Morocco

Financial Year – 1 January – 31 December
Currency – MAD

Generale Regime

The Moroccan taxation system consists of direct and indirect taxes. Indirect taxes provide a greater source of tax revenue than the direct taxes. Moroccan corporations are subject to a unitary tax system called the corporate tax (impôt sur les sociétés or IS).

Corporate Income Tax

The definition of ‘corporation’ covers limited liability companies, limited partnerships by shares, general and limited partnerships in which at least one partner is a corporate entity, civil companies, branches of foreign corporations, public sector companies having profit-oriented activity and joint ventures having business-oriented activity. General partnerships and limited partnerships in which all partners are individuals may elect to be taxed under the corporate tax regime. The same applies to joint ventures in which all parties are individuals.

The normal rate will be evolving from 2023 to 2026 as the following:

A higher CIT rates applies to leasing companies and credit institutions.

Foreign contractors carrying out engineering, construction or assembly projects relating to industrial or technical installations may opt to be taxed at a rate of 8% calculated on the total contract price net of VAT and similar taxes.

Companies are always subjected to a legal minimum tax (cotisation minimale (CM)) of MAD 3.000 or 0.25% of the annual turnover. The CM is based on turnover, income from interest, subsidies, bonuses or donations received. The CM is not payable by companies during their first 36 months of operation.

Social Solidarity Contribution – CSS

Companies are also subject to pay Social Solidarity Contribution based on the same amount used for calculation of the Corporate Income Tax with the following rates:

Morocco operates a territorial tax system. Companies (both resident and non-resident) are generally subject to corporate tax only on income generated from activities carried on in Morocco. Foreign corporations are subject to taxation on income arising in Morocco if they have, or are deemed to have, a permanent establishment in Morocco. A company is resident in Morocco if it is incorporated there or its place of effective management is in Morocco.

The calendar year is normally the fiscal year although a company may opt for a different fiscal year. Accounts for income tax purposes must be filed within three months after the end of the relevant accounting period.

Corporate tax is payable in four equal instalments, based on the prior year’s assessment. The actual amount payable is adjusted in the three months following the end of the accounting period.

Foreign companies that have elected for the 8% default taxation must submit a declaration of their turnover before 1 April following each calendar year.

Non Resident Tax

Morocco applies a special company income tax for all the non-residents who provide services to Moroccan resident companies. The tax rate is 10% and concerns :

• Royalties for the use or right to use copyright on literary, artistic or scientific works including films cinematographic and television;
• Royalties for the granting of a license to exploit patents, designs, plans, formulas and secret processes, trademarks;
• Remunerations for the provision of scientific information, technical or other, and for studies carried out in Morocco or abroad;
• Remunerations for technical assistance or for the provision of personnel made available to companies domiciled or operating in Morocco;
• Remunerations for the operation, organization or exercise artistic or sports 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;
• Remunerations for the road transport of persons or goods made from Morocco abroad for the part of the price corresponding to the journey traveled in Morocco;
• Commissions and fees;
• Remunerations of benefits of any kind used in the Morocco or provided by non-residents.

Branch Remittance Tax

A 15% (or a different rate following the tax agreement) branch remittance tax is imposed on profits remitted to the head office. The Moroccan-sourced income of Moroccan branches of foreign companies is subject to income tax at the ordinary corporate rate of tax. The taxable income is calculated as if the branch was a separate entity from the foreign company.

Value Added Tax

The Value Added Tax (VAT) is a non-cumulative tax levied at each stage of the production and distribution cycle. Thus, suppliers of goods and services must add VAT to their net prices. Where the purchaser is also liable for VAT, input VAT may be offset against output VAT. The standard VAT rate is 20% and applies to all suppliers of goods and services, except those taxed at other rates or those who are exempt. A reduced rate of 10% applies to specific items such as banking and credit services, leasing, gas, water and electricity.

Two types of exemptions from VAT are provided. The first is an exemption with credit, equivalent to the zero tax concept, which applies to exports, agricultural materials and equipment, and fishing equipment. The second is an exemption without credit- ie the seller receives no credit for input VAT paid. This exemption applies to basic foodstuffs, newspapers and international transport services.

Business Tax

A business tax or “taxe professionnelle” is levied on individuals and enterprises that habitually carry out business in Morocco. The business tax is applied on the annual rental value of business premises (rented or owned) capped at MAD 50 million net of VAT. The tax rates range from 10 % to 30% with exemption for the five first years of activity.

Urban Property

Owners of real estate are subject to urban property tax on the rental value of the property. The same applies to owners of machines and appliances that are integral parts of the establishment producing goods or services.

Customs Duties

All goods and services may be imported. Goods deemed to have a negative impact on national production, however, may require an import licence. Products from the EU are fully exempted from March 2012. Cars, household items and also semi-finished products for local industry are reviewed. The rates fall for products brought from the outside world. Some materials and products, however, are exempted, especially those imported under the investment charter, imported under customs economic systems and those using renewable energies. Value added tax is also payable on goods imported into Morocco.

Determination of Taxable Income

Losses

Tax losses may be carried forward for a period of four years from the end of the lossmaking accounting period. However, the portion of a loss that relates to depreciation may be carried forward indefinitely. Losses may not be carried back.

Dividends

Dividends received by corporate shareholders from taxable Moroccan-resident entities must be included in business profits of the recipient company but the dividends are 100% deductible in the computation of taxable income. The participation exemption in Morocco is also applicable to dividend derived from foreign subsidiaries. The original participation exemption regime granted 100% allowance to a Moroccan recipient company of Moroccan-source dividends.

Dividends paid to a non-resident are subject to a withholding tax unless the rate is reduced under an applicable tax treaty.

The rates is evolving as the following:

Consolidated Returns

Consolidated returns are not permitted. Each company must file its own return.

Interest Deductions

Interest paid on loans and other debts is deductible to the extent it relates to borrowings made for income producing purposes. Thin capitalisation rules apply to reduce the deduction available where the taxpayer is a foreign entity operating in Morocco, a foreign controlled Moroccan entity or a Moroccan resident with foreign business investments. In each of these cases, the tax deduction for interest may be reduced if the taxpayer’s debt exceeds the levels permitted under the thin capitalisation provisions.

Interest on loans obtained from a non-resident is subject to a 10% withholding tax. Royalties paid to non-residents are subject to a 10% withholding tax unless the rate is reduced under an applicable tax treaty.

Repatriation of Profits and Transfer Pricing

In addition to paying interest and dividends, the payment of management fees, service fees and royalties are methods of repatriating profits to the non-resident associates, controllers and owners of Moroccan entities.

In these circumstances, the payments made by the Moroccan resident to the non-resident associate must reflect the market value of the goods and/or services to the Moroccan company. That is, all payments must be calculated with reference to arm’s length market rates.

Where the Tax Office takes the view that the Moroccan company has paid an excessive amount for the goods and/or services, the Tax Office can disallow the deduction claimed by the Moroccan company and substitute an alternative price.

Other transactions between Moroccan taxable entities (or branches) and their related foreign entities or head offices are also subject to the transfer pricing rules. Where a Moroccan branch of a foreign company remits profits to its parent by way of management fees or service fees, the profits are not subject to withholding tax or branch profits tax.

Deductibiliy of Expenses

The tax result for each accounting period is determined on the basis of the excess of income over expenditure for the financial year, incurred for the purposes of the taxable activity, in accordance with the accounting rules and regulations in force, modified, where applicable (Article 8 of General Tax Code).

Inventories are valued at the lower of cost or current market price and work in progress is valued at cost price.

Are not deductible (examples):

• advertising gifts with a unit value exceeding one hundred (100) dirhams
• donations in money or in kind granted to associations not provided for in the General Tax Code
• annual amortization of tourism vehicule which price exceeds 300.000,00 MAD
• interest charges on shareholders‘ current account loans at a rate higher than the rate set annually by the tax authorities and relating to more than one time the share capital
• tax penalties
• other liberalities

Foreign Tax Relief

Since a Moroccan resident is taxed on worldwide income, the Moroccan tax system provides relief from foreign taxes paid on such worldwide income by means of a foreign tax credit. This foreign tax credit cannot exceed the Moroccan tax otherwise payable in respect of the foreign-source income.

Personal Tax

Individuals, regardless of nationality or activity, who have their habitual residence in Morocco are subject to a personal income tax (impôt sur le revenue or IR) on their worldwide income on a progressive scale between 10% and 38%.

Individuals who do not have their habitual residence in Morocco are subject to tax only on Moroccan-source income. Habitual residence status is established by reference to one of the following:

1. place of permanent abode
2. centre of economic interest
3. duration of stay in the country exceeding 183 days within any period of 365 days.

The issue of double taxation is partially addressed by tax treaties or unilateral relief in the form of tax credit.

All compensation received by an individual is taxable, including salaries and wages, allowances, pension annuities, and all other employment benefits, investment income, property income and income derived from the carrying out of a business or profession.

Capital gains derived from the disposal of immovable property are generally subject to tax as part of the personal income of the individual, i.e. 20%.

Filing and payment: the tax return must be filed by 31 March of each year in the place where the taxpayer has his/her habitual residence or main business.

Resident individuals are assessed to tax on taxable income from January 2010 according to the following scales:

A range of rebates are available to Moroccan resident individual taxpayers.

Employers must retain and pay any income tax due on the salaries paid to their employees the previous month within the first ten days of each month. Individuals who receive incomes from non-wage sources must file a tax declaration every year on or before 31 March.

Net rental income is taxable under the general income tax (Impôt Général sur le Revenu or IGR) at progressive rates. A standard deduction of 40% of the gross rental income covers the income-generating expenses in lieu of itemised deductions. In the same time, rental fees are subject to withholding tax:

• 10% if the annual rental revenue is under 120.000 MAD per year
• 15% if it is above.

The rules concerning this withholding tax are the following :

• Rental fees are submitted to WHT if it is paid by a company to a physical person who is not registered to tax authorities as a professional of renting
• The WHT is considered as an advance payment of the income tax on rental revenue.

Treaty and Non-Treaty Withholding Tax Rates

The Moroccan government is eager to encourage foreign investment. This is reflected by the territoriality principle for taxation applicable to corporations mentioned above. In addition, Morocco has concluded about 47 treaties including a multilateral agreement with MAU (Maghreb Arab Union: Algeria, Tunisia, Libya and Mauritania) for the prevention of double taxation, mainly with developed countries. Morocco’s list of treaty-partners includes Belgium, Canada, France, Germany, Italy, Luxembourg, the Netherlands, Norway, Romania, Spain, the United Kingdom and the United States.

However, the treaty signed with Sweden was cancelled and has not been applicable since 2007.

Most of the tax treaties are based on the UN (United Nations) model and do not contain specific anti-abuse provisions. Reduced withholding tax rates vary from one treaty to another. Of special interest is the treaty with France which offers advantages involving self-employed foreigners and payments for technical assistance and contracts (eg imported supplies).

Last updated: 22.09.2023