Morocco Personal Income Tax

Under Morocco domestic law, residents of Morocco are subject to tax on their worldwide income. Individuals resident in Morocco must pay tax on their employment income, regardless of where the services are performed or the employer is located. Nonresidents are subject to tax on their Morocco-source income only.

Individuals are considered resident in Morocco if they meet any of the following conditions:

  • They maintain their home in Morocco.
  • They maintain the center of their activities (vital interests) in Morocco.
  • They are present in Morocco for at least 183 days during a period of 365 days.

Income subject to tax

Employment income. Taxable employment income includes total compensation after deductions for employees’ social security contributions. Compensation includes bonuses and the market value of fringe benefits, but the following types of income are exempt from income tax:

  • Family allowances
  • Workers’ compensation payments for industrial accidents or death
  • Specific allowances for professional expenses if they corre­spond to actual expenses incurred for professional purposes and are not covered by the flat-rate deduction for business expenses provided by the Moroccan Tax Code
  • Retirement benefits and severance pay within the limits pro­vided by the Labor Law
  • Alimony payments received
  • Supplementary pension received if the contributions are not deductible in determining taxable income
  • Compensation for pregnancy leave
  • Literary and art awards amounting to a maximum of MAD100,000 per year

In addition, for the period of January 2015 through 31 December 2019, gross salary capped at MAD10,000 per month paid by newly created companies during the first two years of their incor­poration to employees (up to a maximum of five employees) hired under unlimited duration contracts is exempt from tax. This exemption is granted for 24 months, starting from the employee’s hiring date.

Self-employment and business income. Self-employed individu­als are divided into two taxable categories, depending on the nature of their activities. They may be taxed on commercial and professional income or on agricultural income.

The tax base for self-employed individuals engaged in commer­cial or professional activities is computed in the same manner as the tax base for corporations. Taxable income equals the differ­ence between gross income and expenses incurred for the perfor­mance of the activity during the calendar year.

Self-employed individuals may elect to use a fixed taxation sys­tem (taxation on a deemed-value basis) if annual turnover does not exceed the following amounts:

  • MAD1 million for food, handicraft products, fishing activities, and commercial and manufacturing activities
  • MAD250,000 for service activities

In addition, the 2014 Financial Bill instituted a new regime for “auto-entrepreneurs,” which can be elected by self-employed individuals, if the following conditions are satisfied:

  • Annual turnover does not exceed MAD500,000 for commercial and industrial activities and crafts or MAD200,000 for service providers.
  • The “auto-entrepreneur” registers with Morocco social security.

The 2015 Financial Bill removed the declarative requirements and the registration requirements for taxpayers under the “auto-entrepreneur” regime.

For the rates under the “auto-entrepreneur” regime, see Rates.

However, if the income derived from agricultural farms is less than MAD5 million, the exemption mentioned above is granted only if such income has remained under this amount for three consecutive years.

Notwithstanding the above, from 1 January 2016 through 31 December 2017, income derived from agricultural farms that does not exceed MAD20 million is totally exempt from income tax.

Investment income. Dividends paid by Moroccan companies are subject to a 15% withholding tax. Dividends received from non­resident companies are subject to the provisions of applicable double tax treaties. Otherwise, they are subject to income tax in Morocco at a rate of 15%.

Interest paid by banks or companies to Moroccan resident indi­viduals is subject to a 30% final withholding tax. The interest is not subject to any further income tax.

Interest, technical assistance fees, rental fees for equipment and royalties paid to nonresident individuals or foreign entities are subject to a 10% final withholding tax, subject to the provisions of applicable double tax treaties. Dividends paid to nonresidents are subject to the provisions of applicable double tax treaties. Otherwise, they are subject to a 15% final withholding tax.

Directors’ fees. If a director has managerial powers, directors’ fees are considered to be employment income and are taxed at the usual income tax rates described in Rates. Directors’ fees derived by individuals who do not hold salaried positions with the com­pany are subject to withholding tax at a rate of 30%, which is not a final tax, and is then reported in the annual tax return and taxed at the regular income tax rates, with deduction of the tax with­held.

Taxation of employer-provided stock options. Employees exercis­ing stock options may benefit from the difference between the price of the shares on the vesting date and the exercise price. Instead of constituting additional salary, the realized profit is composed of an exempt portion and capital gain that is not taxed until the transfer date.

This exemption is subject to the following conditions:

  • The difference between the vesting price and exercise price may not exceed 10% of the share value at the date of vesting. Any ex cess is considered salary, and is subject to income tax.
  • The sale of the shares may not occur within a three-year non-availability period beginning with the exercise date.
  • The shares must be registered.

This exemption is provided only for stock options issued by Moroccan companies.

Stock options, free shares or any other process to buy shares granted by Moroccan companies to their managers and employ­ees, or granted by companies not resident in Morocco to manag­ers and employees employed by Moroccan companies or branch­es of the nonresident companies, must be declared by the Moroccan entity in its annual salary return filed before 1 March of the year following the year of the acquisition or of the distribu­tion of the shares.

Capital gains. Gains derived from the sale of real property held by an individual are subject to the tax on real estate profits at a 20% rate. However, if the real property is unbuilt land, the following are the capital gains tax rates:

  • 30% for the first sale of unbuilt land included in the urban perimeter, effective from 1 January 2013
  • 30% if the duration between the acquisition and sale of the unbuilt land is six or more years
  • 25% if the duration between the acquisition and sale of the unbuilt land equals or exceeds four years and is less than six years
  • 20% if the duration between the acquisition and sale of the unbuilt land is less than four years

The minimum tax is 3% of the transfer price. However, gains derived from the sale of real property amounting to a maximum of MAD140,000 per year are exempt.

Capital gains derived by resident individuals from the sale of shares of resident companies are taxed at a rate of 15% for listed shares and 20% for unlisted shares. Capital gains derived from the sale of shares of nonresident companies are taxed at a rate of 20%. Capital gains derived from the transfer of an individual’s business assets, including real property, are taxed at the same rates as ordinary income.

Deductions

Deductible expenses. The following expenses are deductible:

  • Professional expenses if they are not covered by the flat-rate deduction for business expenses provided by the Moroccan Tax Code, which is set at of 20% of gross remuneration up to MAD30,000 per year. A different rate of deduction is provided for certain occupations. For example, certain insurance com­pany’s employees are entitled to a 45% deduction.
  • Social security contributions.
  • Pension contributions withheld from gross wages up to 50% of net taxable salary, but pension contributions paid abroad by foreign nonresident employees may be deducted only up to the amount corresponding to the contribution rate for other compa­ny employees.
  • Contributions to employer-subscribed group medical insurance.
  • Interest payments or rental margin (tax regime for Ijara Mountahia Bitamlik [IMB] introduced by 2016 Financial Bill), for the cost of the acquisition or construction of a building or the renovation of a taxpayer’s principal residence, if the employer withholds the payments directly from gross remu­neration.
  • A 55% deduction is applied before taxation of pensions for the pension amount up to MAD168,000. A 40% deduction is applied for the pension amount that exceeds MAD168,000.
  • A 40% deduction is applied before taxation of artists’ fees sub­ject to withholding tax of 30%.
  • A 40% deduction is applied before taxation of professional athletes’ salary subject to a progressive rate.

Personal deductions and allowances. The following tax credits are granted:

  • MAD360 for each dependent, up to a maximum of six
  • 80% of the income tax due on foreign-source retirement pen­sions received in non-convertible dirhams

Business deductions. In general, deductible expenses for com­mercial, professional and agricultural activities are similar. They include depreciation and general expenses incurred for business purposes, including personnel and social security expenses, cer­tain taxes, rental and leasing expenses, and financial charges. Depre ciation of business assets is deductible if it is recorded annually in the accounts and relates to assets shown in the bal­ance sheet. The rates of depreciation depend on the nature of the assets that are used.

After net income for each category of income is aggregated, the following expenses are deductible:

  • Interest payments or rental margin (tax regime for IMB), up to 10% of taxable income, on loans taken out by the taxpayer for the acquisition or construction of a principal home
  • Gifts to charitable organizations known as public utility associations
  • Contributions to a long-term retirement pension (more than 8 years) payable after 50 years of age, up to 10% of taxable global income

Rates. Tax liability is determined by applying the progressive rates for each bracket to taxable income.

The following are the rates of income tax.

Taxable income Tax rate Tax due Cumulative tax due
MAD % MAD MAD
First 30,000 0
Next 20,000 10 2,000 2,000
Next 10,000 20 2,000 4,000
Next 20,000 30 6,000 10,000
Next 100,000 34 34,000 44,000
Above 180,000 38

 

The following are the tax rates for the “auto-entrepreneurs” regime (see Self-employment and business income):

  • 1% of the turnover that does not exceed MAD500,000 for com­mercial, industrial and crafts activities
  • 2% of the turnover that does not exceed MAD200,000 for ser­vice providers

Relief for losses. In general, losses incurred in business and agri­cultural activities may be carried forward for four years to offset profits from the same category. Losses attributable to the depre­ciation of assets may be carried forward indefinitely.

Estate and gift taxes

Estate and gift tax rates range from 1% to 6%, depending on the nature of the assets and operations and the relationship between the recipient and the deceased or the donor.

Social security

Social security contributions, which are withheld by the employ­er, are based on gross compensation paid, including fringe ben­efits and bonuses.

Employer contributions are paid, and employee contributions are withheld and paid, monthly. The employer must pay 6.4% of gross monthly compensation for family allowances. For death pensions and for daily compensation for illness, disability and pregnancy leave, employers must contribute 8.6%, and employ­ees 4.29%, of gross monthly compensation, capped at MAD6,000. In addition, the employer must pay 1.6% of gross monthly com­pensation as a contribution to the Moroccan office of staff train­ing.

An additional contribution for “loss of employment indemnity” is payable. Employers must contribute 0.38%, and employees 0.19%, of the gross monthly compensation, capped at MAD6,000.

Contributions on monthly gross remuneration are payable for mandatory medical insurance. The contribution rates are 2.26% for employees and 4.11% for employers, except for companies exempted from this mandatory medical insurance, which pay at a rate of 1.5%. This exemption is provided for companies that were set up before 2005 and that are already contributing to private medical insurance.

Tax filing and payment procedures

The tax year in Morocco for individuals is the calendar year. Moroccan residents must file annual general income tax returns before the following dates:

  • 1 March following the end of the tax year (28 February or 29 February at the latest) for individuals who have professional income taxed under the fixed-taxation system (see Section A), and/or income other than professional income.
  • 1 May following the end of the tax year (30 April at the latest) for individuals who have professional income taxed under the real or simplified regimes and for individuals who have received investment income (dividends or interest). The related tax due, if any, is payable at the time of the filing.
  • 1 April following the end of the tax year (31 March at the latest) for individuals receiving dividends and interest from abroad and/or realizing capital gains on the sale of securities from foreign sources. The related tax due, if any, is payable at the time of the filing.

The tax return indicates separately the various categories of income. If a taxpayer receives no income other than exempted agricultural income or employment income paid by one employer domiciled or established in Morocco, he or she is not required to file a return. Tax on employment income must be withheld by employers domiciled or established in Morocco.

Except for the cases listed above, income tax is computed by the tax administration and is payable on receipt of a tax assessment notice.

Taxpayers subject only to discharge rates are exempt from the requirement to file an annual general income tax return.

Double tax relief and tax treaties

A taxpayer may deduct the amount of foreign income tax paid from Moroccan income tax payable on the foreign-source income if the individual can document that the foreign tax was paid and if a double tax treaty is in force between Morocco and the coun­try in which such foreign income tax was paid. However, this tax credit may not exceed the Moroccan income tax imposed on the income subject to foreign tax.

Morocco has entered into double tax treaties with the following countries.

Algeria                            India                             Portugal

Austria                            Indonesia                     Qatar

Bahrain                            Ireland                          Romania

Belgium                           Italy                              Russian

Bulgaria                           Jordan                          Federation

Canada                            Korea (South)              Senegal

China                               Kuwait                         Singapore*

Côte d’Ivoire*                 Latvia                           Spain

Croatia                             Lebanon                       Sweden

Czech Republic               Luxembourg                Switzerland

 

     
Denmark Macedonia Syria
Egypt Malaysia Tunisia
Finland Mali* Turkey
France Malta Ukraine
Gabon Netherlands United Arab
Germany Norway Emirates
Greece Oman United Kingdom
Guinea* Pakistan United States
Hungary Poland Vietnam

* This treaty will enter into force on 1 January 2017.

Morocco has also entered into a tax treaty with the Arab Maghreb Union countries. The Arab Maghreb Union consists of Algeria, Libya, Mauritania, Morocco and Tunisia.

Morocco has also signed tax treaties that are not yet in force with Côte d’Ivoire, Iran and Yemen.

The treaties generally provide the following relief:

  • Commercial profits are taxable in the treaty country where a foreign firm performs its activities through a permanent estab­lishment.
  • Dividends, interest and royalties are taxable in the treaty coun­try where the beneficiary is a resident. Dividends are also subject to withholding taxes in the treaty country where the payer is a resident. These taxes may be offset against the tax due in the country of the beneficiary’s residence.
  • Employment income is taxable in the treaty country where the activity is performed, except for income from short-term assignments (less than 183 days) that is not borne by an entity of the treaty country where the activity is performed.

Entry and tourist visas

Entry visas are required for foreign nationals from certain coun­tries, including Egypt, Iran, Sudan and Syria. Nationals of the United States and member countries of the European Union (EU) are not required to obtain entry visas. The Ministry of the Interior determines the countries for which entry visas are required.

Generally, tourist visas, valid for a period of three months, are the only type of temporary visa issued in Morocco. The Moroccan embassy or consulate in each country can provide information regarding the documents necessary for a tourist visa.

Work permits and self-employment

Foreign nationals are authorized to work in Morocco if they ful­fill the following conditions:

  • Expatriated to Morocco: They must enter into a work contract signed by an entity established in Morocco (either a Moroccan company or a fixed place of business of a foreign company). They must obtain the approval of the Anapec (a government agency) and the Ministry of Work in Morocco.
  • Seconded by the foreign parent company to its Moroccan subsidiary or branch: They are still employees of the foreign company and require only the approval of the Moroccan Labor Ministry.

Expatriates may be self-employed if they set up independent com­panies or businesses in Morocco. Expatriates must have valid work permits and residence permits to be self-employed. The mini­mum amount of capital required depends on the type of business or company that a foreign national intends to start. For example, a limited liability company requires no minimum share capital.

Residence permits

Residence permits are issued to foreign nationals for one year and may be renewed an indefinite number of times. The renewed permit is valid for one or two years.

To obtain a residence permit, a foreign national must present a copy of the stamped work permit and an information record card to the police authorities in his or her area of residence in Morocco.

Family and personal considerations

Family members. Family members who are aged 18 or older and intend to reside with a working expatriate in Morocco must obtain residence cards. A working expatriate’s spouse or depen­dents who in tend to work in Morocco must independently apply for and receive separate work permits. Children of working expa­triates do not need student visas to attend schools in Morocco.

Driver’s permits. In general, an expatriate may drive with an inter­national driving license for an unlimited length of time. To obtain a Moroccan license, an applicant must pass a physical driving test and a verbal exam.