Morocco is in a strategic location for access to Europe. It is also well located as a platform for reaching other international markets, especially North and West Africa. With Africa increasingly seen as a future engine of global growth, Morocco is a potential gateway to the continent for like a UK companies.

Strengths of the Moroccan market include:

good communication network and global transport connections, strategic geographic location and gateway to Africa, open Skies Agreement with the European Union (EU) and low cost flights from the UK, strong banking and finance sector, ‘advanced status’ with the EU since 2008, competitive labour costs, tax incentives, no restrictions to capital and ease of repatriation for profits and dividends.

Morocco has several free trade agreements currently in place with various countries, including the EU, the USA, Turkey, Jordan, Tunisia, Egypt and across Africa.

Free Zones in Morocco:

• Export Processing Zone of Tangier
• Free Zones at Tanger Med Ksar el Majaz Mellousa 1 and 2
• Free Zone in Dakhla and Laayoune:
• Free Storage Zone of hydrocarbons: Kebdana and Nador
• Export Processing Zone in Kenitra

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Advantages of doing business in Morocco

1.  Morocco business formation only requires a minimum capital of US$1000 of which only 25% must be paid-up before  incorporation. The company can be formed by two shareholders, who can be a foreign and with no needed for a resident director.
2. Registering a company in Morocco is easy for foreigner because:

• Contrary to many other African and Middle Eastern countries including 1) Algeria 2) Libya 3) Saudi Arabia and 4) the United Arab Emirates, foreigners are not required to form a joint venture in order to do business in Morocco
• Foreigners are not subject to higher capital requirements than locals in most industries
• While business registration with the Moroccan Business Register is slow compared to developed countries like New Zealand, France, Singapore or Hong Kong, it is still much faster than other North African countries.
• For the reasons listed above, Morocco is currently ranked by the world Bank as the 43rd best place in the world for the ease of starting a business

3. While the standard corporate income tax is high (30%), foreigners starting a business in        Morocco can benefit from the following tax benefits

• Companies operating in a free trade zone Morocco benefit from a tax holiday of five years. Thereafter, they enjoy a reduced tax rate of 8.75% for the following twenty years.
• Foreigners starting a local company in Morocco can also secure Casablanca Finance City status, which allow them to benefit to up to five years of corporate tax holidays and a permanently reduced CIT rate of 10%. Eligible activities include, investment holding, financial services and HR, legal, audit and other professional services
• Morocco has entered into a least 50 double taxation avoidance treaties with different countries including; Singapore, Switzerland, United States, United Kingdom, Canada, United Arab Emirates, among many other jurisdictions
• Many other industries benefit from tax benefits, including ´; agriculture, which can be permanently tax exempt and accommodation and tourism, which benefit from a five-years tax holidays followed by a permanently reduced rate of 17.5%.

4. Morocco is great place to start a call center, a farm and other business requiring manpower because:

• The average salary of a Moroccan worker is only 450€ per month in the private sector. The minimum salary is only 225€ on a monthly basis.
• It is easy to find workers Morocco, due to an unemployment rate officially at 10% and reality much higher due to chronic unemployment, notably amongst the younger urban generations.
• The vast majority oh the urban educated workforce is fluent French and often also speak English
• Employers in need of reducing payroll costs are often allowed to do so. Morocco is needed ranked as the 38th best place in the world the flexibility of wages by the World Economic Forum.

 Disadvantages of doing business in Morocco

1. While there are many ways to legally minimize corporate tax, the standard rate is high 30%. Companies subject to CIT are furthermore subject to a minimum tax corresponding to 0.5% of their turnover. Morocco also implements withholding tax on dividends distributions and branch remittances, at a standard rate of 15%
2. It is nearly impossible to open a corporate bank account in Morocco without registering a permanent establishment like a branch or a subsidiary

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The World Bank “Ease of doing Business -ranking”

READ MORE: MOROCCAN COMPANY FORMATION SERVICES & FEES

Taxes in Morocco

Residence: A company is resident in Morocco if it is incorporated in Morocco or if its place effective management is in Morocco

Basis: Morocco operates a territorial tax system. Companies (both resident and nonresident) generally are 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.

Taxable income: Companies are taxed on the difference between their trading income and expenditure. Business expenses incurred in the operation of the business generally are deductible, unless specifically excluded. Expenses not allowed include interest on shareholder loans where the stocks is not fully paid up, interest on shareholder loans in excess of the official annual interest rate and penalties and fines.

Taxation of dividends: Dividends received by corporate shareholders from taxable Moroccan-resident entities must be included in business profits, but the dividends are 100% deductible in calculating taxable income.

Capital gains: Capital gains are treated as non-current income and taxed at the normal corporate tax rate.

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

Foreign tax credit: Foreign tax credits are available if so provided in an applicable tax treaty.

Participation exemption: See Taxation of dividends

Compliance for corporation:

Tax year: The calendar year normally is the fiscal year, although a company may opt for a different fiscal year.

Consolidated returns: Consolidated returns are not permitted; each company must file its own individual return.

Filling requirements: Accounts for income tax purposes must be filed within three months of the end of the relevant accounting period. Corporate tax is payable in four equal installments, based on the previous year’s assessments. 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.

Penalties: Interest and penalties apply for late filing, failure to file or filing an incorrect return

Rulings: An optional advance pricing agreement ruling procedure has been introduced.

Tax authorities: General Tax Administration

Incentives- A variety of incentives are offered to encourage Moroccan and foreign investors. Incentives include an exemption from business tax for the first five years of operations for newly incorporated companies, and a corporate income tax exemption for companies exporting goods and services or operating tourist establishments (subject to certain conditions) for the first five years of operations, followed by a reduced rate on export sales.

There are several export and industrial free zones in the main cities, Tangiers, Kenitra, Rabat, Nador, Fes and Layoune that are open for various activities. Authorized companies located in the export and industrial free zones benefit from a business tax exemption for the first 15 years, together with an exemption from corporate income tax for the first five years of operations, followed by a reduced rate of 8.75% for the following 20 years.

An offshore financial center in Tangier is open to all international banks and financial institutions that have obtained prior authorization from the ministry of finance. Banks operating in the offshore financial center are entitled to an exemption from registration fees and stamp duty on initial share capital and subsequent increases, and on the acquisition of premises for setting up a head office and branches, provided the premises are retained for at least 10 years: an exemption from VAT; an exemption from the trading license tax and urban tax on buildings occupied by the head office or agency; an annual corporation tax of 10% or USD 25 000 for the first 15 years, an exemption from tax in respect of dividend distributions and transfer of share proceeds, and customs duty exemptions.

Companies with the status of Casablanca Finance City are entitled to a corporate tax exemption on sales turnover generated in foreign currency and on capital gains arising from the transfer of foreign securities for five years from the start of the tax year in which the company obtained this status. After the expiration of this period, an 8.75% corporate tax rate applies.

Tax-neutral treatment may be available for corporate income tax purposes for a restructuring group.

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Personal Taxation in Morocco 2017

Personal taxation basis:

Residents individuals are taxed on their worldwide income: nonresidents are taxed only on Moroccan-source income.

Tax Residence:

The following individuals are resident in Morocco for tax purposes: 1. individuals who are habitually resident in Morocco 2. Individuals who are present in Morocco for at leas 183 days in a given year, whether or not continuously and 3. Individuals whose professional activities or center of economic interest are located in Morocco.

Filling status:

Joint filing is not permitted, each individual must file a separate return

Income tax rates in Morocco:

Rates are progressive from 0% to 38%

Social security payments in Morocco:

An employer is required to register its employees with the social fund and pay social security contributions based on the employee’s salary. Both the employer and employee are required to contribute, and the employee’s contributions is withheld by the employer.

Inheritance/estate tax in Morocco:

There is no inheritance tax, but a gift tax is levied at a flat rate of 20%

Net wealth/net worth tax in Morocco:

No

Tax year:

Calendar year

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