be waived when one of the parties requires so or when a particularly relevant public interest is involved. In particular, the notification requirement can be waived when one of Macaos EOI partners specifically states in its EOI request that it does not want the taxpayer or the holder of the information be informed or aware of the EOI request. When notified of an EOI request, taxpayers may lodge a judicial appeal against it. Under both the tax regulations and the EOI Act, the competent authoritys has powers to carry out unannounced onsite inspections at the taxpayers premise and collect all relevant information. 192. Existing bank secrecy provisions in Macao law are overridden when information is sought by the FSB acting within its competence, including in order to answer an EOI request. The scope of legal professional privilege under the EOI Act is in line with the international standard.
B.1. Competent Authoritys ability to obtain and provide information

Competent authorities should have the power to obtain and provide information that is the subject of a request under an exchange of information arrangement from any person within their territorial jurisdiction who is in possession or control of such information (irrespective of any legal obligation on such person to maintain the secrecy of the information).
Bank, ownership and identity information (ToR B.1.1) and accounting records (ToR B.1.2)
193. Macaos Administrative Procedures Code (APC) provides for a general power for authorities to collect information from entities and individuals (Arts.85 to 98). In addition, the tax laws contain special provisions enabling the Financial Services Bureau (FSB) to conduct inspection of entities and to collect information and tax related documents (Arts.62-63 CTL, Arts.51 to 57 Salary Tax Regulation, Arts.30 to 35 ITR). 194. The FSB can obtain information from other government agencies and services. Government agencies in Macao, as well as those private companies officially vested in the quality of administrative public utility, are under a specific obligation to co-operate with the FSB regarding the observance and execution of tax regulations. Upon request, such agencies and companies have to inform the FSB of the facts they have knowledge of and which are likely to produce taxable income (Art.63 CTL, Art.32 ITR, Art.54 CTL). Importantly, this means that the FSB can obtain information on companies and on companies shareholders from the Commercial Registrar and details of associations and foundations from the Identification Services Bureau.
195. Information that has not been filed with government agencies (unknown information) can be requested from the taxpayer. For this purpose, the FSB can issue an official notice. The taxpayer must reply to the notice within 15 days (Art.17 CTL). If the taxpayer does not furnish the information requested in the notice, the FSB can undertake an onsite inspection of the taxpayers premises, provided that an onsite inspection is required to collect such information. (Art.2(g) Decree Law No.30/99/M Organic Law and Arts.62(1) and 62(3)(a) CTL). 196. The procedure for onsite inspections of financial and non-financial entities is regulated under the Organic Law of FSB (Art.2(g) of Decree-Law No.30/99/M) and the CTL (Art.62). Under these laws, the FSB can approach the person holding the information (the investigated target) for inspection at any time. During inspection, the requested party has to co-operate and provide the information or documents as required. Tax inspectors can also request information about a company from persons who have commercial dealings with that company. Failure to comply with such a request would be classified as a refusal to provide documents or information related to accounting documents and trigger a penalty (Art.65 CTL). The CTL does not provide the FSB with search and seizure powers to collect tax relevant information. 197. If the requested information cannot be collected in the course of the inspection, the FSB can issue a written notice containing the list of documents and information to be provided. Such notice is issued under the Administrative Procedure Code (Art.73). Failure to comply with the notice is sanctioned with a penalty (see below). 198. The 2009 Information Exchange Act (EOI Act) gives the FSB special powers to collect information requested under double taxation conventions (DTCs) and taxation information exchange agreements (TIEAs) (Art.1(2)). In particular, information that can be exchanged by the FSB includes all information which is available to the FSB itself as part of its general duties, as well as documents or records in any form that are used to register, prove and report the business operations of the institutions regulated under the Financial System Act and the Offshore Sector Act (Art.2). 199. The FSB is directly responsible for collecting and providing to foreign competent authorities information that is under its responsibility as a tax authority (Art.2(1)(1) EOI Act). This includes known information on taxpayers i.e. information which is already in the FSBs database as well as unknown information on taxpayers i.e. information which has not been spontaneously submitted by the taxpayers but that it is useful for tax purposes, such as an assessment of the taxable profits or clarifications on data reported in the tax returns. 200. Information will be provided on a reciprocal basis. As a consequence, Macao will not provide information that, based on the requesting partys

domestic laws, the requesting competent authority could not obtain within its territory (Art.3(2) EOI Act). 201. When the information requested is not already known to the FSB, the FSB can require the institution holding such information to furnish it pursuant to the procedure set out by the EOI act. Under the EOI Act, such a request is issued through a written notice, setting a minimum delay of five working days from the date of receipt of the notice for the submission of information (Art.6(3)). The request can be forwarded to the Monetary Authority of Macao (AMCM) for execution. Financial institutions are under an express duty to co-operate and provide information to AMCM, which supervises Macaos financial and offshore sectors (Arts.5 to 10 FSA). AMCM can conduct inspections at the offices of the financial entities that are under its supervision (Art.8 FSA). It can conduct inspections directly through specifically appointed persons or bodies. AMCM is authorised to perform inspections at any time on any transactions, documents, accounting reports, and other records or documents, etc. These provisions also apply to offshore institutions, including offshore banks and offshore trust management companies (Art.28 OSL). 202. Under the EOI Act, each EOI request needs to be accompanied by all the elements for a proper identification of natural or legal persons (Art.6(1)). The level of detail the request of the foreign tax administration should contain is clarified in the FSBs Circular Note No.02/DIR/201133. Pursuant to the Circular Note, in what refers to the elements required for the identification of the persons subject to the request, Article 6 (1) of the EOI Act must be given an identical interpretation to the one proposed by the OECD (para.5). Thus, a request for information on tax matters is considered as containing all information that can appropriately recognise the identity of the persons when it contains sufficient elements which allow the identification of the person subject of the request, not being necessary the inclusion of its name and/or address (para.7). For instance, to the extent that the name and/or address of the bank account holder is unknown, the number of the bank account will be considered as an appropriate identification element for EOI purposes (para.8). The information which Macao in practice has considered sufficient for identification of natural or legal persons will be considered in the Phase 2 review.
Use of information gathering measures absent domestic tax interest (ToR B.1.3)
203. The concept of domestic tax interest describes a situation where a contracting party can only provide information to another contracting party if it has an interest in the requested information for its own tax purposes.
33. www.dsf.gov.mo/tax/tax_communication.aspx?lang=pt.
204. The EOI Act expressly enables the FSB to provide in response to EOI requests both information under its responsibility (i.e. information relevant for domestic tax purposes) and information kept by banks and offshore institutions, when such information is not otherwise available to it (i.e. it is not relevant for domestic tax purposes). 205. Macaos domestic legislation is clear in imposing on the FSB a duty to implement international taxation agreements especially in the field of exchange of information and to co-operate with foreign tax authorities. Such duties are not conditional upon the existence of a domestic tax interest in the information or assistance requested by the foreign tax administration.
Enforcement provisions to compel production and access to information (ToR B.1.4)

206. As previously described, the FSB has the necessary powers to compel the production of information from natural and legal persons. Both the Complementary Tax and the EOI Law provide the ability for the FSB to issue notices to collect information, including from third parties. The FSB can also undertake onsite inspections of the taxpayers premises, provided that an onsite inspection is required to collect such information. The FSB cannot apply to magistrate for a search warrant. Since there are no criminal tax offences in Macao, the police has no search and seizure powers for criminal tax issues. 207. Compliance with official notices and requests by the FSB is ensured through a system of fines. Non-submission of or inaccuracy of statements submitted under the CTL is subject to a fine of MOP 100 to 10 000 (EUR 8.6 to 860) (Art.64 CTL). Refusal to provide documents or information related to accounting documents is subject to a fine of between MOP 1 000 and 20 000 (EUR 86 to 1 720) (Art.65). The same penalties apply when the person subject to inspection does not submit information requested in an FSB notice within 15 days from receipt of the notice or does not furnish information about a company with which he has commercial dealings (Art.65(3)). Offences that are not specifically sanctioned are subject to a default fine of not less than MOP 50 (EUR 4.4) and not more than MOP 500 (EUR 44) (Art.66L). 208. The EOI Act specifies that institutions failing to respond or reply to the information request commit an offence punishable under Article 312(b) of the Criminal Code (Art.6(e)). Offenders are subject to imprisonment for a term not exceeding two years or, in default, to the payment of a penalty equivalent to 240 days of penalty charges. 34
34. Under Macaos Criminal Code, fines are fixed in days. As a rule, fines range from a minimu of 10 to a maximum of 360 days; each day of fine corresponds to an amount between MOP 50 and MOP 10 000 (EUR 4.3 to 860). The Court
Secrecy provisions (ToR B.1.5)

209. Macaos laws do not contain any specific secrecy provisions that would prohibit or restrict the disclosure to tax authorities of: information regarding the ownership of companies, and partnerships; in the case of trusts, information on settlors, trustees or beneficiaries; in the case of foundations, information on founders, members of the foundation council or beneficiaries; accounting information with respect to any of these entities and arrangements. 210. Bank confidentiality is protected under Article 78 of the Financial System Act (FSA), pursuant to which members of the company boards of credit institutions, their employees, auditors, advisors, mandataries and other persons who work for them on a permanent or temporary basis shall not reveal or take advantage, for their own or anybody elses benefit, of inside information obtained during the course of their duties. The duty to maintain secrecy continues even after the employment or service is terminated (Art.78(3)). It also applies to persons currently or previously employed by or who have provided services to AMCM (Art.78(4)). Those who breach the duty of confidentiality under the FSA are liable to disciplinary, civil and criminal action (Art.81). 211. The duty to maintain secrecy applies to the names of the banks customers and to other information related to customers, deposit accounts and respective transactions, application of funds and other banking operations (Art.78(2) FSA). These provisions apply also to offshore financial institutions (Arts.28 OSL and 34 Decree Law 25/87/M). Information provided by foreign supervising authorities to AMCM is also protected under the bank secrecy provisions. 212. Bank secrecy may be waived with the customers consent or by a court order issued under the terms provided for by criminal law or criminal procedure law (Art.80 FSA). The FSA also provides for a number of exceptions to the duty to protect the confidentiality of bank information (Art.79).35
determines the amount of days of fine on the basis of economic and financial situation of the offender. When the economic and financial situation of the offender justifies it, the court may authorise the payment of the fine within a period not exceeding one year, or allow payment by instalments (Arts.45 and 65(1) and (2)). The duty to protect the confidentiality of bank information is overridden, for example: to provide information for statistics purposes or supervising financial institutions; to exchange information between the AMCM and other supervising bodies, provided such information will still be subject to bank secrecy and will not be used for purposes other than supervising; for the purpose of defence, according to the regulations issued under the FSA: for a mutual information system of credit institutions aimed at reducing risks and protecting activities; in accordance with the right of credit institutions or their trustees to use bank information to collect compensations due to the delay of repayments from their customers; when
35.
Importantly, Article 7 of the EOI Act expressly states that bank secrecy provisions are excluded when bank information is sought by the FSB for the purpose of responding to an EOI request. Macaos authorities have further confirmed that there is no limit or restriction as to the type of bank information that can be obtained for the purposes of exchange of information.
Professional secrecy
213. The confidentiality of information shared by a client with his lawyer is protected by the Code of Conduct of Macaos lawyers, approved by the Executive Ruling 121/GM/92 (Arts.5 to 7). Similarly, the confidentiality of information shared with an accountant or an auditor is protected under the Code of Conduct of Macaos accountants and auditors, approved by Administrative Regulation 36/2004 (Art.7). 214. For auditors and accountants, professional privilege does not attach to information required to be furnished to competent authorities under any law or when so requested by a court (Art.7(4)(2) Administrative Regulation 36/2004). 215. For lawyers, the privilege attaches to documents or other things that relate, directly or indirectly, to the facts subject to secrecy (Art.5(6) Executive Ruling 121/GM/92). The Code of Conduct does not expressly provide for exceptions to legal professional privilege. 216. Pursuant to the EOI Act, a request for information can be refused if the supply of information would reveal confidential communications between a client and an attorney, solicitor or other admitted legal representative where such communications are produced for the purposes of seeking or providing legal advice or produced for the purposes of use in existing or contemplated legal proceedings (Art.5(1)(3)). This provision is in line with the international standard. Macaos authorities have confirmed that the exchange of information held by attorneys, solicitors or other admitted legal representatives will only be declined in the circumstances mentioned in Article 5.
Phase 1 Determination The element is in place.
necessary, to obtain technical opinions; to undertake special measures in saving or settlement; and for statistical purposes or brief announcements of information that do not identify persons or institutions.
B.2. Notification requirements and rights and safeguards

The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the requested jurisdiction should be compatible with effective exchange of information.
217. The Terms of Reference provides that rights and safeguards should not unduly prevent or delay effective exchange of information. For instance, notification rules should permit exceptions from prior notification (e.g. in cases in which the information request is of a very urgent nature or the notification is likely to undermine the chance of success of the investigation conducted by the requesting jurisdiction). 218. As explained in Section B.1, the FSB can approach taxpayers or other persons holding relevant information for inspection at any time, based on the Organic Law of the FSB (Art.2(g) of Decree-Law No.30/99/M) and Article 62 of the CTL. During the inspection, the requested party has to co-operate and provide the information or documents as requested. For documents, the taxpayer is not required to keep at his registered place of business a notice can be issued requiring the taxpayer to provide them within 15 days (Art.73 APC). In addition, Macaos EOI Act requires the FSB to notify the person holding the information and any other interested person36 of an EOI request, its origin and its content (Arts.10(1) and 6(2)). 219. The notice requesting a person to provide information for the purpose of an EOI request must indicate the information necessary to implement the exchange of information (see para.207 above) and set the holder a minimum of five working days from the date of receipt of the notice for the submission of information. When it is not possible to provide the information requested within the time set by the FSB, the person holding the information may require an additional period of five days (Art.6(3)). 220. When notified of an EOI request, the taxpayer can lodge a judicial appeal against the exchange of information if he thinks that the information submitted by the relevant institutions is incorrect (Art.10(3) EOI Act). The appeal is lodged against the administrative act approving the exchange pursuant to the procedures set out in Macaos Administrative Appeal Code (or AAC; Decree Law No.110/1999, Arts.120 to 131). Appeals on EOI issues are handled by the Court of Second Instance (Art.36(10) and (11) of Law No.9/1999, Law of Judicial Organization). During the appeal, the exchange of information may be suspended by the court provided that the three following requirements are met: (a) the execution of the act (the EOI request) is expected to cause irreversible damage to the applicant or to the interests he is protecting; (b) the suspension of the act will not seriously damage the
36. The term is not further defined by the EOI Act.
public interest specifically pursued by the administrative act and (c) there is no strong evidence the judicial appeal would be rejected (Art.121 AAC). 221. Notification to the persons concerned, however, needs not be served when one of the contracting parties declares that the request should not be notified or that the exchange of information aims at protecting a particularly relevant public interest (Art.10). This means that when one of Macaos counterparties states that it does not want the person concerned be informed of the process, the advance notice requirement can be waived. When such a request is received, an express prohibition to inform the person concerned is added to the notice requesting the holder to provide the requested information (Art.6(4)).
COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION 65
C. Exchanging information
Overview
222. This section of the report examines whether Macao has a network of agreements that would allow it to achieve effective exchange of information in practice. 223. Jurisdictions generally cannot exchange information for tax purposes unless they have a legal basis or mechanism for doing so. The legal authority to exchange information may be derived from bilateral or multilateral mechanisms (e.g. double tax conventions, tax information exchange agreements, the Joint Council of Europe/OECD Convention on Mutual Administrative Assistance in Tax Matters) or arise from domestic law. Within particular regional groupings information exchange may take place pursuant to exchange instruments applicable to that grouping (e.g. within the European Union, the directives and regulations on mutual assistance). 224. Since April 2009, Macao has actively sought to extend its network of EOI agreements, signing 10 agreements in that time. This is in addition to its pre-existing agreements with the Peoples Republic of China, Belgium, Mozambique and Portugal. At present, Macao has agreements that provide for exchange of information with 13 jurisdictions, 3 of which are in force. Macao has also signed a Protocol updating the EOI provision of its existing DTC with mainland China. For 9 of the agreements that are not yet in force, Macao has completed all internal ratification procedures. Macaos agreements in the main follow the form and substance of the OECD Model Tax Convention or the OECD Model TIEA. All but one of the agreements concluded by Macao provide for exchange of tax information to the international standard. The three agreements that are in force are all in line with the standard. Macao continues to actively develop its EOI network, having concluded two further agreements (with Jamaica and Malta) which are awaiting signature, as well conducting ongoing negotiations of another seven agreements. 225. Macaos network of agreements covers almost all Portuguese-speaking jurisdictions and one of its main trading partners and neighbouring countries,
66 COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION

namely mainland China. Macao still lacks agreements with its other main trading partners,37 but negotiations are ongoing with Hong Kong, China. Macao has not refused any request to negotiate an exchange of information agreement with any jurisdiction. 226. All exchange of information provisions in Macaos double taxation conventions (DTCs) contain confidentiality provisions to ensure that the information exchanged will be disclosed only to persons authorised by the agreements. While each of the articles might vary slightly in wording, these provisions generally contain all of the essential aspects of Article 26(2) of the Model Tax Convention. 227. The agreements concluded by Macao also ensure that the contracting parties are not obliged to provide information which would disclose trade, business, industrial, commercial or professional secrets or trade process or to make disclosures which would be contrary to public policy. There are no legal restrictions on the ability of Macaos competent authority to respond to requests within 90 days of receipt by providing the information requested or by providing an update on the status of the request.
C.1. Exchange of information mechanisms

Exchange of information mechanisms should allow for effective exchange of information.
Foreseeably relevant standard (ToR C.1.1)

228. The international standard for exchange of information envisages information exchange upon request to the widest possible extent. Nevertheless it does not allow fishing expeditions, i.e. speculative requests for information that have no apparent nexus to an open inquiry or investigation. The balance between these two competing considerations is captured in the standard of foreseeable relevance which is included in Article 26(1) of the OECD Model Tax Convention and Article 1 of the OECD Model TIEA. Article 26(1) of the OECD Model Tax Convention reads as follows: The competent authorities of the contracting states shall exchange such information as is foreseeably relevant to the carrying out of the provisions this Convention or to the administration or enforcement of the domestic laws concerning taxes of every kind and description imposed on behalf of the contracting states or their political subdivisions or local authorities in so far as
37. Overall, Macaos main trading partners are, in order: the United States; mainland China; the European Union; and Hong Kong, China (imports), and, Hong Kong, China; mainland China; and the United States (exports).
the taxation thereunder is not contrary to the Convention. The exchange of information is not restricted by Articles 1 and 2. 229. Macao has signed agreements providing for international exchange of information (EOI) with 13 jurisdictions. Of these 13 agreements, 5 are double taxation conventions (DTCs) and 8 taxation information exchange agreements (TIEAs). Three of the agreements (the DTC with the Peoples Republic of China, Mozambique and Portugal) are in force. Macao has also signed a protocol with the Peoples Republic of China to align the language of the EOI provision of the existing DTC with the international standard. 230. The TIEAs signed by Macao (with Australia and with the seven Nordic countries: Denmark, Faroe Islands, Finland, Greenland, Iceland, Norway and Sweden) provide for the exchange of information that is foreseeably relevant to the administration and enforcement of the internal laws of the contracting parties. The term foreseeably relevant is used also in the new Protocol to the DTC with the Peoples Republic of China signed on 26 April 2011. The DTCs with Cape Verde, Peoples Republic of China, Portugal and Mozambique use the term necessary in place of foreseeably relevant. Macaos authorities indicate they interpret these terms pursuant to the Commentary to Article 26 of the OECD Model Tax Convention, where the term as is necessary is recognised to allow for the same scope of exchange as does the term foreseeably relevant.38 231. The wording of the agreement with Peoples Republic of China is different to that of Article 26 of the OECD Model Tax Convention in that there is also specific reference to exchange of information for the prevention of evasion of taxes. This wording is not inconsistent with the international standard. The EOI Article contained in the new Protocol signed with the Peoples Republic of China (not yet in force) does not contain this wording. 232. Macaos DTC with Belgium provides for the exchange of information that is useful for carrying out the provisions of the agreement or of the domestic laws. The term useful seems to allow for the same scope of exchange as does the term foreseeably relevant or necessary and can therefore be considered in line with the international standard. 233. The EOI provision of the DTC with Cape Verde contains an additional paragraph 6. This paragraph provides for the taxpayer and the bank to be identified in concrete (em concreto) by the requesting authorities. The meaning of this clause is not clear. The standard provides for the EOI
38. The word necessary in Article 26(1) of the 2003 OECD Model Tax Convention was replaced by the phrase foreseeably relevant in the 2005 version. The commentary to Article 26 recognises that the term necessary allows for the same scope of exchange as does the term foreseeably relevant.

request to contain name and address of the person holding the information, but only to the extent possible. Agreements under which an EOI request must necessarily contain the name and address of the concerned taxpayer and of the person holding the information (including a bank) are not in line with the international standard. In addition, international tax treaties prevail over domestic laws (Art.1(3) Civil Code). Macao should therefore clarify, through an official interpretation or statement, that it will reply to an EOI request by Cape Verde also when it does not contain the name and address of the taxpayer or of the bank concerned, provided that it is possible to identify them (e.g. because the request contains a bank account number).
In respect of all persons (ToR C.1.2)

234. For exchange of information to be effective it is necessary that a jurisdictions obligations to provide information are not restricted by the residence or nationality of the person to whom the information relates or by the residence or nationality of the person in possession or control of the information requested. For this reason the international standard for exchange of information envisages that exchange of information mechanisms will provide for exchange of information in respect of all persons. 235. All of Macaos DTCs contain the sentence indicating that the exchange of information is not restricted by Article 1 (Persons Covered article). Equally, the seven TIEAs with the Nordic countries contain a provision concerning jurisdictional scope which is equivalent to Article 2 of the OECD Model TIEA.
Obligation to exchange all types of information (ToR C.1.3)

236. Jurisdictions cannot engage in effective exchange of information if they cannot exchange information held by financial institutions, nominees or persons acting in an agency or a fiduciary capacity. Both the OECD Model Tax Convention and the OECD Model TIEA, which are primary authoritative sources of the standards, stipulate that bank secrecy cannot form the basis for declining a request to provide information and that a request for information cannot be declined solely because the information is held by nominees or persons acting in an agency or fiduciary capacity or because the information relates to an ownership interest. 237. The seven TIEAs concluded by Macao do not allow the requested jurisdiction to decline to supply information solely because it is held by a financial institution, nominee or person acting in an agency or fiduciary capacity, or because it relates to ownership interests in a person. As a consequence, they all meet the standard. A provision containing wording akin to Article 26 (5) is also included in the new Protocol to the DTC with the
Peoples Republic of China, which is not yet in force. Macaos other bilateral agreements do not contain such a provision. 238. The absence of wording akin to Article 26(5) of the OECD Model Tax Convention does not automatically create restrictions on exchange of bank information. The Commentary to Article 26(5) indicates that whilst paragraph 5 (added to the Model Tax Convention in 2005) represents a change in the structure of the Article, it should not be interpreted as suggesting that the previous version of the Article did not authorise the exchange of such information. Macaos authorities confirmed that the absence in the EOI provisions of their agreements of paragraphs containing similar language as those in Article 26(5) of the OECD Model Tax Convention would not prevent them exchanging bank and other protected information. 239. There may be, however, such limitations in place in the domestic laws of some of these treaty partners (Mozambique and Cape Verde). In these cases, the absence of a specific provision requiring exchange of bank information unlimited by bank secrecy may serve as a limitation on the exchange of information which can occur under the relevant DTC. Macao should continue to renegotiate its older DTCs to include Article 26(5) of the OECD Model Taxation Convention. 240. The tax treaty signed with Cape Verde contains language akin to Article 26(5) of the OECD Model Tax Convention but it also includes two further paragraphs that may restrict the effectiveness of the exchange. Article 26(6) of the DTC with Cape Verde requires taxpayer and the bank to be identified in concrete (em concreto). Article 26(7) provides that, notwithstanding the provisions in paragraphs 5 and 6, bank information can be exchanged only when it can be obtained under the domestic laws of both Contracting Parties. Concerns about these requirements have already been discussed above (para.233).
Absence of domestic tax interest (ToR C.1.4)

241. The concept of domestic tax interest describes a situation where a contracting party can only provide information to another contracting party if it has an interest in the requested information for its own tax purposes. A refusal to provide information based on a domestic tax interest requirement is not consistent with the international standard. EOI partners must be able to use their information gathering measures even though invoked solely to obtain and provide information to the requesting jurisdiction. 242. The agreements with the seven Nordic countries allow information to be obtained and exchanged notwithstanding it is not required for any Macao domestic tax purpose. The DTC with Cape Verde and the new Protocol with the Peoples Republic of China contain the wording of Article 26(4) of the OECD Model Tax Convention, obliging the contracting parties to use

information-gathering measures to exchange requested information without regard to a domestic tax interest. The remaining DTCs (with Belgium, Mozambique and Portugal) do not contain such a provision. The Commentary to Article 26(4) indicates that paragraph 4 was introduced in the 2005 Model Tax Convention to express an implicit obligation contained in this Article to exchange information in situations where the requested information is not needed by the requested State for domestic tax purposes. 243. Macao does not have a domestic tax interest requirement. However, it is possible that a domestic tax interest requirement may exist in some of Macaos partner countries (e.g. in Mozambique). In such cases, the absence of a specific provision requiring exchange of information regardless of any domestic tax interest will serve as a limitation on the exchange of information which can occur under the relevant agreement. Macao should continue to renegotiate its older DTCs to include Article 26(4) of the OECD Model Taxation Convention.
Absence of dual criminality principles (ToR C.1.5)

244. The principle of dual criminality provides that assistance can only be given if the conduct being investigated (and giving rise to the information request) would constitute a crime under the laws of the requested country if it had occurred in the requested country. In order to be effective, exchange of information should not be constrained by the application of the dual criminality principle. 245. None of the EOI agreements concluded by Macao applies the dual criminality principle to restrict the exchange of information.
Exchange of information in both civil and criminal tax matters (ToR C.1.6)
246. All of the EOI agreements concluded by Macao provide for the exchange of information in both civil and criminal tax matters. 247. The first paragraph of the exchange of information article in the DTC with the Peoples Republic of China mentions that the information exchange will occur in particular for the prevention of fiscal evasion. The use of the term in particular means that EOI can take place also in the cases where no tax evasion is involved, i.e. in civil tax matters.
Provide information in specific form requested (ToR C.1.7)

248. There are no restrictions in the exchange of information provisions in Macaos exchange of information agreements that would prevent Macao from providing information in a specific form, as long as this is consistent with its own administrative practices.
In force (ToR C.1.8)

249. For effective exchange of information a jurisdiction must have exchange of information arrangements in force. Where exchange of information agreements have been signed the international standard requires that jurisdictions must take all steps necessary to bring them into force expeditiously. 250. Pursuant to Macaos laws, it is not necessary to incorporate international law into domestic law for its effective application. Once international tax treaties are duly ratified by the Chief Executive, they are published in the Official Gazette (Arts.3(6) and 5(1) of Publication of Laws Act Once published in the Gazette, such agreements immediately and automatically become part of Macao SARs legal order. 251. Three of the 13 agreements which Macao has concluded are in force (see Annex 2 for signing and entry into force dates). They all provide for exchange of information in line with the standard. Of the ten agreements that are not yet in force, eight have been signed within the past twelve months (the TIEAs with Denmark, the Faroe Islands, Finland, Greenland, Iceland, Norway and Sweden, signed on 29 April 2011, and with Australia, signed on 12 July 2011, as well as the DTC with Cape Verde, signed on 15 November 2010). The new Protocol with the Peoples Republic of China is not yet in force and has also been signed within the past 12 months (26 April 2011). For nine of the agreements not yet in force39, Macao has recently concluded its steps to bring them into force and is currently in the process of notifying its partners of this. It can therefore be concluded that Macao has taken all reasonable action to expedite the bringing into force of those agreements that have been signed and which are not yet in force.
Be given effect through domestic law (ToR C.1.9)

252. For information exchange to be effective the parties to an exchange of information arrangement need to enact any legislation necessary to comply with the terms of the arrangement. 253. Macao has enacted domestic legislation, principally the 2009 Exchange of Information Act, to give effect to its arrangements for the exchange of information for tax purposes.
39.
TIEAs with Australia, Denmark, the Faroe Islands, Finland, Greenland, Iceland, Norway and Sweden and the protocol with mainland China.

Phase 1 determination The element is in place. Factors underlying recommendations Recommendations
One of Macaos DTCs contains Macaos authorities should commence additional language which restricts the negotiations to amend the agreement exchange of bank information. with Cape Verde to bring it to the standard.
C.2. Exchange-of-information mechanisms with all relevant partners

The jurisdictions network of information exchange mechanisms should cover all relevant partners.
254. Ultimately, the international standard requires that jurisdictions exchange information with all relevant partners, meaning those partners who are interested in entering into an information exchange arrangement. Agreements cannot be concluded only with counterparties without economic significance. If it appears that a jurisdiction is refusing to enter into agreements or negotiations, in particular with those jurisdictions that have a reasonable expectation of requiring information in order to properly administer and enforce its tax laws, it may indicate a lack of commitment to implement the standards. 255. Macaos treaty network covers almost all Portuguese-speaking jurisdictions, which are, in respect of Macaos economic and cultural relationships, clearly relevant. Macao also has a DTC with mainland China, its main trading partner, and a protocol to that DTC has been signed. Macao is actively negotiating agreements with some of its other main trading partners, namely, Hong Kong, China and Vietnam. 40 256. The policy of Macao with respect to expanding its EOI network has been to focus on jurisdictions with which it has a significant economic and cultural relations, e.g. Portuguese speaking countries, as well as with those jurisdictions which are either Global Forum, G20 or OECD members. It has already signed agreements with 8 OECD members, 9 Global Forum members and 2 G20 members. For nine of the agreements not yet in force41, Macao has
40. 41. Overall, Macaos main trading partners are, in order: the United States; mainland China; the European Union; and Hong Kong, China (imports), and, Hong Kong, China; mainland China; and the United States (exports). TIEAs with Australia, Denmark, the Faroe Islands, Finland, Greenland, Iceland, Norway and Sweden and the protocol with mainland China.
concluded its steps to bring them into force and is currently in the process of notifying its partners of this. Over recent months, it has initialled agreements with three further Global Forum members (India, Jamaica and Malta). Negotiations are in a very advanced stage with one further G20 economy (Germany), as well as with other Global Forum members (Argentina, Ireland and New Zealand). It can therefore be concluded that Macao has taken action to expand its treaty network. Macao has also taken all necessary steps to bring into force those agreements that have been signed and which are not yet in force. It is recommended that Macao continue expanding its treaty network, by establishing agreements to the standard with all its relevant partners and bringing them into force expeditiously. 257. Comments were sought from jurisdictions participating in the Global Forum in the course of the preparation of this report, and no jurisdiction advised the assessment team that Macao had refused to negotiate or conclude an EOI agreement with it.
Phase 1 determination The element is in place, but certain aspects of the legal implementation of the element need improvement. Factors underlying recommendations Currently, 3 of Macaos 13 signed agreements are in force and they do not cover some of its main trading partners. Recommendations Macao should establish agreements to the standard with all its relevant partners and bring them into force expeditiously.
C.3. Confidentiality
The jurisdictions mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received.
Information received: disclosure, use and safeguards (ToR C.3.1)

258. Governments would not engage in information exchange without the assurance that the information provided would only be used for the purposes permitted under the exchange mechanism and that its confidentiality would be preserved. Information exchange instruments must therefore contain confidentiality provisions that spell out specifically to whom the information can be disclosed and the purposes for which the information can be used. In addition to the protections afforded by the confidentiality provisions of information exchange instruments, countries with tax systems generally impose strict confidentiality

requirements on information collected for tax purposes. Confidentiality rules should apply to all types of information exchanged, including information provided in a request, information transmitted in response to a request and any background documents to such requests. 259. All of the exchange of information articles in Macaos double tax agreements have confidentiality provisions modeled on Article 26(2) of the OECD Model Tax Convention. Pursuant to these provisions, information provided by foreign tax authorities can only be used for the purpose for which they are required and can be detected only in judicial proceedings. 260. In addition, the EOI Act requires employees and agents of the FSB to keep confidential, even after the termination of their functions, the facts of which they acquire knowledge in the exercise of their functions, including information obtained through EOI. Such information may not be disclosed for purposes or use other than compliance with a request for EOI (Art.8). When responding to an EOI request, Macaos officials are exempted from complying with the obligations set out by the law on the Individual Information Protection Law (Law 8/2005) (Art.9).
All other information exchanged (ToR C.3.2)

261. The confidentiality provisions in the agreements and in Macaos domestic law do not draw a distinction between information received in response to requests and information forming part of the requests themselves. As such, these provisions apply equally to all requests for such information, background documents to such requests, and any other document reflecting such information, including communications between the requesting and requested jurisdictions and communications within the tax authorities of either jurisdiction. 262. In addition, Macaos domestic law explicitly protects the transfer of information outside the region of Macao. It states that the competent authority can disclose the information based on the provisions of the agreements made between jurisdictions. 263. The EOI Act allows for the disclosure of information relating to an EOI request to interested persons (Art.10(1); see paragraph 218). Information relating to the request, however, does not need to be disclosed to a person concerned by the information whenever the counterparty so requires. Whether in practice disclosure of information relating to an EOI request is conducted in a manner consistent with the confidentiality requirements in the standard, will be considered as part of the Phase 2 review of Macao.

C.4. Rights and safeguards of taxpayers and third parties

The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties.
264. The international standard allows requested parties not to supply information in response to a request in certain identified situations. 265. Among other reasons, an information request can be declined where the requested information would disclose confidential communications protected by the legal professional privilege. Legal professional privilege is a feature of the legal systems of many countries. However, communications between a client and an attorney or other admitted legal representative are, generally, only privileged to the extent that the attorney or other legal representative acts in his or her capacity as an attorney or other legal representative. Where legal professional privilege is more broadly defined it does not provide valid grounds on which to decline a request for exchange of information. To the extent, therefore, that an attorney acts as a nominee shareholder, a trustee, a settlor, a company director or under a power of attorney to represent a company in its business affairs, exchange of information resulting from and relating to any such activity cannot be declined because of legal professional privilege. 266. The limits on information which must be exchanged under Macaos arrangements mirror those provided for in the international standard. Each of Macaos agreements ensures that the parties are not obliged to provide information which would disclose any trade, business, industrial, commercial or professional secret or information which is the subject of legal professional privilege or information the disclosure of which would be contrary to public policy. The EOI Act also contains language concerning professional privilege which is in line with the standard (Art.5(1), (2) and (3)) (see previously, section B.1.5 of this report).
C.5. Timeliness of responses to requests for information

The jurisdiction should provide information under its network of agreements in a timely manner.
Responses within 90 days (ToR C.5.1)

267. In order for exchange of information to be effective, the information needs to be provided in a timeframe which allows tax authorities to apply it to the relevant cases. If a response is provided but only after a significant lapse of time the information may no longer be of use to the requesting authorities. This is particularly important in the context of international cooperation as cases in this area must be of sufficient importance to warrant making a request. 268. There are no specific legal or regulatory requirements in place which would prevent Macao responding to a request for information by providing the information requested or providing a status update within 90 days of receipt of the request.
Organisational process and resources (ToR C.5.2)

269. Macaos legal and regulatory framework relevant to exchange of information for tax purposes is presided over by Macaos Chief Executive and effectively managed by the Financial Services Bureau (FSB), Macaos tax administration agency. Pursuant to the EOI Act, the Chief Executive of Macao is ultimately responsible for international exchange of tax information. Whilst the FSB is the competent authority to receive, deliver and process EOI requests, it is the competence of the Chief Executive to formally accept or decline EOI requests made or received by Macao (Art.4(1)). The FSB is also responsible for negotiating EOI agreements, which are then signed by the Chief Executive. 270. A review of Macaos organisational process and resources will be conducted in the context of its Phase 2 review.
Absence of restrictive conditions on exchange of information (ToR C.5.3)

271. There were no aspects of Macaos laws that appear to impose restrictive conditions on exchange of information. A review of the practical application of these processes and the resources available to the Macaos competent authority will be conducted in the context of its Phase 2 review.

Phase 1 determination The assessment team is not in a position to evaluate whether this element is in place, as it involves issues of practice that are dealt with in the Phase 2 review.
SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS 79
Summary of Determinations and Factors Underlying Recommendations

Factors underlying recommendations
Determination
Recommendations
Jurisdictions should ensure that ownership and identity information for all relevant entities and arrangements is available to their competent authorities. (ToR A.1) The element is in place, but certain aspects of the legal implementation of the element need improvement. Macaos laws do not clearly identify that all foreign companies with a sufficient nexus to Macao are required to keep ownership and identity information. It is open to public companies to issue bearer shares. While such shares may not be in circulation currently there are insufficient mechanisms in place to ensure the availability of ownership information in all circumstances. Macao should ensure that ownership and identity information is kept with respect to all foreign companies with a sufficient nexus to Macao. Macao should ensure that robust mechanisms are in place to identify the owners of bearer shares or should abolish bearer shares.
80 SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS

Determination
Recommendations
Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements. (ToR A.2) The element is in place, but certain aspects of the legal implementation of the element need improvement. Macaos laws do not require all foreign companies with a sufficient nexus to Macao to keep accounting records, including underlying documentation. Foundations that are not public interest entities are not expressly required to keep accounting records. For all relevant entities, record keeping requirements do not clearly cover the full range of underlying documentation. The element is in place. Competent authorities should have the power to obtain and provide information that is the subject of a request under an exchange of information arrangement from any person within their territorial jurisdiction who is in possession or control of such information (irrespective of any legal obligation on such person to maintain the secrecy of the information). (ToR B.1) The element is in place. The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the requested jurisdiction should be compatible with effective exchange of information. (ToR B.2) The element is in place. Exchange of information mechanisms should allow for effective exchange of information. (ToR C.1) The element is in place. One of Macaos DTCs contains additional language which restricts the exchange of bank information. Macaos authorities should commence negotiations to amend the agreement with Cape Verde to bring it to the standard. Macao should ensure that comprehensive, reliable accounting information is kept for all relevant entities, including foundations and foreign companies with a sufficient nexus to Macao, for a minimum of five years. Macao should ensure that comprehensive underlying documentation is kept for all entities for a minimum of five years.
Banking information should be available for all account-holders. (ToR A.3)
SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS 81
Determination
Recommendations
The jurisdictions network of information exchange mechanisms should cover all relevant partners. (ToR C.2) The element is in place, but certain aspects of the legal implementation of the element need improvement. Currently, 3 of Macaos 13 signed agreements are in force and they do not cover some of its main trading partners. Macao should establish agreements to the standard with all its relevant partners and bring them into force expeditiously.
The jurisdictions mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received. (ToR C.3) The element is in place. The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties. (ToR C.4) The element is in place. The jurisdiction should provide information under its network of agreements in a timely manner. (ToR C.5) The assessment team is not in a position to evaluate whether this element is in place, as it involves issues of practice that are dealt with in the Phase 2 review.
ANNEXES 83
Annex 1: Jurisdictions Response to the Review Report 42
The Macao delegation is pleased to announce its acceptance of the phase 1 Peer Review Report as drafted by the assessment team and approved by the Peer Review Group. We express our gratitude for all the hard work done by the Global Forum Secretariat, the assessors as well as the Peer Review Group. In general, the report reflects the entire situation of Macao in a true and fair manner and the Macao delegation is pleased to accept the recommendations as suggested in the report. In the future, Macao will continue keeping its commitment to the international standard of exchange of information for tax purposes and will continue working closely with the international community and the Global Forum to improve the suggested issues. The Macao delegation is confident that the suggested recommendations, which nonetheless do not constitute major issues in Macao, will be promptly implemented. To implement the recommendations contained in the report, the Macao delegation will work with the respective competent authorities in Macao and study the necessary steps and measures required. In particular, necessary actions to address the issue of bearer shares as well as the improvement of legislation concerning foreign companies will proceed. Any improvements will be reported to the Global Forum on a timely basis. Macaos endorsement and implementation of the internationally agreed standards on tax transparency and exchange of tax information has never been hindered by its small-scale economy and low international trade volume. With the help of the Central Government of China and the Global Forum Secretariat, Macao has successfully signed 12 agreements which meet the international standard, having also taken all necessary steps to bring these agreements into force expeditiously. In that regard, Macao already completed all its internal procedures to ratify all of the signed agreements that are not yet in force.
42. This Annex presents the jurisdictions response to the review report and shall not be deemed to represent the Global Forums views.
84 ANNEXES
Meanwhile, Macao has initialed TIEAs with India, Jamaica and Malta, and its negotiations with Ireland, Germany, New Zealand and Argentina have also already reached the final stage. In addition we have also started the negotiations of DTCs with Hong Kong and Vietnam. In conclusion, Macao has been actively extending its international network of tax information exchange, and has never turned down a single request from any jurisdiction for tax agreement negotiation. To maintain its commitment, Macao will continue initiating negotiations with new treaty partners and fully engage in EOI mechanisms at international standard.
ANNEXES 85
Annex 2: List of all Exchange-of-Information Mechanisms in Force
Treaty partner 1 2 3 4 5 6 7 8 9 10 11 12 13 Australia Belgium Cape Verde China, Peoples Republic of Denmark Faroe Islands Finland Greenland Iceland Mozambique Norway Portugal Sweden
Type of EOI arrangement TIEA DTC DTC DTC Protocol TIEA TIEA TIEA TIEA TIEA DTC TIEA DTC TIEA
Date signed 12/07/2011 19/06/2006 15/11/2010 27/12/2003 26/04/2011 29/04/2011 29/04/2011 29/04/2011 29/04/2011 29/04/2011 15/06/2007 29/04/2011 28/09/1999 29/04/2011
Date in force
27/12/2003
11/01/2011 29/09/1999
86 ANNEXES
Annex 3: List of all Laws, Regulations and Other Relevant Material
Constitutional and Administrative Law

Administrative Regime of Public Interest (Declaracao de Utilidade Pblica Adminsutrativa, Law N2/1999) Basic Law (31 March 1993) General Regulation for Lawyers (Decree Law N31/1991) Personal Data Protection Act (Decree Law N8/2005) Publication of Laws (Publicaco e formulario das Diplomas, Law N3/1999).
Commercial and civil laws

Administrative Contentious Procedure Code (Cdigo do Processo Administrativo Contencioso, Decree Law N110/1999) Civil Registry Code (Codigo do Registro Civil, Decree Law N59/1999) Civil Code (Codigo Civil, DL N39/1999 amended by Decree Law N48/1999) Commercial Code (DL N40, August 1999, amended by Law N6, April 2000) Commercial Registration Code (Cdigo do Registo Comercial, Decree Law N56/99/M) Financial System Act (Decree Law N32/1993) Finance Companies Act (Decree Law N15/1983)
ANNEXES 87
Financial Documents Retention Regulation (Normas sobre a Conservao da Documentao em Arquivo na Direco dos Servios de Finanas. Order N94/1988) General Rules for Financial Reports (Chief Executive Order N2/2005) Law on the Accounting Records of the Non-Profit Organizations (ARNPO Law) (Official Gazette no.24/2003) Offshore Regime of Macao (Decree Law N58/1999) Regulation on Money changers (Decree Law N38/1997) Regulatory Framework for Cash Remittance (Decree Law Law N15/1997) Regulation on Association (Law N2/1999) Retention Regulation on Identity Documents (Normas Respeitantes Conservao dos Documentos em Arquivo nos Servios de Identificao de Macau, Order N66/1986)
Tax laws
Direct Tax on Profits, Complementary Law (Imposto Complementar de Rendimentos, Law N21/1978) Information Exchange Act for Fiscal Purposes (Troca de Informaes em Matria Fiscal. Law N20/2009) Tax on Industrial Business (Contribuio Industrial, Law N15/1977)
Anti-money laundering and financial laws

Prevention and Suppression of the Crime of Money Laundering (Law N2/2006) Preventative Measures for the Crimes of Money Laundering and Financing of Terrorism (Administrative Regulation N7/2006) Preventive Measures on Suspicious Transactions, (Decree Law 24/1998) Solicitors Guideline issued by the independent commission for the exercise of the disciplinary power over solicitors on anti-money laundering.
88 ANNEXES
Other
Competency and Authority of Judicial Police (Polcia Judiciria Law N5/2006) Compliance with Certain Acts of International Law (Lei Relativa ao Cumprimento de Certos Actos de Direito Internacional, Law N4/2002) Criminal Code (Codigo Penal) (1995. Consolidated version with the amendments from 2001, 2006, 2008 and 2009) Criminal Litigation Code (Cdigo de Processo Penal Decree-Law No. 48/96/M) Criminalization of Illicit Traffic in Narcotic Drugs and Psychotropic Substances. (Decree Law N 5/1991 Law against Organized Crime (Ley da Criminalidade Organizada, Law N7/1997) Law of Judicial Organization (Law No.9/1999) Prevention and Suppression of the Crime of Terrorism (Law N3/2006)
Instructions and guidelines

Circular Note No.02/DIR/2011 of 15 July 2011 issued by the Financial Services Bureau. Accountants instructions issued by financial services Bureau and enforced through Registry of Auditors and Accountants, on prevention and suppression of money laundering and financing of terrorism for auditors, accounts and tax consultants. Guidelines issued by Legal Affairs Bureau on money laundering and financing of terrorism in respect of notaries and registrars. Instruction N1/2006 Lawyers instructions issued by Macao Lawyers association on the procedures to be adopted in order to comply with duties regarding the prevention of money laundering and financing of terrorism in respect of lawyers and trainee lawyers Instructions N2/2006 issued by Gaming Inspection and Coordination Bureau about Preventive Measures Against Crimes of Money Laundering and Terrorist Financing. Specifically recording of transactions and patrons involved in gaming transactions. Instructions issued by Macao Economic Services on trust and company service providers, and specify general procedures to be adopted with a view to prevent money laundering crimes and financing of terrorism.
ANNEXES 89
Instructions issued by Macao Economic Services on traders in goods of high unit value and specify general procedures to be adopted with a view to preventing money laundering crimes and financing of terrorism. Instruction N2/2006 Offshore Preventive Measures issued by Macao Trade and Investment Promotion Institute on anti-money laundering and combating the financing of terrorism in respect of offshore business activities for commercial offshore services institutions and auxiliary offshore services institutions.
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT

The OECD is a unique forum where governments work together to address the economic, social and environmental challenges of globalisation. The OECD is also at the forefront of efforts to understand and to help governments respond to new developments and concerns, such as corporate governance, the information economy and the challenges of an ageing population. The Organisation provides a setting where governments can compare policy experiences, seek answers to common problems, identify good practice and work to co-ordinate domestic and international policies. The OECD member countries are: Australia, Austria, Belgium, Canada, Chile, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The European Union takes part in the work of the OECD. OECD Publishing disseminates widely the results of the Organisations statistics gathering and research on economic, social and environmental issues, as well as the conventions, guidelines and standards agreed by its members.
OECD PUBLISHING, 2, rue Andr-Pascal, 75775 PARIS CEDEX 16 (23 2011 56 1 P) ISBN 978-92-64-12661-9 No. 59645 2011
Global Forum on Transparency and Exchange of Information for Tax Purposes
PEER REVIEWS, PHASE 1: MACAO, CHINA

The Global Forum on Transparency and Exchange of Information for Tax Purposes is the multilateral framework within which work in the area of tax transparency and exchange of information is carried out by over 100 jurisdictions which participate in the work of the Global Forum on an equal footing. The Global Forum is charged with in-depth monitoring and peer review of the implementation of the standards of transparency and exchange of information for tax purposes. These standards are primarily reected in the 2002 OECD Model Agreement on Exchange of Information on Tax Matters and its commentary, and in Article 26 of the OECD Model Tax Convention on Income and on Capital and its commentary as updated in 2004, which has been incorporated in the UN Model Tax Convention. The standards provide for international exchange on request of foreseeably relevant information for the administration or enforcement of the domestic tax laws of a requesting party. Fishing expeditions are not authorised, but all foreseeably relevant information must be provided, including bank information and information held by duciaries, regardless of the existence of a domestic tax interest or the application of a dual criminality standard. All members of the Global Forum, as well as jurisdictions identied by the Global Forum as relevant to its work, are being reviewed. This process is undertaken in two phases. Phase 1 reviews assess the quality of a jurisdictions legal and regulatory framework for the exchange of information, while Phase 2 reviews look at the practical implementation of that framework. Some Global Forum members are undergoing combined Phase 1 plus Phase 2 reviews. The ultimate goal is to help jurisdictions to effectively implement the international standards of transparency and exchange of information for tax purposes. All review reports are published once approved by the Global Forum and they thus represent agreed Global Forum reports. For more information on the work of the Global Forum on Transparency and Exchange of Information for Tax Purposes, and for copies of the published review reports, please visit www.oecd.org/tax/transparency and www.eoi-tax.org.
Please cite this publication as: OECD (2011), Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews: Macao, China 2011: Phase 1: Legal and Regulatory, OECD Publishing. http://dx.doi.org/10.1787/9789264126626-en This work is published on the OECD iLibrary, which gathers all OECD books, periodicals and statistical databases. Visit www.oecd-ilibrary.org, and do not hesitate to contact us for more information.
ISBN 978-92-64-12661-9 23 2011 56 1 P
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Global Forum On Transparency and Exchange of Information For Tax Purposes: Peer Reviews: Global Forum On Transparency and Exchange of Information For Tax Purposes Peer Reviews: Macao, China 2011

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Global Forum On Transparency and Exchange of Information For Tax Purposes: Peer Reviews: Global Forum On Transparency and Exchange of Information For Tax Purposes Peer Reviews: Macao, China 2011

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GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE OF INFORMATION FOR TAX PURPOSES

Peer Review Report Phase 1 Legal and Regulatory Framework

ISBN 978-92-64-12661-9 (print) ISBN 978-92-64-12662-6 (PDF)

Corrigenda to OECD publications may be found on line at: www.oecd.org/publishing/corrigenda.

ABOUT THE GLOBAL FORUM 5

About the Global Forum

General information on the legal and tax system

Overview of the financial sector and relevant professions Financial sector

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 21

Compliance with the Standards

22 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 23

A.1. Ownership and identity information

Companies (ToR 15 A.1.1) Types of companies

24 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 25

26 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

Information provided to government authorities

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 27

28 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 29

Information held by companies

30 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

Information held by directors and officers

Information held by service providers Information held by notaries

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 31

Information held by other service providers

32 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 33

34 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

Bearer shares (ToR A.1.2)

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 35

Partnerships (ToR A.1.3) Types of partnerships

36 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

Information provided to government authorities

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 37

Information held by the partnership or partners

Information held by service providers Notaries

38 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

Information held by other service providers

Trusts (ToR A.1.4) Types of trusts

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 39

40 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 41

Information to be provided to government authorities

42 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

Information to be held by trustees and service providers

Foundations (ToR A.1.5) and Other relevant entities and arrangements

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 43

Information held by government authorities

44 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

Anti-money laundering legislation

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 45

46 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

AML/CFT regulations, instructions and guidelines

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 47

A.2. Accounting records

General requirements (ToR A.2.1) Commercial laws

48 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 49

50 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

Underlying documentation (ToR A.2.2)