Morocco: Income Taxes Imposed and Relief Extended to Foreign Corporations
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[edit] Income Taxation
Foreign corporations permanently conducting business inside Morocco are treated by Moroccan unitary income tax statues as if they were domestic corporations. Under a significantly modernized Investment Charter enacted in January 1996, corporations face a “Main” tax rate generally amounting to 35% of Moroccan generated income. (Federation of International Trade Associations, 2007) Business profits from any and all Moroccan sources, including capital gains, are summed and deemed taxable. (PriceWaterhouseCoopers, 1994) The tax is payable in advance on a quarterly schedule of estimates with a Moroccan tax return and final settlement expected within the first quarter of the following fiscal year. (Deloitte Touche Tohmatsu, 2007)
In addition to the Main income tax, a National Solidarity tax equal to 10% of the Main corporate tax payable is assessed to all corporations. (Info-Prod Research (Middle East) Ltd., 1999) This has the effect of raising the Main tax rate to 38.5%.
[edit] Relief from Income Taxation
Morocco actively encourages new foreign investment within its borders. This attitude is reflected concretely in specific income tax statutes and policies providing fair treatment, deferments, and outright exemptions for foreign corporations.
As an example of fair treatment, it is generally possible for companies home-based in the most advanced nations to avoid instances of double income taxation. Moroccan treaties with 17 significant trading partner countries use a system of credits aimed at preventing a foreign corporation from being taxed by both its home country and by Morocco on the same income. (PriceWaterhouseCoopers, 1994)
Foreign corporation income tax deferments, reductions and even total exemptions are offered under an increasingly more standardized Middle East and North Africa regional arrangement, “MENA”, aimed, in part, to decrease tax competition between countries in the region. Morocco offers tax holidays up to 5 years in length for newly arriving foreign companies, reduced or eliminated income taxes for corporations working in specific economic sectors such as agriculture, until 2020, and tourism. Also allowed are accelerated depreciation accounting for machinery and equipment, and location-based incentives, such as the standing tax-exempt offer to companies willing to set up operations in the Western Sahara (MENA-OECD Investment Programme, 2007) and in the northern and southern zones of Morocco. (Deloitte Touche Tohmatsu, 2007)
Beyond statutory incentives, Moroccan authorities have historically negotiated one-off tax incentive arrangements with foreign companies interested in placing subsidiary operations or other Foreign Direct Investments inside the country. According to experts writing for the World Bank just prior to the enactment of the 1996 Investment Charter overhaul in which the most useful of these “conventions” were codified, ad-hoc incentives were offered to companies promising particularly attractive economic benefits to the nation. (Sewell, Tsiopoulos, & Mintz, 1995) Given this precedent, foreign companies with compelling cases will likely continue to press for specific incentives that can translate into global competitive advantages.
References:
Deloitte Touche Tohmatsu. (2007). Morocco Snapshot. Retrieved October 28, 2007, from [1]
Federation of International Trade Associations. (2007). Taxes/Accounting. Retrieved October 18, 2007, from [2]
Info-Prod Research (Middle East) Ltd. (1999). Morocco Taxation. Retrieved October 28, 2007, from [3]
MENA-OECD Investment Programme. (2007). Tax Incentives for Investment – A Global Perspective: experiences in MENA and non-MENA countries. Retrieved October 28, 2007, from [4]
PriceWaterhouseCoopers. (1994). Doing Business and Investing in: Morocco. Retrieved October 15, 2007, from [5]
Sewell, D., Tsiopoulos, T., & Mintz, J. (1995). Tax Effects on Investment in Morocco. Retrieved October 18, 2007, from [6]
