Corporate tax in Morocco

Summary

Corporate Income Tax Rate (%) 31 (a)
Capital Gains Tax Rate (%) 31 (a) (b)
Branch Tax Rate (%) 31 (a)
Withholding Tax (%)
Dividends 15 (c)
Interest 10 / 20 / 30 (d)
Royalties, Scientific Know-how
Payments, Technical Assistance
Fees and Remuneration for
Most Services
10 (e)
Wages and Indemnities Paid to
Non-permanent Employees
30 (f)
Rent on Equipment Used in Morocco 10 (e)
Branch Remittance Tax 15 (b)
Net Operating Losses (Years)
Carryback 0
Carryforward 4 (g)

a) Corporate income tax is imposed at proportional rates ranging from 10% to 31% (for details, see Section B). The corporate income tax rate is 37% for banks, financial institutions and insurance companies. Corporate income tax incentives are available (see Section B).

b) See Section B.

c) The dividend withholding tax is a final tax for nonresidents. Withholding tax does not apply to dividends paid to Moroccan companies subject to Moroccan corporate tax if a property attestation (a certificate containing the company’s tax number and attesting that the company is the owner of the shares) is delivered by the beneficiary company.

d) The 10% rate applies to interest paid to nonresidents on loans or other fixed-interest claims. The 10% tax is a final tax. The 20% rate applies to interest paid to resident companies and interest paid to resident self-employed indi­viduals in connection with a business conducted by the recipient. The 20% tax may be credited by recipients against their total income tax. The 30% rate applies to interest payments made to resident individuals if the payments are unrelated to a business conducted by the recipient. The 30% tax is a final withholding tax.

e) This is a final tax applicable only to nonresidents. Rental and maintenance of aircraft used for international transport are exempt from this withholding tax.

f) This withholding tax applies only to payments to persons who are not salaried employees and do not hold a special function in the company paying the indemnities. The rate is 17% for teachers.

g) Losses attributable to depreciation may be carried forward indefinitely.

Taxes on corporate income and gains

Corporate income tax. The following companies are subject to corporate income tax:

  • Resident companies (those incorporated in Morocco)
  • Nonresident companies deriving taxable income from activities carried out in Morocco
  • Nonresident companies deriving capital gains from sales of un – listed shares and bonds in Morocco (unless a double tax treaty between Morocco and the residence country of the beneficiary provides otherwise)
  • Branches of foreign companies carrying on business activities independent of those performed by their head office

In general, only Moroccan-source income is subject to tax unless a provision of a double tax treaty provides otherwise.

Tax rates. The regular corporate tax rates are proportional rates. The following are the rates.

Taxable income
Exceeding (MAD) Not exceeding (MAD) Rate (%)
0 300000 10
300000 1000000 20
1000000 5000000 30
5000000 31

The rates in the above table apply to the total taxable income of the company. For example, if a company’s taxable income is MAD400,000, the total taxable income is taxed at 20%.

Banks, financial institutions and insurance companies are subject to tax at a rate of 37%.

The minimum tax equals the greater of the minimum fixed amount of MAD3,000 and 0.5% of the total of the following items:

  • Turnover from sales of delivered goods and services rendered
  • Other exploitation income (for example, directors’ fees received when the company acts as an administrator of another company, revenues from buildings that are not used in the company’s ac­tivities, and profits and transfers of losses with respect to shared operations)
  • Financial income (excluding financial reversals and transfers of financial expenses)
  • Subsidies received from the state and third parties

The rate of minimum tax is reduced to 0.25% for sales of petro­leum goods, gasoline, butter, oil, sugar, flour, water and electric­ity. The minimum tax applies if it exceeds the corporate income tax resulting from the application of the proportional rates or if the company incurs a loss. New companies are exempt from minimum tax for 36 months after the commencement of business activities.

Before January 2016, if minimum tax is applied because of the incurrence of tax losses or because the minimum tax amount ex­ceeded the corporate income tax, the minimum tax could be offset against the corporate income tax due in the following three years. Effective from 1 January 2016, the minimum tax can no longer be offset against corporate income tax.

Nonresident contractors may elect an optional method of taxation for construction or assembly work or for work on industrial or technical installations. Under the optional method, an 8% tax is applied to the total contract price including the cost of materials, but excluding value-added tax (VAT).

Tax incentives. Morocco offers the same tax incentives to domes­tic and foreign investors. Various types of companies benefit from tax exemptions and tax reductions, which are summarized below.

Permanent exemptions. Permanent tax exemptions are available to agricultural enterprises and cooperatives with annual turnover of less than MAD5 million, excluding VAT.

Capital risk companies are exempt from corporate income tax on profits derived within the scope of their activities (these are prof­its related to purchases of companies’ shares that support such companies’ development and the sales of such shares thereafter).

Total exemption followed by permanent reduction. Export com­panies are exempt from corporate income tax on their profits related to their export turnover during the first five years follow­ing their first export transaction. These companies benefit from a reduced rate of 17.5% in subsequent years. Exporters of recycled metals cannot benefit from the 17.5% rate. For the exportation of services, the 17.5% rate applies if both of the following condi­tions are met:

  • The related turnover must be realized in foreign currencies (other than dirhams) that is properly repatriated to Morocco.
  • The currencies must be repatriated to the Moroccan bank account of the company.

Hotel companies benefit from a tax exemption and a tax reduc­tion with respect to their profits corresponding to their foreign currency revenues that are generated by their hotels and are remitted to Morocco either directly or through travel agencies. Hotel companies are fully exempt from tax on such profits for the first five years following their first foreign currency sale opera­tion, and they benefit from a reduced rate of 17.5% on such prof­its in subsequent years. Management companies of “real estate residences for tourism promotion” also benefit from this measure, under the same conditions. A “real estate residence for tourism promotion” is a residence assimilated to a hotel in which the hous­ing units belong to one or more owners and of which a minimum percentage of the housing units (fixed by regulations at 70%) is managed by a licensed management company for at least 9 years.

Regional or international head offices that have Casablanca Finance City status are subject to a reduced 10% corporate in­come tax rate beginning on the date of obtaining such status. Other Casablanca Finance City companies benefit from a five-year exemption and subsequently a reduced rate of 8.75%.

Permanent reductions. Mining companies, including those that sell products to export companies, benefit from a reduced corpo­rate income tax rate of 17.5%.

Total exemption followed by temporary reduction. Export compa­nies established in Moroccan free zones (zones franches) are exempt from corporate income tax for the first 5 years of activity and are subject to corporate income tax at a rate of 8.75% for the following 20 years. This rule also applies to operations rendered between companies established in the same Moroccan free zone and between companies established in different Moroccan free zones.

Temporary exemption. Under a transitional measure, the follow­ing agricultural enterprises continue to benefit from the tempo­rary corporate income tax exemption:

  • From 1 January 2016 until 31 December 2017: agricultural enterprises with turnover of less than MAD20 million
  • From 1 January 2018 until 31 December 2019: agricultural enterprises with turnover of less than MAD10 million

Companies holding a hydrocarbon exploration and exploitation permit are exempt from corporate income tax for 10 years from the beginning of hydrocarbon regular production.

Subject to certain conditions, real estate developers benefit from a total exemption from corporate income tax and other taxes with respect to construction programs for social housing under agree­ments entered into with the government. This temporary regime ap plies from 1 January 2010 through 31 December 2020.

Temporary reduction. Handicraft companies, private schools and educational institutes benefit from a reduced corporate income tax rate of 17.5% for their first five years of operations.

Banks and holding companies located in offshore zones benefit from a reduction in corporate income tax for the first 15 years of operation. Banks may elect to pay a minimum corporate income tax of USD25,000 or pay tax at a reduced rate of 10%. Holding companies pay a flat tax of USD5,000 per year.

Capital gains. Capital gains on the sale of fixed assets are taxed at the proportional corporate tax rates (see Tax rates).

Nonresident companies are taxed on profits derived from sales of unlisted shares of Moroccan companies at the proportional corpo­rate income tax rates, unless a double tax treaty between Morocco and the residence country of the beneficiary provides other wise. In addition, they must file an income declaration before the end of the month following the month in which the sales occurred.

Special rules apply to mergers and liquidations of companies (see Section E).

Administration. Within three months after the end of their finan­cial year, companies must file a corporate income tax return with the local tax administration where their headquarters are located. The companies’ financial statements must be enclosed with the return.

Companies must make advance payments of corporate income tax. For companies with a 31 December year-end, the payments must be made by 31 March, 30 June, 30 September and 31 December. Each payment must be equal to 25% of the previous year’s tax.

If the minimum tax does not exceed MAD3,000, it is fully pay­able in one installment. Payment of the minimum tax exceeding this amount is made in accordance with the rules applicable to the corporate income tax.

Dividends. Dividends are generally subject to a 15% withholding tax. However, withholding tax does not apply to dividends paid to Moroccan companies subject to Moroccan corporate tax if a property attestation is delivered by the beneficiary company. Such companies are also exempt from corporate income tax on the dividends.

Foreign tax relief. Foreign tax relief is granted in accordance with the provisions of Morocco’s double tax treaties and the Moroccan Tax Code.

Determination of trading income

General. The computation of taxable income is based on financial statements prepared according to generally accepted accounting principles, subject to modifications provided in the Moroccan Tax Code.

Business expenses are generally deductible unless specifically excluded by law. The following expenses are not deductible:

  • Interest paid on shareholders’ loans in excess of the interest rate determined annually by the Ministry of Finance or on the por­tion of a shareholder’s loan exceeding the amount of capital stock that is fully paid up. No interest on shareholders’ loans is deductible if the capital stock is not fully paid up.
  • Certain specified charges, gifts, subsidies, corporate income tax and penalties.

The tax base for coordination centers (centers de coordination) is equal to the sum of the following:

  • Ten percent of their operating expens es
  • Their income derived from non-current operations, such as sales of goods and services, and investments in securities

Inventories. Inventory is normally valued at the lower of cost or market value.

Provisions. Provisions included in the financial statements are gen­erally deductible for tax purposes if they are established for clearly specified losses or expenses that are probably going to occur.

Provisions on bad debts are deductible if a court action is insti­tuted against the debtor within 12 months after the booking of the provision.

Depreciation. Land may be amortized only if it contributes to pro­duction (for example, mining lands). Other fixed assets may be depreciated using the following two methods:

  • The straight-line method at rates generally used in the sector of the activity.
  • A declining-balance method with depreciation computed on the residual value by applying a declining coefficient that ranges from 1.5 to 3 and that is linked to the term of use. The declining-balance method may not be used for cars and buildings.

The following are some of the annual applicable straight-line rates.

Asset Rate (%)
Commercial and industrial buildings 4 or 5
Office equipment 10 to 15
Motor vehicles (for vehicles used in tourism, the maximum depreciable value
is MAD300,000 including VAT)
20 to 25
Plant and machinery 10 to 15

Certain intangible assets, such as goodwill, do not depreciate over time or by use and, consequently, are not amortizable.

Relief for tax losses. Losses may be carried forward for four years; losses attributable to depreciation may be carried forward indefi­nitely. Losses may not be carried back.

Groups of companies. Moroccan law does not provide tax-consolidation rules for Moroccan companies.

Other significant taxes

The following table summarizes other significant taxes.

Nature of tax Rate (%)
Value-added tax, on goods sold and services
rendered in Morocco
General rate 20
Electric power, transport of tourists and
certain other items
14
Restaurants, hotels, cooking salt, bank
operations and certain other items
10
Utilities (water provided through
public distribution network and oil),
pharmaceuticals, sugar, preserved
sardines and dried milk
7
Professional tax, on gross rental value of
the business premises
10 to 30
Communal services tax (tax base similar to
professional tax)
6.5 / 10.5
Registration duties, on transfers of real
property or businesses
1 to 6
Professional training tax, on gross salaries
including fringe benefits
1.6
Social security contributions, paid by employer
For family allowances, on gross monthly
remuneration (no maximum limit of
remuneration applies)
6.4
For illness and pregnancy, on gross monthly
remuneration, up to a maximum remuneration
of MAD6,000 a month
8.6
For required medical care 3.5

Miscellaneous matters

Foreign-exchange controls. Remittances of capital and related in­come to nonresidents are guaranteed. No limitations are imposed on the time or amount of profit remittances. The remittance of net profits on liquidation, up to the amount of capital contributions, is guaranteed through transfers of convertible currency to the Bank of Morocco.

As a result of the liberalization of foreign-exchange controls, foreign loans generally do not require an authorization from the exchange authorities. However, to obtain a guarantee for the remit­tance of principal and interest, notes are commonly filed at the exchange office, either through the bank or directly by the bor­rower. In general, if the loan’s conditions are equivalent to those prevailing in foreign markets, the exchange office approves the loan agreement. The loan agreement must be filed with the ex – change office as soon as it is established.

To promote exporting, Moroccan law allows exporters of goods or services to hold convertible dirhams amounting to 50% of repa­triated currency. Exporters must spend these convertible dirhams on professional expenses incurred abroad. Such expenses must be paid through bank accounts of convertible dirhams, called “Convertible Accounts for the Promotion of Export” (Comptes Convertibles de Promotion des Exportations).

Mergers and liquidations. The Moroccan Tax Code provides two types of taxation for mergers, which are the common tax regime and the specific regime.

Under the common tax regime, the absorbed company is subject to tax on all profits and capital gains relating to the merger and on the profits realized between the beginning of the fiscal year and the effective date of the merger.

The specific regime allows deferred taxation of profit related to goodwill and land if certain conditions are met.

The 2010 Finance Bill instituted a temporary regime, which origi­nally applied from January 2010 through December 2012. This regime was extended until 31 December 2016. In addition to the incentives provided by the specific regime, the temporary regime provides other incentives such as an exemption for profits derived from share transfers at the level of the shareholders. The tempo­rary regime also applies to total scissions of companies.

Liquidations of companies trigger immediate taxation in accor­dance with the tax rules described above and, if applicable, a 15% withholding tax on liquidation profit called “Boni de liquidation.” The “Boni de liquidation” is the balance of assets that re mains for shareholders on the liquidation of a company after settlement of all liabilities, and the reimbursement of the share capital and reserves aged more than 10 years.

Treaty withholding tax rates

Dividends (%) Interest
(%)
Royalties
(%)
Austria 5/10 (i) 10 10
Bahrain 5/10 (h) 10 10
Belgium 6.5/10 (j) 10 10
Bulgaria 7/10 (c) 10 10
Canada 15 (e) 15 (e) 05/10/17
China 10 (e) 10 10
Croatia 8/10 (k) 10 10
Czech Republic 10 (e) 10 10
Denmark 10/25 (e) 10 10
Egypt 10/12.5 (e) 10 10
Finland 7/10 (l) 10 10
France 15 (a)(e) 10/15 (e) 05/10/17
Gabon 15 10 10
Germany 5/15 (e) 10 10
Greece 5/10 (i) 10 10
Hungary 12 (e) 10 10
India 10 (e) 10 10
Indonesia 10 10 10
Ireland 6/10 (m) 10 10
Italy 10/15 (e) 10 05/10/17
Jordan 10 10 10
Korea (South) 5/10 (f) 10 05/10/17
Kuwait 2.5/5/10 (e) 10 10
Latvia 8/10 (k) 10 10
Lebanon 5/10 (h) 10 05/10/17
Luxembourg 10/15 (e) 10 10
Macedonia 10 10 10
Maghreb Arab
Union (d) – (b) – (b) – (b)
Malaysia 5/10 (h) 10 10
Malta 6.5/10 (j) 10 10
Netherlands 10/25 (e) 10/25 (e) 10
Norway 15 (e) 10 10
Oman 5/10 (h) 10 10
Pakistan 10 10 10
Poland 7/15 (c)(e) 10 10
Portugal 10/15 (e) 12 (e) 10
Qatar 5/10 (e) 10 (e) 10
Romania 10 (e) 10 10
Russian Federation 5/10 (f) 10 10
Senegal 10 10 10
Singapore 08/10/17 10 10
Spain 10/15 (e) 10 05/10/17
Switzerland 7/15 (c)(e) 10 10
Syria 07/15/17 10 10
Turkey 7/10 (c) 10 10
Ukraine 10 10 10
United Arab Emirates 5/10 (g) 10 10
United Kingdom 10/25 (e) 10 10
United States 10/15 (e) 15 (e) 10
Vietnam 10 10 10
Non-treaty countries 15 10 10

a) No withholding tax is imposed in France if the recipient is subject to tax on the dividend in Morocco.

b) Tax is payable in the country in which the recipient is domiciled.

c) The 7% rate applies if the beneficiary of the dividends is a company, other than a partnership, that holds directly at least 25% of the capital of the payer of the dividends. The higher rate applies to other dividends.

d) The Maghreb Arab Union countries are Algeria, Libya, Mauritania, Morocco and Tunisia.

e) Under Moroccan domestic law, the withholding tax rate for interest is 10%. Consequently, for interest paid from Morocco, the treaty rates exceeding 10% do not apply. In addition, the domestic withholding tax rate for dividends is 15%, effective from 1 January 2013. Consequently, for dividends paid from Morocco, the treaty rates exceeding 15% do not apply.

f) The 5% rate applies if the beneficiary of the dividends holds more than USD500,000 of the capital of the payer of the dividends. The 10% rate applies to other dividends.

g) The 5% rate applies if the beneficiary of the dividends holds directly at least 10% of the capital of the payer of the dividends. The 10% rate applies to other dividends.

h) The 5% rate applies if the beneficiary of the dividends is a company that holds directly at least 10% of the capital of the payer of the dividends. The 10% rate applies to other dividends.

i) The 5% rate applies if the beneficiary of the dividends is a company, other than a partnership, that holds directly at least 25% of the capital of the payer of the dividends. The 10% rate applies to other dividends.

j) The 6.5% rate applies if the beneficiary of the dividends is a company, other than a partnership, that holds directly at least 25% of the capital of the payer of the dividends. The 10% rate applies to other dividends.

k) The 8% rate applies if the beneficial owner of the dividend is a company (other than a partnership) that holds directly at least 25% of the capital of the company paying the dividends. The 10% rate applies in all other cases.

l) The 7% rate applies if the beneficial owner of the dividends is a company that holds directly at least 25% of the capital of the company paying the divi­dends. The 10% rate applies in all other cases.

m) The 6% rate applies if the beneficial owner of the dividends is a company that owns directly at least 25% of the capital of the company paying the dividends. The 10% rate applies in all other cases.

Morocco has signed tax treaties with Burkina Faso, Cameroon, Côte d’Ivoire, Estonia, Ghana, Iran, Lithuania and Mali, but these treaties have not yet been ratified.

Morocco has ratified tax treaties with Serbia and Yemen, but these treaties are not yet in force.