Worldwide Personal Tax and Immigration Guide 2020–21
1063
Morocco ey.com/globaltaxguides
Casablanca
GMT
EY 37, Boulevard Abdellatif Benkaddour Casablanca 20050 Morocco Executive and immigration contact Abdelmejid Faiz
+212 (522) 957-900 Fax: +212 (522) 390-226 Email: abdelmejid.faiz@ma.ey.com
This chapter has been updated based on tax measures contained in the following: • 2020 Finance Law • 2020 Amending Finance Law • Draft 2021 Finance Bill, which at the time of writing had not yet been voted on by parliament
A. Income tax Who is liable. Under Morocco domestic law, residents of Morocco
are subject to tax on their worldwide income. Individuals resident in Morocco must pay tax on their employment income, regardless of where the services are performed or the employer is located. Nonresidents are subject to tax on their Morocco-source income only. Individuals are considered resident in Morocco if they meet any of the following conditions: • They maintain their home in Morocco. • They maintain the center of their activities (vital interests) in Morocco. • They are present in Morocco for at least 183 days during a period of 365 days. Income subject to tax
Employment income. Taxable employment income includes total compensation after deductions for employees’ social security contributions. Compensation includes bonuses and the market value of fringe benefits, but the following types of income are exempt from income tax: • Family allowances • Workers’ compensation payments for industrial accidents or death • Specific allowances for professional expenses if they correspond to actual expenses incurred for professional purposes and are not covered by the flat-rate deduction for business expenses provided by the Moroccan Tax Code • Retirement benefits and severance pay within the limits provided by the Labor Law • Alimony payments received • Supplementary pension received if the contributions are not deductible in determining taxable income
1064 M O RO C C O
• Compensation for pregnancy leave • Literary and art awards amounting to a maximum of MAD100,000 per year • Premiums and benefits granted to employees as tourism vouchers • Invalidity pensions paid to servicepersons and their successors starting from January 2020 • Allowances awarded to trainees up to a maximum of MAD6,000 per month for 24 months The draft 2021 Finance Bill provides for the exemption of salaries paid by employers to newly hired employees for 24 months starting from their hiring date. Such exemption is subject to the following two conditions: • The employee must be hired under an open-ended contract. • The employee’s age must not exceed 30 years old. In addition, for the period of 1 January 2015 through 31 December 2022, gross salary capped at MAD10,000 per month paid by newly created companies during the 24 months starting from their incorporation to employees (up to a maximum of 10 employees) hired under unlimited duration contracts is exempt from tax. This exemption is granted for 24 months, starting from the employee’s hiring date. Self-employment and business income. Self-employed individuals are divided into two taxable categories, depending on the nature of their activities. They may be taxed on commercial and professional income or on agricultural income. The tax base for self-employed individuals engaged in commercial or professional activities is computed in the same manner as the tax base for corporations. Taxable income equals the difference between gross income and expenses incurred for the performance of the activity during the calendar year. The 2020 Finance Law provides that taxpayers subject to this regime benefit from a 25% reduction of the tax base corresponding to revenues arising from mobile payments. The amending Finance Law for 2020 provides for the total exemption of these revenues. Self-employed individuals may elect to use a fixed taxation system (taxation on a deemed-value basis) if annual turnover does not exceed the following amounts: • MAD2 million for food, handicraft products, fishing activities, and commercial and manufacturing activities • MAD500,000 for service activities The draft 2021 Finance Bill provides for the replacement of the fixed taxation regime by a contribution regime to be known as “the unique professional contribution.” Under this regime, the tax base remains the same as the one used for the fixed taxation system detailed above. The contribution is computed at a 10% rate applied to realized annual or quarterly turnover. Individuals will also be liable to the payment of the following complementary taxes.
M O RO C C O 1065 Amount of income tax MAD
500 501 to 1,000 From 1,001 to 2,500 From 2,501 to 5,000 From 5,001 to 10,000 Above 10,000
Quarterly surplus of tax MAD
300 390 570 720 1,050 3,600
Annual surplus of tax MAD
1,200 1,560 2,280 2,880 4,200 14,400
On the enactment of the draft 2021 Finance Bill, self-employed individuals will be able to elect between the three following taxation regimes: • Net simplified result • The unique contribution • The auto-entrepreneur regime detailed below The draft 2021 Finance Bill also provides that the benefit from the unique contribution regime does not apply to individuals exercising professional activities or services defined by regulation (not yet issued). For capital gains and indemnities, the applicable income tax rate under this regime is 20%. In addition, the 2014 Finance Law instituted a new regime for “auto-entrepreneurs,” which can be elected by self-employed individuals, if the following conditions are satisfied: • Annual turnover does not exceed MAD500,000 for commercial and industrial activities and crafts or MAD200,000 for service providers. • The “auto-entrepreneur” registers with Morocco social security. The 2015 Finance Law removed the declarative requirements and the registration requirements for taxpayers under the “autoentrepreneur” regime. The 2020 Finance Law excluded taxpayers subject to the fixed taxation system (unique contribution starting from 2021) and auto-entrepreneurs from the scope of certain accounting obligations, mainly the following: • Bookkeeping • Establishing inventories • Having a computerized invoicing system • The layout of issued invoices • The possession of an electronic address For the rates under the “auto-entrepreneur” regime, see Rates. However, if the income derived from agricultural farms is less than MAD5 million, the exemption mentioned above is granted only if such income has remained under this amount for three consecutive years. Notwithstanding the above, from 1 January 2016 through 31 December 2017, income derived from agricultural farms that does not exceed MAD20 million is totally exempt from income tax. Investment income. Dividends paid by Moroccan companies are subject to a 15% withholding tax. Dividends received from
1066 M O RO C C O
nonresident companies are subject to the provisions of applicable double tax treaties. Otherwise, they are subject to income tax in Morocco at a rate of 15%. Interest paid by banks or companies to Moroccan resident individuals is subject to a 30% final withholding tax. The interest is not subject to any further income tax. Interest, technical assistance fees, rental fees for equipment and royalties paid to nonresident individuals or foreign entities are subject to a 10% final withholding tax, subject to the provisions of applicable double tax treaties. Dividends paid to nonresidents are subject to the provisions of applicable double tax treaties. Otherwise, they are subject to a 15% final withholding tax. Directors’ fees. If a director has managerial powers, directors’ fees are considered to be employment income and are taxed at the usual income tax rates described in Rates. Directors’ fees derived by individuals who do not hold salaried positions with the company are subject to withholding tax at a rate of 30%, which is not a final tax, and is then reported in the annual tax return and taxed at the regular income tax rates, with deduction of the tax withheld. Taxation of employer-provided stock options. Employees exercis-
ing stock options may benefit from the difference between the price of the shares on the vesting date and the exercise price. Instead of constituting additional salary, the realized profit is composed of an exempt portion and capital gain that is not taxed until the transfer date. This exemption is subject to the following conditions: • The difference between the vesting price and exercise price may not exceed 10% of the share value at the date of vesting. Any excess is considered salary and is subject to income tax. • The sale of the shares may not occur within a three-year nonavailability period beginning with the exercise date. • The shares must be registered. This exemption is provided only for stock options issued by Moroccan companies. Stock options, free shares or any other process to buy shares granted by Moroccan companies to their managers and employees, or granted by companies not resident in Morocco to managers and employees employed by Moroccan companies or branches of the nonresident companies, must be declared by the Moroccan entity in its annual salary return filed before 1 March of the year following the year of the acquisition or of the distribution of the shares. Stock saving plans and company saving plans. Gains (interest or
profit from sales) derived from stock saving plans and company saving plans benefit from exemption provided that contributions and capitalized revenues are maintained during at least five years and the total amount of contributions does not exceed MAD2 million. Capital gains. Gains derived from the sale of real property held by
an individual are subject to the tax on real estate profits at a 20%
M O RO C C O 1067
rate. However, if the real property is unbuilt land, a 30% rate applies for the first sale of unbuilt land included in the urban perimeter, effective from 1 January 2013. The minimum tax is 3% of the transfer price. However, gains derived from the sale of real property amounting to a maximum of MAD140,000 per year are exempt. Capital gains derived from the sales of buildings, entirely or partially, occupied as a main residence by their owners, before the expiration of the legal period of six years are exempt under some conditions. However, the taxpayer can proceed with the payment of tax with the right to restitution subject to some conditions. Capital gains derived by resident individuals from the sale of shares of resident companies are taxed at a rate of 15% for listed shares and 20% for unlisted shares. Capital gains derived from the sale of shares of nonresident companies are taxed at a rate of 20%. Capital gains derived from the transfer of an individual’s business assets, including real property, are taxed at the same rates as ordinary income. Capital gains derived from the contributions of securities held by an individual in companies to a holding resident company subject to corporate income tax benefit from exemption. However, in the event of a future partial disposal of the securities, individuals must pay the tax related to the capital gain resulting from the contribution transfer, in the proportion of the securities sold. Starting from January 2020, buildings and real property rights that are registered in the name of individuals and transferred to associations recognized as being of public utility benefit from tax exemption on the capital gain if the transfer by the individual is performed for free. Deductions
Deductible expenses. The following expenses are deductible: • Professional expenses if they are not covered by the flat-rate deduction for business expenses provided by the Moroccan Tax Code, which is set at of 20% of gross remuneration up to MAD30,000 per year. A different rate of deduction is provided for certain occupations. For example, certain insurance company’s employees are entitled to a 45% deduction. • Social security contributions. • Pension contributions withheld from gross wages up to 50% of net taxable salary, but pension contributions paid abroad by foreign nonresident employees may be deducted only up to the amount corresponding to the contribution rate for other company employees. • Contributions to employer-subscribed group medical insurance. • Interest payments or rental margin (tax regime for Ijara Mountahia Bitamlik [IMB] introduced by 2016 Financial Bill), for the cost of the acquisition or construction of a building or the renovation of a taxpayer’s principal residence, if the employer withholds the payments directly from gross remuneration.
1068 M O RO C C O
• A 60% deduction is applied before taxation of pensions for the pension amount up to MAD168,000. A 40% deduction is applied for the pension amount that exceeds MAD168,000. • A 40% deduction is applied before taxation of artists’ fees subject to withholding tax of 30%. • A 50% deduction is applied before taxation of professional athletes’ salary subject to a progressive rate. Personal deductions and allowances. The following tax credits are granted: • MAD360 for each dependent, up to a maximum of six • 80% of the income tax due on foreign-source retirement pensions received in non-convertible dirhams Business deductions. In general, deductible expenses for commercial, professional and agricultural activities are similar. They include depreciation and general expenses incurred for business purposes, including personnel and social security expenses, certain taxes, rental and leasing expenses, and financial charges. Depreciation of business assets is deductible if it is recorded annually in the accounts and relates to assets shown in the balance sheet. The rates of depreciation depend on the nature of the assets that are used. After net income for each category of income is aggregated, the following expenses are deductible: • Interest payments or rental margin (tax regime for IMB), up to 10% of taxable income, on loans taken out by the taxpayer for the acquisition or construction of a principal home • Gifts to charitable organizations known as public utility associations • Contributions to a long-term retirement pension (more than 8 years) payable after 50 years of age, up to 10% of taxable global income Rates. Tax liability is determined by applying the progressive
rates for each bracket to taxable income.
The following are the rates of income tax. Taxable income MAD
Tax rate %
Tax due MAD
Cumulative tax due MAD
First 30,000 Next 20,000 Next 10,000 Next 20,000 Next 100,000 Above 180,000
0 10 20 30 34 38
— 2,000 2,000 6,000 34,000 —
— 2,000 4,000 10,000 44,000 —
The following are the tax rates for the “auto-entrepreneurs” regime (see Self-employment and business income): • 0.5% of the turnover that does not exceed MAD500,000 for commercial, industrial and crafts activities • 1% of the turnover that does not exceed MAD200,000 for service providers Relief for losses. In general, losses incurred in business and agri-
cultural activities may be carried forward for four years to offset profits from the same category. Losses attributable to the depreciation of assets may be carried forward indefinitely.
M O RO C C O 1069
B. Other taxes Social Contribution to Solidarity. The draft 2021 Finance Bill pro-
vides for a Social Contribution to Solidarity, starting from 2021. The contribution will apply to the following income of individuals: • Professional income • Agricultural income • Salaries • Property income The contribution is computed at a 1.5% rate applied to the annual net Moroccan-source income if it exceeds MAD120,000. Contribution filing and payment procedures. The following are the contribution filing and payment procedures for the contribution: • Professional, agriculture and/or property income: Individuals must file electronically an annual return before 1 June 2021. The payment of the contribution is due the same date. • Salaries: Employers must file an annual return for each employee subject to the contribution before 1 March following the end of the tax year (28 February or 29 February at the latest). The contribution is withheld on a monthly basis and paid by employers to the state before the end of the following month. For several employment salaries, individuals must file a regularization return before 1 February of the following tax year. The contribution is withheld on a monthly basis and paid before the end of the following month by employers. Estate and gift taxes. Estate and gift tax rates range from 1% to
6%, depending on the nature of the assets and operations and the relationship between the recipient and the deceased or the donor.
C. Social security Social security contributions, which are withheld by the employer, are based on gross compensation paid, including fringe benefits and bonuses. Employer contributions are paid, and employee contributions are withheld and paid, monthly. The employer must pay 6.4% of gross monthly compensation for family allowances. For death pensions and for daily compensation for illness, disability and pregnancy leave, employers must contribute 8.6%, and employees 4.29%, of gross monthly compensation, capped at MAD6,000. In addition, the employer must pay 1.6% of gross monthly compensation as a contribution to the Moroccan office of staff training. An additional contribution for “loss of employment indemnity” is payable. Employers must contribute 0.38%, and employees 0.19%, of the gross monthly compensation, capped at MAD6,000. Contributions on monthly gross remuneration are payable for mandatory medical insurance. The contribution rates are 2.26% for employees and 4.11% for employers, except for companies exempted from this mandatory medical insurance, which pay at a rate of 1.5%. This exemption is provided for companies that were set up before 2005 and that are already contributing to private medical insurance.
1070 M O RO C C O
D. Tax filing and payment procedures The tax year in Morocco for individuals is the calendar year. Moroccan residents must file annual general income tax returns before the following dates: • 1 March following the end of the tax year (28 February or 29 February at the latest) for individuals who have professional income taxed under the fixed-taxation system (see Section A), and/or income other than professional income. • 1 May following the end of the tax year (30 April at the latest) for individuals who have professional income taxed under the real or simplified regimes and for individuals who have received investment income (dividends or interest). The related tax due, if any, is payable at the time of the filing. The amending Finance Bill of 2020, which was issued following the onset of the COVID-19 crisis, provides for the postponement, on an exceptional basis, of the deadline for 2019 filing from 30 April 2020 to 30 June 2020. The due date for the related payment of the tax was postponed to 30 September 2020. • 1 April following the end of the tax year (31 March at the latest) for individuals receiving dividends and interest from abroad and/or realizing capital gains on the sale of securities from foreign sources. The related tax due, if any, is payable at the time of the filing. Individuals subject to the unique contribution regime can opt for the filing and payment of the tax on a quarterly basis before the end of the first month the following quarter or on an annual basis before 1 March of the following year. The tax return indicates separately the various categories of income. If a taxpayer receives no income other than exempted agricultural income or employment income paid by one employer domiciled or established in Morocco, he or she is not required to file a return. Tax on employment income must be withheld by employers domiciled or established in Morocco. Except for the cases listed above, income tax is computed by the tax administration and is payable on receipt of a tax assessment notice. Taxpayers subject only to discharge rates are exempt from the requirement to file an annual general income tax return.
E. Double tax relief and tax treaties A taxpayer may deduct the amount of foreign income tax paid from Moroccan income tax payable on the foreign-source income if the individual can document that the foreign tax was paid and if a double tax treaty is in force between Morocco and the country in which such foreign income tax was paid. However, this tax credit may not exceed the Moroccan income tax imposed on the income subject to foreign tax. Morocco has entered into double tax treaties that are in force with the following jurisdictions. Algeria Austria Bahrain
India Indonesia Ireland
Portugal Qatar Romania
M O RO C C O 1071
Belgium Bulgaria Canada China Mainland Côte d’Ivoire Croatia Czech Republic Denmark Egypt Finland France Gabon Germany Greece Guinea Hungary
Italy Jordan Korea (South) Kuwait Latvia Lebanon Luxembourg Malaysia Mali Malta Netherlands North Macedonia Norway Oman Pakistan Poland
Russian Federation Senegal Singapore Spain Switzerland Syria Tunisia Turkey Ukraine United Arab Emirates United Kingdom United States Vietnam
Morocco has double tax treaties that are not yet in force with Albania, Azerbaijan, Bangladesh, Benin, Burkina Faso, Cameroon, Congo (Democratic Republic of), Estonia, Ethiopia, Ghana, Guinea-Bissau, Iran, Japan, Lithuania, Madagascar, Mauritius, Rwanda, Saudi Arabia, São Tomé and Príncipe, Serbia, Slovenia, South Sudan, Yemen and Zambia. It is negotiating double tax treaties with Angola, Gambia and Malawi. Morocco has also entered into a tax treaty with the Arab Maghreb Union countries. The Arab Maghreb Union consists of Algeria, Libya, Mauritania, Morocco and Tunisia. The treaties generally provide the following relief: • Commercial profits are taxable in the treaty country where a foreign firm performs its activities through a permanent establishment. • Dividends, interest and royalties are taxable in the treaty country where the beneficiary is a resident. Dividends are also subject to withholding taxes in the treaty country where the payer is a resident. These taxes may be offset against the tax due in the country of the beneficiary’s residence. • Employment income is taxable in the treaty country where the activity is performed, except for income from short-term assignments (less than 183 days) that is not borne by an entity of the treaty country where the activity is performed.
F. Entry and tourist visas Entry visas are required for foreigners from certain countries, including Egypt, Iran, Lebanon, Sudan and Syria. Nationals of the United States and member countries of the European Union (EU) are not required to obtain entry visas. The Ministry of the Interior determines the countries for which entry visas are required. Generally, a tourist visa, which is valid for a period of three months, is the only type of temporary visa issued in Morocco. The Moroccan embassy or consulate in each country may provide information regarding the documents necessary for the application for the tourist visa.
1072 M O RO C C O
G. Work permits and self-employment Foreigners are authorized to work in Morocco subject to the obtaining of certain authorizations. Expatriation. A foreigner may conclude a local employment con-
tract with an entity based in Morocco (either a Moroccan company or a fixed place of business of a foreign company). The foreigner should obtain the prior approval of the national employment agency (Agence nationale de promotion de l’emploi et des compétences, or ANAPEC) and the Moroccan Ministry of Employment. Secondment by the foreign parent company to its Moroccan subsidiary or branch. A foreigner should obtain the prior approval of
the Ministry of Employment.
Self-employment. Expatriates may be self-employed if they set up
independent companies or businesses in Morocco. They should have valid work permits and residence permits to be selfemployed. The minimum amount of share capital required to set up a company in Morocco depends on the form chosen (MAD300,000 for the incorporation of a PLC [société à responsabilité limitée] and no required minimum share capital for the incorporation of an LLC [société anonyme]).
H. Residence permits Residence permits are issued for a period of 1 to 10 years and may be renewed several times. The renewed residence permit is also valid for a period of 1 to 10 years. To obtain a residence permit, the foreigner should file his or her application personally before the police authorities. In order to obtain the residence permit, the foreigner should submit several documents to the police authorities, such as a copy of his or her work permit issued by the Ministry of Employment, a lease agreement and a medical certificate issued by a Moroccan doctor.
I. Family and personal considerations Family members. Family members who intend to reside with a
foreigner in Morocco should also obtain a residence permit. The application for the residence permit for dependents may be made as soon as the foreigner has obtained his or her residence permit. The spouse or dependents who intend to work in Morocco should independently apply for a work permit. Driver’s permits. The foreigner is authorized to drive with his or
her foreign driver’s license for a period of one year from the obtaining of his or her residence permit. After this period, the foreigner should obtain a Moroccan driver’s license.