Hong Kong–Macau Tax Treaty (Withholding Tax Rates on Dividends, Interest and Royalties)
Does a Macau company need to withhold tax when it pays dividends, interest or royalties to a Hong Kong company? If so, at what rate? And what about payments in the other direction, from a Hong Kong company to a Macau company?
Hong Kong and Macau have a comprehensive double taxation arrangement (signed in 2019, effective in Hong Kong from the 2021/22 year of assessment and in Macau from 1 January 2021). The withholding tax rate on a payment is the lower of the domestic rate and the treaty rate.
Conclusion: Withholding Tax Rates That Actually Apply
Type of payment | Macau company to Hong Kong company | Hong Kong company to Macau company |
Dividends | 0% | 0% |
Interest | 0% | 0% |
Royalties | 0% (Note 1) | 3% (Note 2) |
(Note 1) Macau has no withholding tax regime for dividends, interest or royalties.
(Note 2) If the Hong Kong domestic rate is lower than 3%, the domestic rate applies.
1. Domestic Withholding Tax Rates
Type of payment | Macau domestic law | Hong Kong domestic law |
Dividends | None | None |
Interest | None | None |
Royalties | None | 4.95% (16.5% in certain cases) |
In Hong Kong, only royalties are subject to withholding tax. 30% of royalties received by a non-resident is deemed to be assessable profits, so for a corporate recipient the effective rate is 16.5% × 30% = 4.95%.
However, if the recipient is an associate of the payer and the intellectual property was at any time owned by a person carrying on business in Hong Kong, 100% of the royalties is deemed assessable, and the rate becomes 16.5%.
2. Treaty Rates
支払の種類 | 協定の取扱い |
Dividends (Article 10) | Capped at 5% |
Interest (Article 11) | Capped at 5% (exempt if paid to the Hong Kong or Macau Government, etc.) |
Royalties (Article 12) | Capped at 3% |
3. Payments from a Macau Company to a Hong Kong Company
Under Macau domestic law, no withholding tax applies to dividends, interest or royalties. As this is more favourable than the treaty rates, the rate is 0% in all cases, and there is no need to rely on the treaty.
4. Payments from a Hong Kong Company to a Macau Company
Under Hong Kong domestic law, no withholding tax applies to dividends or interest.
Royalties are normally subject to 4.95%, but this is reduced to 3% under the treaty. Even where the 16.5% rate would apply (royalties between associates for intellectual property previously owned in Hong Kong), the treaty cap of 3% applies.
The Hong Kong payer files Form BIR54 (Return of Payment to Non-resident) and pays the tax withheld.
5. Points to Note When Using the Treaty
Principal purpose test: Treaty benefits are denied if the tax authority concludes that obtaining those benefits was one of the principal purposes of the arrangement or transaction.
Proof of residence: To claim the 3% treaty rate, the Macau company must be a Macau tax resident and the beneficial owner of the royalties. It may be asked to provide a certificate of tax residence issued by the Macau Financial Services Bureau. A Hong Kong company claiming treaty benefits in Macau may need a Hong Kong Certificate of Resident Status.
Taxation in Hong Kong: Dividends, interest and royalties received from Macau may fall within Hong Kong’s foreign-sourced income exemption (FSIE) regime.
Taxation in Macau: Macau moved to a territorial basis of taxation on 1 January 2026, so dividends, interest and royalties received by a Macau company from Hong Kong are generally not taxed. However, constituent entities of multinational enterprise groups remain taxable on such income, with a credit for Hong Kong tax paid.
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