Morocco: Corporate Tax Comparative Guide

1 Basic framework

1.1 Is there a single tax regime or is the regime multi-level (eg, federal, state, city)?

There is a single tax regime, which applies to all companies that are subject to tax in Morocco.

1.2 What taxes (and rates) apply to corporate entities which are tax resident in your jurisdiction?

Corporate income tax: Corporate income tax is calculated according to the following progressive scale.

Business tax: Business tax is based on the annual rental value. The rates vary according to the nature of the activity carried out, as follows.

1.3 Is taxation based on revenue, profits, specific trade income, deemed profits or some other tax base?

Corporate income tax is calculated on the basis of net taxable profits, while business tax is based on the amount of the annual rental value.

1.4 Is there a different treatment based on the nature of the taxable income (eg, gains on assets as opposed to trading income or dividend income)?

The nature of the taxable income may have an impact on the tax rates. Some products are subject to withholding tax, such as income from shares (15%) and fixed-income investment products (20%); while trading income is taxed according to the progressive scale set out in question 1.2.

1.5 Is the regime a worldwide or territorial regime, or a mixture?

N/A

1.6 Can losses be utilised and/or carried forward for tax purposes, and must these all be intra-jurisdiction (ie, foreign losses cannot be utilised domestically and vice versa)?

A deficit in a fiscal year may be deducted from the profits in the following fiscal year. In the absence of profits or in the event of insufficient profits to allow for such deduction, the deficit or the balance of deficit may be deducted from the profits in subsequent accounting periods until the fourth year following the financial year of deficit.

Losses incurred by institutions that are not subject to tax in Morocco cannot be deducted from the Moroccan taxable base.

1.7 Is there a concept of beneficial ownership of taxable income or is it only the named or legal owner of the income that is taxed?

The concept of beneficial ownership does not exist in Morocco; only the legal owner of the income is taxed.

1.8 Do the rates change depending on the income or balance-sheet size of the taxpayer?

Yes, companies in Morocco are subject to tax on a progressive scale, whereby the rate of corporate tax varies according to the amount of taxable profits.

1.9 Are entities other than companies subject to corporate taxes (eg, partnerships or trusts)?

Yes, the following entities are also subject to corporate income tax:

• public institutions that operate on a for-profit basis;
• associations and similar bodies;
• funds created by law or by convention which do not have legal personality and are managed by public or private law bodies; and
• general partnerships and limited partnerships incorporated in Morocco and comprising only natural persons, as well as joint ventures, which are liable to corporation tax upon irrevocable option.

2 Special regimes

2.1 What special regimes exist (eg, for fund entities, enterprise zones, free trade zones, investment in particular sectors such as oil and gas or other natural resources, shipping, insurance, securitisation, real estate or intellectual property)?

The special tax regimes applicable in Morocco are outlined in the table below.

2.2 Is relief available for corporate reorganisations or intra-group transfers of companies and other assets? Please include details of any participation regime.

Under the special regime for mergers, merged or divested companies are not taxed at the time of the transaction on the net capital gain realised following the contribution of all fixed assets and equity securities, provided that certain formal conditions are met.

Under this special regime, the merger or division premium realised by the acquirer and corresponding to the capital gain on its participation in the merged or divested company is exempt from tax.

Capital gains resulting from the exchange of shares in the merged or divested company for shares of the acquirer, carried out in the context of merger or divestment transactions, are not taxable for natural or legal persons who are shareholders of the merged or divested company until such time as the shares are sold or withdrawn.

2.3 Can a taxpayer elect for alternative taxation regimes (eg, different ways to calculate the taxable base, such as revenue-based versus profits based or cash basis versus accounts basis)?

Moroccan companies are taxed on the basis of their profits. Non-resident successful tenderers of works, construction or assembly contracts can opt for flat-rate taxation (8%), based on the value of the contract excluding value added tax.

2.4 What are the rules for taxing corporates with different functional or reporting currency from that of the jurisdiction in which they are resident?

Transactions carried out in foreign currencies must be recorded in the financial statements at the exchange rate prevailing on the transaction date.

2.5 How are intangibles taxed?

Intangible assets are taxable for corporate income tax purposes as non-current income.

The capital gain or loss on the sale of intangible assets equates to the difference between the sale price and the cost price of the items.

2.6 Are corporate-level deductions available for contributions to pensions?

No.

2.7 Are taxpayers from different sectors (eg, banking) subject to different or additional taxes or surtaxes?

Credit institutions and similar, and insurance and reinsurance companies, are subject to a tax rate of 37%.

2.8 Are there other surtaxes (eg, solidarity surtax, education tax, corporate net wealth tax, remittance tax)?

Companies that generate taxable profits of MAD 40 million or more are subject to social solidarity contributions at a rate of 2.5%. The taxable base corresponds to the taxable profit.

2.9 Are there any deemed deductions against corporate tax for equity?

No.

3 Investment in capital assets

3.1 How is investment in capital assets treated – does tax treatment follow the accounts (eg, depreciation) or are there specific rules about the write-off for tax purposes of investment in capital assets?

N/A

3.2 Are there research and development credits or other tax incentives for investment?

No. However, there are several exemptions and investment incentives.

All new companies benefit from a full exemption from business tax for the first five consecutive fiscal years. They also benefit from an exemption from value added tax for capital goods to be entered in a capital account, for a period of 36 months from the start of operations.

3.3 Are inventories subject to special tax or valuation rules?

Inventories are not subject to any special tax. In Morocco, inventories are valued at cost price, or at the current price if the latter is lower and work in progress is valued at cost.

3.4 Are derivatives subject to any specific tax rules?

No.

4 Cross-border treatment

4.1 On what basis are non-resident corporate entities subject to tax in your jurisdiction?

Non-resident companies are subject to tax based on their taxable income earned in Morocco.

4.2 What withholding or excise taxes apply to payments by corporate taxpayers to non-residents?

Remuneration paid to foreign companies for services that they provide to Moroccan taxpayers is subject to a 10% withholding tax.

4.3 Do double or multilateral tax treaties override domestic tax treatments?

In principle, tax treaties override national regulations.

However, in practice, it is not always easy to enforce the provisions of such treaties when they are contrary to the provisions of Moroccan tax law.

4.4 In the absence of treaties, is there unilateral relief or credits for foreign taxes?

No, tax credits are granted only if there is an applicable tax treaty. The tax credit is also conditional on the issuance of a certificate of payment of tax abroad to the Moroccan tax authorities.

4.5 Do inbound corporate entities obtain a step-up in asset basis for tax purposes?

Inbound corporate entities can enter the share capital based on the historical value of the shares. However, this has no real tax impact.

4.6 Are there exit taxes (for disposed-of assets or companies changing residence)?

No. However, the sale of assets constitutes non-current income, which is subject to corporate income tax.

5 Anti-avoidance

5.1 Are there anti-avoidance rules applicable to corporate taxpayers – if so, are these case law (jurisprudence) or statutory, or both?

The Moroccan General Tax Code provides for anti-avoidance measures.

5.2 What are the main ‘general purpose' anti-avoidance rules or regimes, based on either statute or cases?

Provisions aimed at avoiding base erosion and profit shifting.

5.3 What are the major anti-avoidance tax rules (eg, controlled foreign companies, transfer pricing (including thin capitalisation), anti-hybrid rules, limitations on losses or interest deductions)?

The main anti-avoidance rules allow the Moroccan tax authorities to reject certain transactions which are of a fictitious nature and are aimed solely at achieving tax benefits or at evading tax or reducing the tax amount. The tax authorities can also reject certain transactions carried out between affiliated companies.

5.4 Is a ruling process available for specific corporate tax issues or desired domestic or cross-border tax treatments?

Taxpayers can ask the tax authorities to rule on the tax regime applicable to their specific situation in light of the legislative provisions. Such a request may be made in relation to the following:

• legal and financial arrangements relating to investment projects;
• restructuring operations of companies and groups of companies located in Morocco; and
• operations between companies located in Morocco with direct or indirect links of dependence.

The tax authorities must respond to requests within three months of the date of receipt of the request.

5.5 Is there a transfer pricing regime?

Yes, there is a transfer pricing regime in Morocco.

Profits that are indirectly transferred, by either increasing or decreasing the purchase or sale price, or by any other means, can be reported in the taxable income.

From 2020 onwards, companies that are directly or indirectly dependent on companies located outside Morocco will have to provide the tax authorities, by electronic means, with transfer pricing documentation to justify their transfer pricing policy.

5.6 Are there statutory limitation periods?

The limitation period is set at four years. In the event of failure to report, this period is extended to 10 years.

6 Compliance

6.1 What are the deadlines for filing company tax returns and paying the relevant tax?

The declaration of taxable income must be filed within three months of the end of each financial year.

The tax is paid by advance payment in four instalments, before the expiry of the third, sixth, ninth and twelfth months following the opening date of the accounting period.

Any outstanding balance must be paid before the deadline for the declaration.

6.2 What penalties exist for non-compliance, at corporate and executive level?

There are two primary penalties, as follows.

Sanctions for failure to file or delay in filing tax returns: Increases of 5%, 15% and 20% are applicable to the declaration of taxable income, as follows:

• 5% if the declaration, deeds and agreements are filed within 30 days of the due date and, if an amended declaration is filed after the deadline, giving rise to the payment of additional fees;
• 15% if the declaration, deeds and agreements are filed after this 30-day period; and
• 20% for failure to file a declaration, incomplete or insufficient declaration.

Sanctions for late payment of taxes and duties: A penalty of 10% and an increase of 5% will be payable for the first month of delay; thereafter, 0.5% for each additional month or fraction of a month will be added to the unpaid amount.

6.3 Is there a regime for reporting information at an international or other supranational level (eg, country-by-country reporting)?

Yes, the Moroccan tax authorities can exchange information with the tax authorities of countries that have signed a double taxation agreement with Morocco.

Credit institutions are entitled to provide information to the tax authorities of countries with which Morocco is considering concluding an automatic information exchange agreement.

7 Consolidation

7.1 Is tax consolidation permitted, on either a tax liability or payment basis, or both?

No, each company is taxed individually.

8 Indirect taxes

8.1 What indirect taxes (eg, goods or service tax, consumption tax, broadcasting tax, value added tax, excise tax) could a corporate taxpayer be exposed to?

Corporate taxpayers are exposed to the following indirect taxes:

• value added tax;
• customs duties; and
• domestic consumption tax.

8.2 Are transfer or other taxes due in relation to the transfer of interests in corporate entities?

Transfers of interest are subject to the same tax regime as sales of shares (ie, corporate income tax applies to the capital gains).

9 Trends and predictions

9.1 How would you describe the current tax landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

The current environment is favourable for investment and encourages business creation – for example, the 2019 Finance Act reduced the corporate income tax rate.

Various business representatives are now lobbying for a review of the value added tax (VAT) regime in Morocco, in order to reduce the VAT impact on companies' cash flow.

10 Tips and traps

10.1 What are your top tips for navigating the tax regime and what potential sticking points would you highlight?

Full compliance with the tax rules is recommended and companies should try to make contact anonymously with the tax authorities in case of any questions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.