Macau (China)
This report analyses the implementation of the AEOI Standard in Macau with respect to the requirements of the AEOI Terms of Reference. It assesses both the legal frameworks put in place to implement the AEOI Standard and the effectiveness of the implementation of the AEOI Standard in practice.
The methodology used for the peer reviews and that therefore underpins this report is outlined in Chapter 2.
Overall findings
AEOI legal framework
Macau’s legal framework implementing the AEOI Standard is in place and is consistent with the requirements of the AEOI Terms of Reference. This includes Macau’s domestic legislative framework requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (CR1) and its international legal framework to exchange the information with all Macau, China’s Interested Appropriate Partners (CR2).
Effectiveness of AEOI in practice
Macau’s implementation of the AEOI Standard is on track with respect to the requirements of the AEOI Terms of Reference to ensure the effectiveness of the AEOI Standard in practice. This includes ensuring Reporting Financial Institutions correctly conduct the due diligence and reporting procedures (CR1) and exchanging the information in an effective and timely manner (CR2). Macau is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.
Overall rating in relation to the effectiveness in practice: On Track
General context
Macau commenced exchanges under the AEOI Standard on a non-reciprocal basis in 2018 (i.e. Macau sends but does not receive information).
In order to provide for Reporting Financial Institutions to collect and report the information to be exchanged, Macau:
enacted Law No. 5/2017 (Legal Regime for the Exchange of Tax Information) as amended by Law No. 21/2019 and Law No. 1/2022; and
issued Chief Executive Resolution No. 211/2017, amended by Chief Executive Resolution No. 232/2020.
Under this framework Reporting Financial Institutions were required to commence the due diligence procedures in relation to New Accounts from 1 July 2017. With respect to Preexisting Accounts, Reporting Financial Institutions were required to complete the due diligence procedures on High Value Individual Accounts by 30 June 2018 and on Lower Value Individual Accounts and Entity Accounts by 30 June 2019.
Following the initial Global Forum peer review, Macau amended its legislative framework to address issues identified, the last of which was effective from 1 April 2022.
With respect to the exchange of information under the AEOI Standard, Macau has the Convention on Mutual Administrative Assistance in Tax Matters in place1 and Macau activated the associated CRS Multilateral Competent Authority Agreement in time for exchanges in 2018.
Table 1 sets out the number of Financial Institutions in Macau that reported information on Financial Accounts in 2021 as defined in the AEOI Standard (essentially because they maintained Financial Accounts for Account Holders, or that were related to Controlling Persons, resident in a Reportable Jurisdiction). It also sets out the number of Financial Accounts that they reported in 2021. In this regard, it should be noted that Macau requires the reporting of Financial Accounts based on a prescribed list of exchange partners and some accounts may be required to be reported more than once (e.g. jointly held accounts or accounts with multiple related Controlling Persons), which is reflected in the figures below. These figures provide key contextual information to the development and implementation of Macau’s administrative compliance strategy, which is analysed in the subsequent sections of this report.
Table 2 sets out the number of exchange partners to which information was successfully sent by Macau in the past few years (including where the necessary frameworks were in place, containing an obligation on Reporting Financial Institutions to report information, but no relevant Reportable Accounts were identified). These figures provide key contextual information in relation to Macau’s exchanges in practice, which is also analysed in subsequent sections of this report.
In order to provide for the effective implementation of the AEOI Standard, in Macau:
the Financial Services Bureau (the tax authority) has the responsibility to ensure the effective implementation of the due diligence and reporting obligations by Reporting Financial Institutions and for exchanging the information with Macau’s exchange partners;
technical solutions necessary to receive and validate the information reported by Reporting Financial Institutions were put in place via an online facility; and
the Common Transmission System (CTS) is used for the exchange of the information, along with the associated file preparation and encryption requirements.
It should be noted that the review of Macau’s legal frameworks implementing the AEOI Standard concluded with the determination that Macau’s domestic and international legal frameworks are In Place. This has been taken into account when reviewing the effectiveness of Macau’s implementation of the AEOI Standard in practice.
Findings and conclusions on the legal frameworks
The detailed findings and conclusions on the AEOI legal frameworks for Macau are below, organised per Core Requirement (CR) and then per sub-requirement (SR) as extracted from the AEOI Terms of Reference (see Annex C).
CR1 Domestic legal framework: Jurisdictions should have a domestic legislative framework in place that requires all Reporting Financial Institutions to conduct the due diligence and reporting procedures in the CRS, and that provides for the effective implementation of the CRS as set out therein.
Macau’s domestic legislative framework is in place and contains all of the key aspects of the CRS and its Commentary requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (SRs 1.1 – 1.3). It also provides for a framework to enforce the requirements (SR 1.4).
SR 1.1 Jurisdictions should define the scope of Reporting Financial Institutions consistently with the CRS.
Macau has defined the scope of Reporting Financial Institutions in its domestic legislative framework in accordance with the CRS and its Commentary.
SR 1.2 Jurisdictions should define the scope of Financial Accounts and Reportable Accounts consistently with the CRS and incorporate the due diligence procedures to identify them.
Macau has defined the scope of the Financial Accounts that are required to be reported in its domestic legislative framework and incorporated the due diligence procedures that must be applied to identify them in accordance with the CRS and its Commentary.
SR 1.3 Jurisdictions should incorporate the reporting requirements contained in Section I of the CRS into their domestic legislative framework.
Macau has incorporated the reporting requirements in its domestic legislative framework in accordance with the CRS and its Commentary.
SR 1.4 Jurisdictions should have a legislative framework in place that allows for the enforcement of the requirements of the CRS in practice.
Macau has a legislative framework in place to enforce the requirements in accordance with the CRS and its Commentary.
CR2 International legal framework: Jurisdictions should have exchange relationships in effect with all Interested Appropriate Partners as committed to and that provide for the exchange of information in accordance with the Model CAA.
Macau’s international legal framework to exchange the information is in place, is consistent with the Model CAA and its Commentary and provides for exchange with all of Macau’s Interested Appropriate Partners (i.e. all jurisdictions that are interested in receiving information from Macau and that meet the required standard in relation to confidentiality and data safeguards) (SRs 2.1 – 2.3).
SR 2.1 Jurisdictions should have exchange agreements in effect with all Interested Appropriate Partners that permit the automatic exchange of CRS information.
Macau has exchange agreements that permit the automatic exchange of CRS information in effect with all its Interested Appropriate Partners.
SR 2.2 Such an exchange agreement should be put in place without undue delay, following the receipt of an expression of interest from an Interested Appropriate Partner.
Macau put in place its exchange agreements without undue delay.
SR 2.3 Jurisdictions should ensure that the exchange agreements in effect provide for the exchange of information in accordance with the requirements of the Model CAA.
Macau’s exchange agreements provide for the exchange of information in accordance with the requirements of the Model CAA.
Findings and conclusions in relation to effectiveness in practice
The detailed findings and conclusions in relation to effectiveness in practice of AEOI for Macau are below, organised per Core Requirement (CR) and then per sub-requirement (SR) as extracted from the AEOI Terms of Reference (see Annex C).
CR1 Effectiveness in practice: Jurisdictions should ensure that in practice Reporting Financial Institutions correctly implement the due diligence and reporting procedures, which includes a requirement for jurisdictions to have in place an administrative framework to ensure the effective implementation of the CRS.
Macau’s implementation of the AEOI Standard is on track with respect to ensuring that Reporting Financial Institutions are correctly conducting the due diligence and reporting procedures and are therefore reporting complete and accurate information. This includes ensuring effectiveness in a domestic context, such as through having an effective administrative compliance framework and related procedures (SR 1.5), and collaborating with exchange partners to ensure effectiveness (SR 1.6). Macau is encouraged to continue its implementation process to ensure its ongoing effectiveness.
SR 1.5 Jurisdictions should ensure that in practice Reporting Financial Institutions identify the Financial Accounts they maintain, identify the Reportable Accounts among those Financial Accounts, as well as their Account Holders, and where relevant Controlling Persons, by correctly conducting the due diligence procedures and collect and report the required information with respect to each Reportable Account. This includes having in place:
an effective administrative compliance framework to ensure the effective implementation of, and compliance with, the CRS. This framework should:
be based on a strategy that facilitates compliance by Reporting Financial Institutions and which is informed by a risk assessment in respect of the effective implementation of the CRS that takes into account relevant information sources (including third party sources);
include procedures to ensure that Financial Institutions correctly apply the definitions of Reporting Financial Institutions and Non-Reporting Financial Institutions;
include procedures to periodically verify Reporting Financial Institutions’ compliance, conducted by authorities that have adequate powers with respect to the reviewed Reporting Financial Institutions, with procedures to access the records they maintain; and
effective procedures to ensure that Financial Institutions, persons or intermediaries do not circumvent the due diligence and reporting procedures;
effective enforcement mechanisms to address non-compliance by Reporting Financial Institutions;
strong measures to ensure that valid self-certifications are always obtained for New Accounts;
effective procedures to ensure that each, or each type of, jurisdiction-specific Non-Reporting Financial Institution and Excluded Account continue to present a low risk of being used to evade tax; and
effective procedures to follow up with a Reporting Financial Institution when undocumented accounts are reported in order to establish the reasons why such information is being reported.
In order to ensure that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures, Macau implemented all of the requirements in accordance with expectations. The key findings were:
Macau has developed and commenced implementing an overarching strategy to ensure compliance with the AEOI Standard using a risk assessment that takes into account a range of relevant information sources, including questionnaires, data analysis and characteristics of the industry sectors. Macau has introduced a requirement for Reporting Financial Institutions to submit certain statistical information annually that goes beyond the standard reporting requirement, as an additional source of information for risk analysis and the targeting of compliance activities. Macau’s compliance strategy is designed to facilitate compliance through education and communication, and to ensure compliance through enforcement procedures, put in place following the recent legal amendments that provide for the necessary enforcement powers. Macau intends to keep its compliance strategy and risk assessment under review to ensure its effectiveness on an ongoing basis.
Macau has worked to understand its population of Financial Institutions, including relevant non-regulated entities, through mandatory registration and nil reporting obligations cross-checked against regulatory lists, domestic tax information, account data from known Financial Institutions and the Foreign Financial Institution list for FATCA purposes. Macau has undertaken activities to ensure the entities are correctly registering and filing. Macau intends to keep its understanding of its Financial Institution population up to date on a routine basis.
The institution responsible for implementing Macau’s compliance strategy appears to have the necessary resources to discharge its functions. With respect to resourcing, Macau has assigned the equivalent of four full time equivalent staff to carry out compliance activities with Reporting Financial Institutions, and these staff have access to IT systems and other specialist teams to conduct risk assessments and provide data analysis in support of the compliance activities. Overall, they appear to have developed an appropriate operational plan to verify compliance with the requirements.
Macau has conducted various desk-based checks to verify whether the information being reported is complete and accurate, with questionnaires having been sent to all Reporting Financial Institutions. Furthermore, it appears that Macau has effective procedures for the inspection of records of Reporting Financial Institutions and has carried out one onsite visit with more being scheduled. It has procedures in place to apply dissuasive penalties and sanctions for non-compliance in relation to filing, record keeping and due diligence failures. It also appears that Macau is ready to take effective action to address circumvention of the requirements if such circumvention is detected and is taking action to ensure self-certifications are obtained as required. Macau is also monitoring and following up with Reporting Financial Institutions that report undocumented accounts.
Macau will also keep its jurisdiction-specific category of Excluded Accounts under review to ensure it continues to pose a low risk of being used for tax evasion purposes.
It is noted that Macau does not have a jurisdiction-specific list of Non-Reporting Financial Institutions for ongoing monitoring.
Table 3 provides a summary of the specific activities undertaken, or that are planned to be undertaken, in relation to each of the key parts of the framework described above.
In terms of the Financial Account information collected and sent by Macau, while the presence of the key data point of dates of birth and the level of undocumented accounts appeared to be in line with most other jurisdictions, it was found to include a lower proportion of Tax Identification Numbers with respect to the individuals associated with the accounts, when compared to most other jurisdictions. Follow-up discussions confirmed that Macau is aware of these issues and is taking steps to address them.
Feedback from Macau’s exchange partners indicated that, compared to what they generally experience when seeking to match information received from their other exchange partners with their taxpayer database, they achieved a much lower level of success when seeking to match information received from Macau. Furthermore, six exchange partners highlighted issues with respect to the information received, such as low rates of valid Tax Identification Numbers and the absence of a first name being given for individuals. Follow-up discussions confirmed that Macau is aware of these issues and is seeking to improve the situation.
Based on these findings it was concluded that, overall, Macau is meeting expectations in ensuring that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures, including by having in place the required administrative compliance framework and related procedures. It was also noted that there is room for improvement with respect to the ongoing implementation of Macau’s enforcement framework given the recent change in its legal framework to provide the necessary power. Macau is therefore encouraged to continue its implementation process to ensure its effectiveness, including by addressing the recommendations made.
Macau should continue to implement its plan to verify and enforce compliance by Reporting Financial Institutions.
Macau should continue to address the issues raised by its exchange partners.
SR 1.6 Jurisdictions should collaborate on compliance and enforcement. This requires jurisdictions to:
use all appropriate measures available under the jurisdiction’s domestic law to address errors or non-compliance notified to the jurisdiction by an exchange partner; and
have in place effective procedures to notify an exchange partner of errors that may have led to incomplete or incorrect information reporting or non-compliance with the due diligence or reporting procedures by a Reporting Financial Institution in the jurisdiction of the exchange partner.
It should be noted that, as Macau exchanges information on a non-reciprocal basis and does not therefore receive information, it is not required to have in place procedures to notify its exchange partners. SR 1.6 b) has therefore not been assessed in this case.
In order to collaborate on compliance and enforcement, it appears that Macau implemented all of the requirements in relation to issues notified to them (i.e. under Section 4 of the MCAA or equivalent) in accordance with expectations. While no such notifications have yet been received, Macau has the necessary systems and procedures to process them as required.
Based on these findings it was concluded that Macau is fully meeting expectations in relation to collaborating with its exchange partners to ensure that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures. Macau is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.
CR2 Effectiveness in practice: Jurisdictions should exchange the information effectively in practice, in a timely manner, including by sorting, preparing, validating and transmitting it in accordance with the AEOI Standard.
Macau’s implementation of the AEOI Standard is on track with respect to exchanging the information effectively in practice, including in relation to sorting, preparing and validating the information (SR 2.4), correctly transmitting the information in a timely manner (SRs 2.5 – 2.7), and providing corrections, amendments or additions to the information (SR 2.9). The requirements in relation to the receipt of the information (SR 2.8) have not been assessed as Macau exchanges information non-reciprocally, so does not receive information. Macau is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.
SR 2.4 Jurisdictions should sort, prepare and validate the information in accordance with the CRS XML Schema and the associated requirements in the CRS XML Schema User Guide and the File Error and Correction-related validations in the Status Message User Guide (i.e. the 50000 and 80000 range).
Feedback from Macau’s exchange partners did not raise any specific concerns with respect to their ability to process the information received from Macau and therefore with respect to Macau’s implementation of these requirements. Furthermore, none of Macau’s exchange partners reported rejecting more than 25% of files received due to the technical requirements not being met. This is a relatively low amount when compared to other jurisdictions.
Based on these findings it was concluded that Macau is fully meeting expectations in relation to sorting, preparing and validating the information. Macau is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.
SR 2.5 Jurisdictions should agree and use, with each exchange partner, transmission methods that meet appropriate minimum standards to ensure the confidentiality and integrity of the data throughout the transmission, including its encryption to a minimum secure standard.
In order to put in place an agreed transmission method that meets appropriate minimum standards in confidentiality, integrity of the data and encryption for use with each of its exchange partners, Macau linked to the CTS.
Based on these findings it was concluded that Macau is fully meeting expectations in relation to agreeing and using appropriate transmission methods with each of its partners. Macau is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.6 Jurisdictions should carry out all exchanges annually within nine months of the end of the calendar year to which the information relates.
Feedback from Macau’s exchange partners did not raise any concerns with respect to the timeliness of the exchanges by Macau and therefore with respect to Macau’s implementation of this requirement.
Based on these findings it was concluded that Macau is fully meeting expectations in relation to exchanging the information in a timely manner. Macau is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.7 Jurisdictions should send the information in accordance with the agreed transmission methods and encryption standards.
Feedback from Macau’s exchange partners did not raise any concerns with respect to Macau’s use of the agreed transmission methods and therefore with Macau’s implementation of this requirement.
Based on these findings it was concluded that Macau is fully meeting expectations in relation to sending the information in accordance with the agreed transmission methods and encryption standards. Macau is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.8 Jurisdictions should have the systems in place to receive information and, once it has been received, should send a status message to the sending jurisdictions in accordance with the CRS Status Message XML Schema and the related User Guide.
It should be noted that, as Macau exchanges information on a non-reciprocal basis and does not receive information, it is not required to have in place systems to receive the information and provide status messages. SR 2.8 has therefore not been assessed in this case.
SR 2.9 Jurisdictions should respond to a notification from an exchange partner as referred to in Section 4 of the Model CAA (which may include Status Messages) in accordance with the timelines set out in the Commentary to Section 4 of the Model CAA. In all other cases, jurisdictions should send corrected, amended or additional information received from a Reporting Financial Institution as soon as possible after it has been received.
Macau appears ready to respond to notifications and to provide corrected, amended or additional information in a timely manner and no such concerns were raised by Macau’s exchange partners and therefore with respect to Macau’s implementation of these requirements.
Based on these findings it was concluded that Macau appears to be meeting expectations in relation to responding to notifications from exchange partners and the sending of corrected, amended or additional information. Macau is encouraged to continue to ensure the ongoing effectiveness of its implementation.
Note
← 1. Through a territorial extension by China.