Investing in Africa Morocco

Transcription

1 Investing in Africa Morocco This information was last updated in May 2006 For further details and updates, please contact: Ahmed Ben Abdelkhalek Telephone: Fax:

2 Investing in Morocco Introduction Morocco has a great deal to offer to investors. It s geographical position, climate, natural resources, as well as its relatively young population are some of the contributing factors to the increasing success with which the country has attracted, and will continue to attract, both local and foreign investments. At the end of 1994, Morocco s population was estimated at over 28.7 million. Located in the north-western side of Africa, Morocco is situated at the cross-roads of the America-Middle East, and Europe-Africa axes. The Economy Morocco has 8.7 million hectares of arable land. Its main crops are cereals, fruits and vegetables, oil-producing plants, wine growing and industrial crops. Farming and fishing account for some 14% of the GDP. Morocco also has an important mining industry with the production of phosphates (75% of world reserves) at some 18 million tons. Other significant economic sectors are energy, building and public works, the processing industries (agro-food, textile and leather, mechanical and electrical), handicrafts, tourism and banking. Trade Agreements Under the co-operation agreement between Morocco and the European Economic Community (EEC) signed on 26 April 1976 in Rabat, Morocco has access to financial aid, either direct or as credit facilities, and to the EEC markets. A partnership agreement was signed in February 1996 between Morocco and the European Union. Trade agreements have been signed with various African countries, both French and English speaking. There are conventional agreements with Egypt, Gabon, Mali, Nigeria, Sudan, Zaire, Libya and Cameroon. Agreements signed with countries where goods are traded duty-free, with no restriction on quantity, include those with Tunisia, Senegal, Guinea, Mauritania, Ivory Coast, Niger Republic, Syria and Algeria. Morocco continues to strengthen its trade relations with the Arab countries, such as Saudi Arabia, Qatar, the United Arab Emirates and Kuwait. Morocco also aims to extend its trade relations to other countries, in particular Eastern Europe. Agreements have been signed with Austria, Bulgaria, Hungary, Malta, Norway, Poland, Romania, Russia, Yugoslavia, Finland and Turkey. Morocco has signed conventional commercial co-operation agreements with Argentina, Cuba and Brazil. Investment Guarantee Agreements Since 1973, foreign investors can hold all the equity capital in Moroccan companies. The repatriation of investments, tax-free profits and gains on disposals is guaranteed with no limit on the amount or period. In addition, Morocco guarantees all foreign investment against risk of nationalisation and compulsory purchase, and has signed investment guarantee agreements with a number of countries. Forms of Business Organisation - Natural or legal persons can carry out economic activity in Morocco. There are two main types of company in Morocco, namely the limited liability company and the private limited company. Page - 2 -

3 Limited Liability Company (societe anonyme, S.A) Main features: - it is made up of at least five shareholders - the minimum share capital is 300,000 dirhams - the shareholders liability is limited to their share capital. Private Limited Company (societe a responsabilite limitee, S.A.R.L.) Main features: - it is made up of two or more partners - the minimum share capital is 10,000 dirhams - each shareholder is liable for the debts of the company up to the amount of his share capital in the company. Sole Proprietorship the owner is personally liable for all his business liabilities. From a tax and social security standpoint, he cannot be treated as an employee of the business. General Partnership The partners are jointly and severally liable for the partnership s liabilities. The business can be run by one or more managers elected by the partners. Limited Partnership This is made up of one or more active partners, jointly liable for the partnership s debts, with unlimited liability, and one or more sleeping partners who are liable only to the extent of their respective contributions. The partnership is managed either by one of the active partners, or by a third party elected by the partners. Joint-Venture Company This is made up of two or more partners, who are natural or legal persons. To form a joint venture, the entities must enter into an agreement to conduct business and then choose as a vehicle any of the legal entities discussed above. Investment Incentives Morocco offers a package of incentives designed to encourage both Moroccan and foreign investors. The new law setting out the investment charge was recently adopted by the Chamber of Representatives. This law aims to promote the major goals of the state concerning development and investment for the next ten years. Legal measures for enhancing investment in Morocco in terms of the law are as follows: Fiscal Advantages exemption from business license tax ( impot des patentes ). New enterprises which set up operations in certain demarcated zones of Morocco and new, small and medium-sized industries set up anywhere in Morocco will be exempt from this duty for the first five consecutive years of operation the amount of the business license tax is usually determined with reference to the gross rental value of the premises (including the means of production) used for carrying on trade. The rental value is in turn determined with reference to leases and rental deeds or by means of direct comparison or appreciation. The rate of this proportional tax varies between 5% and 30% of the rental value, according to the class of trade in the case of companies exporting goods and services, an exemption is granted from corporate tax for the first five consecutive years of operation. Thereafter, a reduction of 50% of the corporate tax is granted on that portion of export sales. For exports services, this exemption is applied only for the sales turnover generated in a foreign currency for companies operating in specific provinces or economically deprived zones in Morocco, as defined by decree, a reduction of 50% of the corporate tax rate, granted for the first five consecutive years of operation. The Moroccan cities identified in terms of this decree are: Page - 3 -

4 Al Hoceima, Berkane, Boujdour, Cefchaouen, Es-Semaa, Fahs Bni Makada, Geulmim, Laayoune, Larache, Nador, Oued Dahab, Oujda-Angad, Tan Tan, Tanger Assilah, Taounate, Taourirt, Tata, Taza, Tetouan. an exemption from Value Added Tax ( VAT ) on the cost of materials, tools and equipment, imported or acquired locally, which are depreciable assets registered in a fixed asset account an exemption from VAT on goods, merchandise and services financed or delivered as a gift by the European Union an exemption from the minimum contribution in respect of corporate tax during the first 36 months of operation equipment, goods, materials, tools, spare parts and accessories which are considered necessary to promote and develop investment, are subject to import duty at between 2.5% and 10% ad valorem. Offshore Financial Centres Offshore Banks The Tangiers offshore financial centre is open to all international banks and financial establishments. Prior authorization from the Ministry of finance is required to register in the trade register. The approval of the Ministry, after consultation with the Central Bank, is also required for the carrying on of banking activities. Such banks are free to carry out exchange transactions on behalf of non-residents. However, all such transactions with non-residents are subject to prior authorisation from the exchange office. The main tax advantages available to offshore banks are as follows: 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, subject to the condition that such premises are retained for a period of at least 10 years exemption from VAT exemption from trading license tax and urban tax on the title of the buildings occupied by their head offices or agencies corporation tax of either 10% or US$25,000 per year during the first 15 years exemption from tax in respect of dividend distributions and share proceeds transfers a flat rate contribution of 18% on salaries and emoluments paid to staff with reservations concerning more favourable tax conditions envisaged by the law of universal application exemption from customs duty and foreign trade inspection formalities in respect of imported equipment and furniture and a refund of customs duty on such equipment purchased locally. Offshore holding companies Offshore holding companies can be established freely in financial centres, subject to notification of the exchange office within 30 days of the date of registration in the trade register. The main tax advantages available to offshore holding companies are as follows: corporation tax of 500US$ on their activities for the first 15 years VAT exemption tax exemption on dividend distributions and share proceeds transfers the same customs advantages and staff regulations that are available to offshore banks Page - 4 -

5 the same exemption from trading license tax, urban, tax, registration fees and stamp duty is applicable. Tangier Province The advantages available to companies established and operating in Tangier are as follows: Tangier Free Zones Companies operating (before 1 January 2001) in the export free zones are subject to the following taxes during the first fifteen years of trade: corporation tax at the rate of 8.75% general income tax, to which a reduction of 80% is applied. With effect from 1 January 2001, companies setting up operations in the export free zones are entitled to the following: Corporate Tax exemption from corporate tax for the first five years of trade a reduced rate of 8.75% for the following ten years. General Income Tax exemption from general income tax for the first five years of trade a reduction of 80% for the following ten years. Taxation of Resident Entities General All business entities, whatever their legal form and business activity, all public establishments, and other legal persons engaged in profit-making transactions, are subject to corporation tax, except for certain types of entities, such as limited partnerships, although such partnerships can, in some cases, still opt for corporation tax. Some companies are furthermore exempt from corporation tax, namely non-profit making associations, and similar organizations, cattle-breeding companies, etc. Companies engaged in certain agricultural activities, such as cotton, sugar and other crops and private teaching establishments can benefit from a 50% rate rebate. Newly listed companies on the stock exchange can benefit from a 25% rate rebate during 3 years following their introduction by the transfer of existing shares or from a 50% rate rebate following their introduction by new issue of capital (at least 20% with renunciation of the preferential right to subscription). Companies Companies are generally subject to corporate tax on income generated from activities carried on in Morocco. The following companies are subject to corporate tax: resident companies i.e. those incorporated in Morocco non-resident companies deriving taxable income from activities carried out in Morocco branches of foreign companies carrying on business activities in Morocco, independent of those carried out by their head office. The corporate tax rate is 35%. The amount of tax payable by companies may not be less than 0.5% of turnover for any financial year. However, the minimum levy may not be less than DH1,500. There is no charge for the first 36 months of activity. Page - 5 -

6 Companies are taxed on the difference between their trading income and expenditure. Business expenses incurred in the running of the business are generally deductible, unless specifically excluded. Expenses not permitted include fines, penalties, interest on shareholder loans where the stock is not fully paid up, and interest on shareholder loans in excess of the official, annual interest rate. Dividends distributed by companies subject to corporate tax must be included in business profits of a recipient company but are 100% deductible in the computation of taxable income. Foreign-source business income of resident companies is not taxable in Morocco provided that such income relates to an enterprise operated outside Morocco, for example, the operations of a foreign branch, a dependent representative or a complete commercial cycle carried out abroad. Capitalisation Depreciation can be claimed on a straight line or reducing balance basis. However, building and vehicles can only be depreciated on a straight line basis for income tax purposes. Inventories Inventories are valued at cost. However, tax law permits a company to make a provision if the original cost of the asset was higher than the current market value. Director s Remuneration Directors remuneration is treated as salaries. Losses Tax losses may be carried forward for a period of 4 years from the end of the loss making accounting period. However, that portion of a loss which relates to depreciation may be carried forward indefinitely. Losses may not be carried back. Capital Gains Capital gains are taxed at regular corporate tax rates. Gains realised qualify for the following partial or total deductions: 0% if the asset was held for less than 2 years before the date of transfer 25% if the asset was held between 2 and 4 years before the date of transfer 50% if the asset was held for more than 4 years before the date of transfer. Alternatively, the company may apply for the roll-forward of the total tax due on condition that it makes a written undertaking to re-invest the proceeds, either in fixed assets, research and development expenses in a company which is subject to corporate tax, in any one financial year within three years of the end of the accounting period in which the disposal occurs. The acquired goods must be preserved for 5 years following the acquisition date. Taxation of Non-Resident Entities Non-Resident Companies Non-resident companies are those which are not incorporated in Morocco or which have their management located outside Morocco. Such companies are subject to corporate tax in Morocco only in respect of business income from Moroccan sources. Subject to any double taxation treaties concluded by Morocco, the following income of non-resident companies is deemed to be from a source in Morocco: income from business activities carried on in Morocco through a permanent establishment in Morocco income from a complete commercial cycle conducted in Morocco income from movable or immovable assets situated in Morocco. Page - 6 -

7 Companies which do not have their registered office in Morocco are subject to tax on the gross amount of specified royalties, payments for technical assistance, payments for technical, scientific or other similar information, fees for the use of or the right to use certain equipment, interest on loans, remuneration for transport of goods or persons from Morocco, commissions and fees. The tax is withheld at source, by the payee at the rate of 10% of the gross amount payable. This is a final tax. Where the services are rendered or the work is carried out by a branch or other permanent establishment of a foreign company in Morocco, without intervention of the foreign head office, the branch or permanent establishment will be taxed in the same way as a Moroccan company. Non-resident companies carrying out engineering, construction or assembly works or works relating to industrial or technical installations, may elect to be taxed on the contract price at the rate of 8% (excluding VAT), instead of being subject to the normal corporate tax at 35%. This is a final tax and will free the foreign company from the obligation to pay tax on income from shares and similar income as well as from the 10% withholding tax. All dividends are subject to a 10% withholding tax, withheld at source. In terms of the rules governing foreign exchange transactions in Morocco, payments for technical assistance rendered by non-resident companies in Morocco are not subject to exchange control. Transfers are made directly by authorized banks, which have the responsibility to check that all supporting documents relating to the services have been furnished to the bank. These banks also bear the responsibility to ensure that the payments are made to the suppliers of the services and that they correspond to the services rendered. Tax Treatment of Groups of Companies Moroccan tax law treats every company within a group as a separate and independent taxpayer. No provision is made for associated companies to file a consolidated return. In addition there are no provisions for the transfer of losses within a group. Relief may be granted in respect of the 10% withholding tax on dividends paid between group companies in Morocco if the company receiving the dividend demonstrates to the distributing company that the former company is subject to Moroccan corporate tax. Tax Treatment of Branches and Subsidiaries compared. In terms of Moroccan tax law, where work is carried out or services are rendered in Morocco by a branch or other permanent establishment of a foreign company, without intervention of the foreign head office, the income of the branch or permanent establishment will be taxed according to the principles applicable to a Moroccan company. The profits will therefore be subject to tax at 35% as in the case of a company. A further 10% withholding tax is imposed on the remittance of branch profits to the foreign head office. A subsidiary of a foreign company is subject to tax at the corporate rate of 35% and, in addition, is subject to a 10% withholding tax on dividends distributed to the foreign parent company. Page - 7 -

8 Corporate Assessments and Payments Companies are assessed on a calendar year basis by default, but they can elect for a different accounting year end. The applicable tax office will depend on the head office or principle business address of the company. Accounts for income tax purposes should be filed within the three months following the end of the related accounting period. Corporate tax is payable in four equal instalments, based on the prior year s assessment. 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 (see Taxation of nonresident entities) must submit a declaration of their turnover before 1 April following each calendar year. The Moroccan companies which choose the imposition of the capital gains at the rate of 35% with a 50% rebate must declare and pay the tax in the month following transfer or withdrawal. Tax Treatment of Individuals The following individuals are resident in Morocco for tax purposes: individuals who are habitually resident in Morocco individuals who are present in Morocco for a minimum period of 183 days within a given year, whether continuously or not individuals whose professional activity or centre of economic interest is located in Morocco. Individuals are taxed on the following income: professional income profits realized by self-employed persons employment income property income dividends and interests. Personal Income Tax Rates Refer to Table 1. Capital Gains Capital gains on the disposal of property are generally subject to tax as part of the personal income of the individual. However, there are a number of exceptions, such as properties occupied by the owner for more than 8 years. Personal Assessments and Payments Personal tax is assessed by reference to calendar years. Annual income tax declarations must be made before 31 March of the following year. Personal income tax is payable within a set period following the date of assessment. Page - 8 -

9 Withholding Taxes In terms of Moroccan domestic law, dividends, interest and royalties paid to non-resident companies are subject to a final 10% withholding tax, at source. Morocco has signed double taxation agreements with numerous countries. A few of these treaties reduce the rate of withholding tax in Morocco on the payment of dividends, interest and royalties to a recipient resident in the foreign country. Refer to Table 2 for the Withholding Tax Rates. Other Taxes Value Added Tax (VAT) VAT was introduced in Morocco in It is levied on all industrial, commercial and craft activities, and on services rendered in Morocco, as well as on import transactions. Input VAT for certain VAT-exempt transactions may not be claimed. These transactions include sales of basic commodities including bread, candles, Moroccan dates, milk, sugar and salt. For certain other VAT-exempt transactions businesses may claim input VAT. These include exports of goods and services and sales of specified agricultural equipment. All persons subject to VAT must make a declaration of existence within 30 days of the start of their operations, in order to be registered for VAT. VAT Rates The standard rate of VAT is 20%. The following are the lower rates: 7% for energy and other consumer goods, other than basic foodstuffs 10% for financial and banking transactions, rental of buildings used as hotels, the sales of drinks and foodstuffs 14% for real estate transactions and transport. Registration Duties Registration Duties are levied on certain legal operations, such as: share capital registrations at 0.25% for companies which manage transferable securities or which take part in the capital of other companies company share capital registrations at 0.5% company share capital disposals at 2.5% property acquisitions at 5%. Notarial Tax - A notarial tax is levied on share capital. The first two blocks of 5,000 dirhams are taxed at 1% and 0.5% respectively. The remainder is taxed at 0.2%, with a minimum of 15 dirhams. Land tax Land registration tax of 5% is payable on property transactions. However, a reduced rate of 2.5% applies to land to be used for housing purposes. Fringe Benefit Tax Benefits in kind are generally taxable in the hands of the employee but are deductible against the employer s profits. Excise Tax and Customs Duties The customs and excise authorities are responsible for payment and collection of internal excise duty in respect of the following goods and products imported or produced: Page - 9 -

10 beer, wine and spirits sugar and similar sweet products petroleum products. A. Temporary Entry This system allows the importation with suspension of duty and taxes of certain goods, which are processed and re-exported within a period of 6 months. This system can be extended to two years. B. Temporary Import Same as temporary entry but concerns goods which are re-exported in the same state as they were imported. C. Export Bonded Warehouse This system allows goods to be placed in storage premises for a fixed period, with suspension of duty and taxes. The advantage of this system is that the goods can be kept in storage for a maximum period of two years, which is added to the period allowed for temporary entry. D. Drawback Contrary to the suspension system, this system starts at the time of exportation. Duty and taxes paid on imported raw materials and semi-finished products used in the manufacture of exported goods, are refunded at a flat-rate. Social Security Tax Every employer is required to register its employees with the National Social Fund (caisse nationale de securite sociale, C.N.S.S). See Table 3 for contribution rates. Sundry Taxes: Urban Tax - Urban tax is levied on the rental value of real estate property. In particular, buildings which form part of the business assets of an enterprise, are subject to urban tax at 13.5%. Municipal Tax - Municipal tax is levied at 10% rental value of real estate assets situated within the boundaries of urban districts and delimited centres; and at 6% of the rental value of real estate assets situated in peripheral zones of urban districts. Business License Tax - This tax is payable by all persons carrying on a commercial or industrial activity. It is mainly a proportional tax which varies according to the profession of the person. It is levied on the rental value of the premises and fixtures, ranging between 5% and 30%. Page

11 Tables TABLE 1: INDIVIDUAL TAX RATES Income Tax Scale Range (Dirhams) (annual income) Rate Up to 20,000 Exempt 20,001 to 24,000 13% 24,001 to 36,000 21% 36,001 to 60,000 35% 60,001 and above 44% Page

12 TABLE 2: WITHHOLDING TAX RATES Dividends % Interest % Royalties% Belgium 15 (e) 15 (e) 5/10 Canada 15 (e) 15 (e) 5/10 Finland 15 (e) France 15 (a) (e) 10/15 (e) 5/10 Germany 5/15 (e) Italy 10/15 (e) 10 5/10 Luxembourg 10/15 (e) Norway 15 (e) Poland 7/15 (e) Portugal 10/15 (e) Russia 5/ Spain 10/15 (e) 10 5/10 Sweden - (b) - (c) - (b) Switzerland 7/15 (e) (f) Tunisia - (d) - (d) - (d) United Kingdom 10/25 (e) United States 10/15 (e) 15 (e) 10 Non-treaty countries (a) (b) (c) (d) (e) (f) No withholding tax is imposed in France if the recipient is subject to tax on the dividend in Morocco. Tax payable in the country in which the recipient is domiciled. Tax payable in the country in which the creditor is domiciled. Tax payable in the source country. Under Moroccan domestic law, the withholding tax rate for dividends and interest is 10%. Thus, for dividends and interest paid from Morocco, the treaty rates exceeding 10% do not apply. Not yet published in either country. Morocco has signed treaties with Czechoslovakia, Denmark, Libya, Netherlands, Romania, India and the United Arab Emirates, The Republic of Korea and Egypt but these treaties have not yet been ratified. Page

13 TABLE 3: SOCIAL SECURITY TAX CONTRIBUTION RATES Benefits Employer Employee contribution contribution Family allowances 6.5 % 1 0% Short-term social benefits 8.6% % 2 Vocational training 1.6% 1 0% Mandatory disease Insurance 3 3% 1 2% 1 (1) Based on the gross salary. (2) Based on the gross salary up to a maximum of 6,000 DH per month. (3) Applicable only when the employer hasn t already contracted private insurance for employees A ceiling of 6,000 DH is applicable when calculating contributions due in respect of short-term benefits. Page

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