Morocco: Global Tax Guide
Table of Contents
Legislation
Residence/Territorial Scope
Article 5 of the General Tax Code provides that companies, whether or not they have a registered office in Morocco, are taxable on all income, profits and income:
• relating to the property they own, the activity they carry out and the lucrative operations they carry out in Morocco, even on an occasional basis;
• whose right of taxation is attributed to Morocco under the conventions for the avoidance of double taxation with respect to taxes on income.
Companies not having their registered office in Morocco are also taxable on specified categories of Moroccan gross income that they receive in return for work they perform or services they provide, either on behalf of their own branches or their establishments in Morocco, or on behalf of independent natural or legal persons, domiciled or carrying out an activity in Morocco.
The income taxed for non-residents includes:
• royalties for the use or right to use of copyrights on literary, artistic or scientific works, including cinematographic and television films;
• Royalties for the granting of licences for the use of patents, designs, plans, formulas and secret processes, trademarks;
• Remuneration for the provision of scientific, technical or other information and for study work carried out in Morocco or abroad;
• remuneration for technical assistance or for the provision of personnel made available to companies domiciled or carrying out their activity in Morocco;
• remuneration for the operation, organisation or exercise of artistic or sporting activities and other similar remuneration;
• rental rights and similar remuneration paid for the use or right to use equipment of any kind;
• Interest on loans and other fixed-income investments;
• remuneration for the road transport of persons or goods carried out from Morocco to abroad, for the part of the price corresponding to the journey travelled in Morocco;
• Commissions and fees;
• remuneration for services of any kind used in Morocco or provided by non-resident persons.
Entities Within Scope
Article 2 of the General Tax Code provides that the following entities are liable to corporation tax:
• companies whatever their form and purpose,;
• public establishments and other legal persons engaged in profit-making operations or operations;
• associations and similar bodies;
• funds created by law or by agreement which do not have legal personality and whose management is entrusted to bodies governed by public or private law, when these funds are not expressly exempted by a legislative provision. The tax is assessed in the name of their managing body.
• establishments of non-resident companies;
• joint ventures comprising at least one legal person as well as those comprising more than 5 natural person partners;
• economic interest groupings.
Entities that can be subject to corporation tax, by making an irrevocable option include joint ventures with fewer than 6 partners, general partnerships and limited partnerships, incorporated in Morocco and comprising only natural persons.
Corporate Income Tax Rates
Article 19 of the General Tax Code provides that the standard rate of corporate income tax is:
• 20%;
• 35% for companies whose net profit is equal to or greater than 100,000,000 dirhams, excluding:
o service companies with the “Casablanca Finance City” status benefiting from the beneficial tax regime;
o companies operating in the industrial acceleration zones;
o companies incorporated as of January 1, 2023 that undertake under an agreement signed with the State to invest an amount of at least 1,500,000,000 dirhams during a period of five (5) years from the date of signature of the agreement, with the exception of public establishments and companies and their subsidiaries in accordance with the laws and regulations in force.
When the net profit made is less than 100,000,000 dirhams, the 20% rate applies only when the earnings remain below this amount for 3 consecutive years.
Companies that list their securities on the stock exchange, by opening or increasing their capital, benefit from a reduction in corporate income tax for 3 consecutive years from the financial year following that of their listing.
The rate of the reduction is set as follows:
25% for companies that list their shares on the stock exchange by opening their capital to the public by selling existing shares;
50% for companies that list their securities on the stock exchange by means of a capital increase of at least 20% with waiver of preferential subscription rights, intended to be distributed to the public at the same time as the IPO of the companies.
The corporate income tax reduction does not apply to:
• credit institutions;
• insurance and reinsurance companies;
• public service concession companies;
• companies whose capital is wholly or partially owned by the State or a public authority or by a company whose capital is at least 50% owned by a public authority.
Companies subject to corporate income tax benefit from a tax reduction equal to the amount of tax corresponding to the amount of their acquisition of a stake in the capital of young innovative companies in new technologies.
Young innovative companies are considered to be companies that were created less than 5 years ago on the date of the acquisition of a shareholding and which:
• the turnover for the last four closed financial years is less than 5,000,000 dirhams per year, excluding value added tax;
• research and development expenses incurred as part of its innovation activities represent at least 30% of the expenses allowed as a deduction from its tax result.
Temporary Exemptions
The holder of a concession for the exploitation of hydrocarbon deposits benefits from a total exemption from corporation tax for a period 10 consecutive years from the date of regular production of any operating concession.
Companies operating approved accounting management centers governed by Law No. 57-90, are exempt from corporate income tax in respect of their operations, for a period of 4 years following the date of their approval.
The following benefit from total exemption from corporation tax for the first 5 consecutive financial years from the date of commencement of their operation:
• industrial companies carrying out activities fixed by regulation;
• and companies carrying out service outsourcing activities within or outside the integrated industrial platforms dedicated to these activities, in accordance with the laws and regulations in force.
Hotel companies benefit, in respect of their hotel establishments, for the part of the taxable base corresponding to their turnover in foreign currency duly repatriated directly by them or on their behalf through travel agencies, from total exemption from corporation tax for a period of 5 consecutive years running from the financial year in which the first hosting transaction was carried out in foreign currency.
Service companies that benefit from the “Casablanca Finance City” regime, benefit from the total exemption from corporation tax for a period of 5 consecutive financial years, starting from the first financial year in which the aforementioned status is granted.
Sports companies constituted in accordance with the provisions of Law No. 30-09 on physical education and sports, benefit from total exemption from corporate income tax for a period of 5 consecutive financial years, starting from the first financial year of operation.
Companies that carry out their activities in industrial acceleration zones, governed by the aforementioned Law No. 19-94, benefit from total exemption from corporate income tax for the first 5 consecutive financial years, from the date of the start of their operation.
Taxable Income and Allowances
Article 9 of the General Tax Code provides that taxable income is determined as follows:
Operating income consisting of:
• the turnover including the receipts and receivables acquired relating to the products delivered, the services provided and the real estate work carried out;
• the variation in product stocks;
• fixed assets produced by the company for itself;
• operating subsidies;
• other operating income;
• takeovers of operations and transfers of charges.
Financial income consisting of:
• income from equity securities and other fixed securities;
• exchange gains.
• accrued interest and other financial income;
• financial assumptions and transfers of charges.
Non-current income consisting of:
• proceeds from the disposal of fixed assets;
• balancing subsidies;
• takeovers of investment subsidies;
• other non-current income;
• non-current takeovers and transfers of charges.
Article 9a of the General Tax Code provides that the proceeds of disposal resulting from the following transactions will not be considered as taxable income:
• repo operations;
• securities lending operations:
• transferable securities listed on the Stock Exchange;
• negotiable debt securities;
• securities issued by the Treasury;
• Sukuk certificates issued by securitisation collective investment funds in accordance with the provisions of the Law;
• asset disposal transactions carried out between the originator institution and the securitisation collective investment funds in the context of a securitisation transaction governed by the Law No;
• the sale of immovable property included in the assets, carried out between the companies within the framework of a contract of sale for repurchase, subject to compliance with the following conditions:
o the contract of sale for repurchase must be drawn up in the form of an authentic deed, in accordance with the legislation in force;
o the surrender must be made within the term stipulated in the contract, which may not exceed three years from the date of conclusion of the contract;
o the re-entry of the immovable property in the assets of the company, after the withdrawal of the repurchase agreement, must be carried out at their original value.
Deductions
Article 10 of the General Tax Code provides that tax deductible expenses include:
Operating expenses consisting of:
• purchases of goods resold as they are and purchases of materials and supplies consumed;
• other external expenses incurred or borne for the purposes of the operation, including:
o Promotional gifts with a maximum unit value of 100 dirhams bearing either the company name, the name or acronym of the company, or the brand name of the products it manufactures or trades;
o Donations in cash or in kind granted to specified organisations:
• taxes payable by the company, including additional contributions issued during the financial year, with the exception of corporation tax;
• personnel and labour costs and related social security contributions, including housing assistance, representation allowances and other benefits in cash or in kind granted to the employees of the company;
• other operating expenses;
• operating grants.
Depreciation and amortization expenses
This includes depreciation and amortization of tangible and intangible assets.
Depreciation charges are deductible from the first day of the month in which the goods were acquired. However, in the case of movable property that is not used immediately, the company may defer its depreciation until the first day of the month in which it is actually used.
Depreciation is calculated on the original value, excluding deductible value added tax, as recorded in the fixed asset. This original value is made up of:
• the acquisition cost, which includes the purchase price plus other transport costs, insurance costs, customs duties and installation costs;
• the cost of production for fixed assets produced by the company for itself;
• the value of the contribution stipulated in the deed of contribution for the assets contributed;
• the contractual value for goods acquired by way of exchange.
For fixed assets acquired at a price denominated in foreign currency, the basis for calculating depreciation is the equivalent in dirhams on the date of the invoice being drawn up.
The deduction of depreciation expenses is made within the limits of the rates allowed according to the customs of each profession, industry or branch of activity. It is subject to the condition that the assets in question are recorded in a fixed asset account and that their depreciation is regularly recorded in the accounts.
However, the rate of depreciation of the acquisition cost of passenger transport vehicles, other than those referred to below, may not be less than 20% per year and the total tax-deductible value, spread over 5 years in equal parts, may not exceed 400,000 dirhams per vehicle, including value added tax.
In the event of the sale or withdrawal of the assets of vehicles whose depreciation is set as provided for above, the capital gains or losses are determined taking into account the net depreciation value on the date of sale or withdrawal.
When the vehicles are used by companies under a leasing or rental contract, the part of the fee or the amount of the rental borne by the user and corresponding to the depreciation at the rate of 20% per annum on the part of the price of the vehicle exceeding 400,000 dirhams, is not deductible.
However, the limitation of this deduction does not apply in the case of rental per period not exceeding 3 months.
A company which does not record in the accounts the depreciation expense relating to a given accounting year loses the right to deduct the expense from the profit or loss of that financial year and the following financial years.
Declining balance depreciation allowances
Capital goods acquired, with the exception of buildings of any purpose and passenger transport vehicles), may, at the company’s irrevocable option, be depreciated under the following conditions:
1.basis for calculating depreciation is the acquisition cost of the capital goods for the first year and its residual value for the following years;
2.the depreciation rate shall be determined by applying the following coefficients to the normal depreciation rate:
• 1.5 for assets with a depreciation period of three or four years;
• 2 for assets with a depreciation period of five or six years;
• 3 for assets with a depreciation period of more than six years.
Provisions
Provisions are made to meet either the depreciation of assets or expenses or losses not yet realized and which current events make probable.
Expenses and losses must be clearly specified as to their nature and must allow an approximate estimate of their amount.
The deductibility of the provision for doubtful debts is conditional on the introduction of a legal appeal within 12 months of its establishment.
Where, in the course of a subsequent accounting year, these provisions are used, in whole or in part, not in accordance with their intended purpose or become irrelevant, they shall be reported in the profit or loss of that financial year.
Finance expenses
Deductible finance expenses include:
Interest charges
These expenses include:
• interest recorded or invoiced by third parties or by approved bodies as remuneration for credit or loan operations;
• interest recorded or invoiced relating to sums advanced by the partners to the company for the purposes of the business, provided that the share capital is fully paid up.
However, the total amount of interest-bearing deductible sums may not exceed the amount of the share capital and the interest rate deductible may not exceed a rate set annually, by order of the Minister in charge of finance, according to the average interest rate on 6 month Treasury bills of the previous year;
• Interest on cash certificates, subject to the certain conditions:
Exchange losses
• Liabilities and receivables denominated in foreign currencies should be valued at the end of each financial year at the latest exchange rate.
• Translation-asset differences relating to reductions in receivables and increases in liabilities recorded as a result of this valuation are deductible from the profit or loss for the year in which they are recognised.
Tax Losses
Article 12 of the General Tax Code provides that unutilised losses can be carried forward for up to 4 financial year following the loss-making year.
Withholding Tax
Article 4 of the General Tax Code provides that the following are subject to withholding tax:
• the income from shares, and similar income, paid, made available or recorded in the accounts of the beneficiary natural or legal persons, whether or not they have their registered office or tax domicile in Morocco (10% withholding tax);
• income from fixed-income investments and income from Sukuk certificates paid, made available or recorded in the account of the beneficiary natural or legal persons, whether they are taxable, exempt or excluded from the scope of the tax and having their registered office in Morocco (20% withholding tax);
• the gross income from the following, paid, made available or recorded in the accounts of non-resident natural or legal persons (10% withholding tax):
o royalties for the use or right to use of copyrights on literary, artistic or scientific works, including cinematographic and television films;
o royalties for the granting of licences for the use of patents, designs, plans, formulas and secret processes, trade marks;
o remuneration for the provision of scientific, technical or other information and for study work carried out in Morocco or abroad;
o remuneration for technical assistance or for the provision of personnel made available to companies domiciled or carrying out their activity in Morocco;
o remuneration for the operation, organisation or exercise of artistic or sporting activities and other similar remuneration;
o rental rights and similar remuneration paid for the use or right to use equipment of any kind;
• fees, commissions, brokerage and other remuneration of the same nature, paid, made available or recorded in the account of legal persons or natural persons whose income is determined according to the actual net income regime or that of the simplified net income regime.
• interest on loans and other fixed-income investments (10% withholding tax);
• remuneration for the road transport of persons or goods carried out from Morocco to abroad, for the part of the price corresponding to the journey travelled in Morocco (5% withholding tax);
• commissions and fees (10% withholding tax);
• remuneration for services of any kind used in Morocco or provided by non-resident persons (10% withholding tax).
The following are exempt from corporate income tax withheld at source:
The income from the following shares, shares and similar income:
• dividends and other similar participation income paid, made available or recorded in an account by companies subject to or exempt from corporate income tax to companies having their registered office in Morocco.
This exemption is reduced to 40% when the above-mentioned income comes from profits relating to the rental of built property distributed by the UCIs which open their capital to the public, through the sale of at least 40% of the existing shares.
• dividends received by undertakings for collective investment in transferable securities (UCITS), governed by the aforementioned Dahir No. 1-93-213;
• dividends received by undertakings for collective investment in capital (UCCI), governed by the aforementioned Law No. 41-05;
• dividends and other similar investment income from foreign sources paid, made available or recorded in the accounts of non-residents by companies established in industrial acceleration zones, governed by Law No. 19-94;
• dividends and other similar investment income from foreign sources paid, made available or recorded in the accounts of non-residents by companies with “Casablanca Finance City” status in accordance with the laws and regulations in force;
• profits and dividends distributed by the holders of a concession for the exploitation of hydrocarbon deposits governed by Law No. 21-90 on the exploration and exploitation of hydrocarbon deposits;
• proceeds from shares belonging to the European Investment Bank (EIB), following the financing granted by the latter to Moroccan and European investors under programmes approved by the government;
• income from the profits of the representations of the Fédération Internationale de Football Association in Morocco and the above-mentioned affiliated bodies, paid, made available or recorded in the account of the Fédération Internationale de Football Association or the bodies attached to it.
Interest and other similar products paid to:
• credit institutions and similar bodies governed by Law No. 103-12, in respect of loans and advances granted by these bodies;
• undertakings for collective investment in transferable securities (UCITS);
• collective investment funds in securitisation (F.P.C.T.) governed by the Law No. 10-98;
• undertakings for collective investment in capital (UCCI) governed by the Law No. 41-05;
Income from Sukuk certificates paid to:
• undertakings for collective investment in transferable securities (UCITS);
• collective investment funds in securitisation (FPCT);
• undertakings for collective investment in capital (UCCI);
• real Estate Collective Investment Undertakings (O.P.C.I.).
Interest received by non-resident companies in respect of:
• loans granted to the State or guaranteed by it;
• deposits in foreign currency or convertible dirhams;
• loans granted in foreign currency for a period equal to or greater than ten (10) years;
• loans granted in foreign currency by the European Investment Bank (EIB) in the context of projects approved by the government.
Transfer Pricing
Morocco includes transfer pricing provisions in the General Tax Code. In particular, transactions between Moroccan entities and foreign entities where there is an element of dependency or control are required to be based on the arms length amount.
Decree N° 2-16-571 OF July 3, 2017 provides for the terms and conditions for concluding a transfer pricing agreement.
CFC Rules
None