China Offers Tax Breaks to Boost Macau-Guangdong Integration

(Bloomberg) — China plans to push forward cooperation between Macau and Guangdong over Hengqin Island, aiming for a “big increase” in Macau residents living and working in the zone by 2024, according to guidelines carried by the official Xinhua News Agency. 

The enterprise income tax rate will be 15% for companies in the Hengqin zone, compared with the normal 20-25% in China.

Personal income tax for Macau residents working in the Hengqin zone will be kept at the same rate as they pay in Macau, which is lower than the rate in China.

The plan, which has laid the groundwork for further integration between Macau and neighboring Hengqin Island, highlights Beijing’s intention for the special administrative region — which mostly relies on its gaming income — to diversify. This comes at a time when Beijing is further cracking down on illegal gambling overseas, raising concerns over its potential impact on sentiment in Macau. 

The cooperation zone will focus on high-tech development and manufacturing industries, such as integrated circuits, new energy, big data and artificial intelligence, according to the guidelines. Macau’s light-rail system will be connected to Guangdong’s network.

Authorities will study free capital flow within the area and consider waiving tariffs on qualified goods entering the island, as well as encourage the establishment of multi-currency investment funds in the region to develop a finance industry, according to the plan. Macau University’s Hengqin campus will now come under the city’s jurisdiction and a new border crossing between the campus and the rest of Hengqin is being studied. 

While the plan points to the future development of Hengqin, it doesn’t mention how this can be linked to the six gaming operators in Macau, which are the main pillars of the city’s economy, said Andrew Chung, an analyst at Daiwa Capital Markets Hong Kong. It remains to be seen whether more policies will follow, he said. 

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