Capital Gains Tax
Capital gains obtained by companies are taxed at the same rates as ordinary income. They can be offset against tax losses of previous years.
There is no legal definition of capital gains for corporate income tax purposes.
Capital gains are calculated as the difference between the proceeds of the transfer of a fixed asset and the acquisition cost of such assets, reduced by the amount of tax-deductible depreciation.
Dividends
Dividends paid to non-resident entities or individuals are subject to a 10% withholding tax under domestic law (new financial law 2023). This rate can be reduced under tax treaties.
Exchange control
Foreign investors benefit from the right to repatriate their investment and the yield thereon provided that the investment was made in foreign currency and duly reported to the exchange control authorities (Office des Changes).
Export Processing Zone
There are several free trade zones called Industrial Acceleration Zone. These are located in Tangier, Kenitra, Dakhla, Laayoune, Oujda, Nador, Fez, Salé and Nouaceur.
They are regulated by law 19-94.
Dividends and other similar income from foreign sources registered in the account of non-residents, by companies established in industrial acceleration zones, are exempted from corporation tax withhold.
The following benefits apply to income accrued from the export of goods and services by companies established in free trade zones (with some exceptions depending on activity):
- 5 first years of operation: exempt from corporate income tax. Then:
- 16.25 % for the fiscal year beginning January 1st 2023
- 17.5 % for the fiscal year beginning 1st 2024
- 18.75 % for the fiscal year beginning January 1st 2025
- 20% for the fiscal year beginning January 1st 2026.
The tax regime in force before January 1, 2021 remains applicable to companies established in industrial acceleration zones before this date.
Interest
Interest paid to non-resident entities or individuals is subject to a 10% withholding tax under domestic law. None of the current tax treaties entered into by Morocco provide for a lower tax rate.
Domestic law exempts interests paid to non-residents from withholding tax, provided that they are in connection with:
- loans granted to the Moroccan State or guaranteed by the Moroccan State;
- deposits in foreign currency or in convertible dirhams;
- loans granted in foreign currency for at least ten years; or
- loans granted in foreign currency by the European Investment Bank to finance projects approved by the Moroccan government.
Losses
Tax losses comprise of losses from ordinary activities and capital losses. Both types of losses are treated the same manner.
The tax authorities usually take the stance that losses incurred by foreign permanent establishments cannot be offset against domestic income.
Operating losses can be carried forward for four years. However, losses arising from fixed assets depreciation can be carried forward indefinitely.
Loss carry-backs are not permitted.
There are no restrictions on tax loss carry-forwards in the event of a change of company ownership.
Newly listed companies (Casablanca Stock Exchange)
Newly listed companies, except banks, insurance companies and public firms, benefit from a reduction on corporate income tax during the three fiscal years following their introduction to the stock market, which is determined as follows:
- A 25% reduction, if the introduction to the stock market is made through a sale of existing shares.
- A 50% reduction, if the shares listed are newly issued through a capital increase of at least 20% of the total share capital.
However, are excluded from the benefit of the reduction mentioned above:- credit institutions;
- insurance and reinsurance companies;
- public service concession companies;
- companies whose capital is wholly or partially owned by the State or a public authority or by a company whose capital is at least 50% owned by a public authority.
Payroll tax and social security
Current social security rates are as follows:
- Employee fixed contribution: 4.48% of gross salary outside of exempted allowances. This base is limited at 6,000.00 dirhams per month.
- Employer fixed contribution: 8.98% on the same basis as above.
- Employee contribution for health insurance: 2.26% of the gross salary outside of exempted allowances. No limitation applies to this base.
- Employer contribution: 12.11% of the gross salary outside of exempted allowances. No limitation applies to this base (6.4 + 1.6 + 2.26 + 1.85).
Personal Income Tax
Personal income tax rates (in force since 2010) are as follows:
Annual taxable income (in dirhams) | Rate
- 0 – 30,000 | 0%
- 30,001 – 50,000 | 10%
- 50,001 – 60,000 | 20%
- 60,001 – 80,000 | 30%
- 80,001 – 180,000 | 34%
- Over 180,000 | 38%
Special rates apply to certain types of income (e.g. capital gains arising on disposals of real estate property are taxed at 20% with a minimum value of 3% of the sale price).
Business Tax ("Taxe professionnelle")
This local tax is due by companies and individuals that perform a business activity. It is levied annually at 10.5% of the rental value, as legally defined, of the buildings and equipment (rented or owned) used in the activity.
New financial law 2023 has made changes to property income by reintroduction of the progressive scale for the taxation:
- Application of the rates of 10% and 15% withhold (non-discharging).
- Reinstatement of the taxation of property income at the rates of the progressive scale. From now on, the net taxable income will be obtained by applying a 40% deduction on the corresponding gross property income:
- Income received and from the rental of built or unbuilt properties and constructions of any kind;
- Rental value of the buildings and constructions that the owners make freely available to third parties.
- Eviction compensation paid to occupants of real estate by the owners of said property.
- Income from profits distributed by OPCIs.
The option for the spontaneous payment of the IR relating to property income is no longer possible.
Business Tax ("Taxe Professionnelle")
This local tax is due by companies and individuals that perform a business activity. It can be 10%, 20% or 30% of the rental value as legally defined, of the buildings and equipment (rented or owned) depending on the classification of the professional activity (Class 1-2-3) with a minimum of 1200 MAD, 600 MD and 300 MAD depending on the class (urban municipalities).
Resident companies / non-resident companies
Resident companies
The following entities are taxed as corporations:
- limited partnerships by shares;
- limited liability companies;
- general and limited partnerships in which at least one partner is a corporation;
- civil companies, permanent establishments of non-resident entities; and
- public sector companies that pursue profit-oriented activities and associations that pursue business-oriented activities.
General partnerships and limited partnerships, in which all partners or parties are individuals, can elect to be taxed as corporations.
Transparent entities, like mutual funds investing in transferable securities, are exempt from corporate income tax and their income is taxed at the owner’s level.
Resident companies and permanent establishments of non-resident companies are taxed on their worldwide income and capital gains irrespective of where these have been derived.
Non-resident companies
As a general rule, non-resident entities are taxed as corporations.
Non-resident entities are taxed on income and capital gains derived in Morocco.
Royalties
Royalties paid to non-residents are subject to a 10% withholding tax under domestic law. This rate can be reduced under tax treaties.
Stamp duty
Transfers of land are subject to a 5% stamp duty, payable by the purchaser. However, acquisitions of land by banks, insurance companies and financial institutions are subject to 6% stamp duty. When land is intended for the construction of a hotel, its transfer is exempt from stamp duty.
Transfers of buildings are subject to a 4% stamp duty, payable by the purchaser. This rate also applies to transfers of land with buildings thereon as long as the surface of the undeveloped land does not exceed five times the constructed area.
The “taxe sur les terrains non bâtis” is a local tax that is due on bare/undeveloped land. The amount of the tax is fixed by each municipality within certain ranges.
Publicity on screens is subject to 5% stamp duty.
Receipts and invoices paid in cash re subject to 0.25% stamp duty.
Technical service fees
Remuneration for services paid to non-residents is subject to a 10% withholding tax under domestic law. While tax treaties can exempt this income from withholding taxes, these treaty provisions are often disregarded by the tax authorities.
Thin cap regulations
A thin capitalisation rule applies to funds received from shareholders, whether resident or non-resident. Under this rule, the interest accrued on the funds granted by shareholders is only tax deductible for the borrower provided that all the following requirements are met:
- the capital stock of the borrower is fully paid-in;
- the interest-bearing principal does not exceed the capital stock of the borrower; and
- the interest rate does not exceed the rate set every year by the Ministry of Economy and Finance. For 2018 this rate has not been set yet. For 2017 it was set at 2.21%.
Transfer pricing
The transfer pricing rules apply to all domestic and cross-border transactions between related parties. Local tax legislation does not provide for any pricing methods. If the parties wish to conclude an agreement on transfer prices, they can do it for maximum 4 years, but have to submit an application to the tax administration before beginning of the first fiscal year concerned by the agreement (article 234 Bis of General Tax code).
Transfer pricing assessments issued by the tax authorities are subject to a penalty ranging from 25% to 35% of the resulting unpaid tax and to an interest rate of 5% for the first month of delay and of 0.5% for each subsequent month. Bilateral assessments are not available.
No pricing rulings or advance pricing agreements are available.
Value Added Tax
The standard rate is 20%.
Reduced rates are 7%, 10%, and 14%.
Some transactions are VAT exempt (like sales related to milk, sugar..., sales and services provided by manufacturers or service providers natural persons, whose annual turnover is less than 500.000 MAD).
