Macau Now a Haven for Portugal banks - from The Standard

Friday, September 02, 2005 Portuguese banks are moving client accounts to Macau from the Atlantic Ocean islands of Madeira to keep them out of reach of prying European tax collectors. Ironically, the development comes just as Macau pares back the incentives it offers overseas companies to register in the SAR in response to protests from Hong Kong about lost tax revenue. Two of Portugal's four biggest banks, Caixa Geral de Depositos (CGD) and Banco Portugues de Investimentos (BPI), set up offshore branches in Macau this summer, according to official government gazette announcements. Within just 17 days of receiving approval to operate in Macau, the CGD branch had assets of 8.91 billion patacas (HK$8.65 billion). Time deposits made up 91 percent of its funds. CGD moved the money to Macau just on the eve of new EU regulations requiring European governments to exchange information about interest paid on savings in accounts controlled by EU citizens. The regulations are intended to help EU governments to snare citizens dodging taxes on interest income via offshore accounts. Portugal's other major banks, Banco Espirito Santo and Banco Comercial Portugues (BCP), already offered offshore banking services in Macau. BCP last month sold its three local subsidiaries to Dah Sing Banking Group of Hong Kong, but kept its offshore branch in Macau. CGD owns Banco Nacional Ultramarino, but previously didn't offer offshore services. The shift involves few staff. CGD has employed five people for its new branch and BPI is likely to have a similar number. Madeira fell within the scope of the new EU rules, which came into effect July 1, because the island group 860 kilometers due west of Casablanca, Morocco, remains under Portuguese sovereignty, unlike Macau, which returned to Chinese rule in 1999. Madeira's offshore tax incentive program came under heavy EU scrutiny in 2000, forcing the islands to suspend registry of new companies in 2001 and 2002 until agreement was reached allowing the program to resume for a few more years, but with banks excluded. The Macau government eliminated tax benefits for new offshore companies in several industries the same day it approved CGD's application. The change did not affect the eligibility of offshore bank branches.