EXECUTIVE EDUCATION CENTER

TAXATION OF INVESTMENT
April 3-4, 2007 Host: Hamid ERRIDA
Holder of National Diploma in Chartered Accountant Tax Manager to Cabinet Garrig
ues MOROCCO
October 15, 2008
INTRODUCTION
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1,984
1986
1987
1990
2004
2005
2006
2007
200?
Train Fiscal Reform
October 15, 2008
PROGRAM
TAX ON CORPORATIONS INCOME TAX VALUE ADDED TAX REGISTRATION RIGHTS PAT
ENT TAX CITY TAX TAX aedileship
IS
October 15, 2008
IR
VAT
OF
Patent
TU-TE
STRUCTURE
Persons Subject / Scope Taxable Tax Calculation Payment of Tax Incentive
s
October 15, 2008
TAX ON COMPANIES
October 15, 2008
Corporation Tax
I. Persons subject
The tax applies sue Societies:

At any corporation, public or private, engaged in exploitation or in operations

to lucrative. associations and organizations related to focal non-resident compa
nies For the special funds

October 15, 2008

Corporation Tax
I. Persons subject

Exclusions: Companies of individuals, except option transparent real estate comp

anies The Economic Interest Grouping
October 15, 2008
Corporation Tax
II. Base Taxable Income Tax =
Determined from the accounting result which is applied non-accounting adjustment
s taking into account the different tax rules in accounting rules
Result Accountant
Income Tax
October 15, 2008
Corporation Tax
II. Base Taxable Income Tax =
Corrections positive or negative reinstatements Result accounting adjustments or
deductions Result tax-accounting-Products Tax loss carryforwards-
+
Expenses not deductible-taxable unrecognized Products
October 15, 2008
Corporation Tax
II. Base Taxable Income Tax =

Terms of deductibility of expenses incurred Being in the interest of the operati

on or be linked to the management of the company; Being found in accounting and
be supported by documentary evidence. Result in a decrease in net assets of the
company. Have actually been incurred during the year. Being accepted by the Inte
rnal Revenue Code.
October 15, 2008
Corporation Tax
II. Base Taxable Income Tax =

Terms of deductibility provisions

Be accounted for to face:

deductible expense clearly specified that finds its origin in the exercise
October 15, 2008
Corporation Tax
II. Base Taxable Income Tax =

Expenses not deductible gifts that have a value greater than 100 dirhams, or who
do not bear the name, initials or trademark of the company. The gifts and donat
ions in cash or in kind granted to institutions other than those provided by the
Internal Revenue Code.
October 15, 2008
Corporation Tax
II. Base Taxable Income Tax =

Expenses not deductible for tax on companies and adjustments thereto. Fines, pen
alties and surcharges of any kind for breach of laws or regulations. The proport
ion of the depreciation of cars depending on the amount above the annual rate of
20% on the threshold of 300,000 DH TTC. The same limitation applies to vehicles
purchased or leased for rent for a period exceeding three months.
October 15, 2008
Corporation Tax
II. Base Taxable Income Tax =

A condition and two limitations to the deductibility of interest on current acco

unts in payment of associated
Condition: social capital must be fully paid. Limitations:
•

the total amount deductible interest-bearing is limited by the amount of capital

the rate of interest deductible may not exceed a rate set annually by decree of
the Minister of Finance, according to the average interest rate on bonds Treasu
ry to six (6) months of the previous year. ex. Rate applicable in 2006: 2.61%.
•
October 15, 2008
Corporation Tax
II. Base Taxable Income Tax =

Other expenses not deductible

Are deductible from taxable income up to 50% of their amount, procurement expend
itures, other external charges and other operating expenses and depreciation cha
rges relating to capital expenditures, the amount charged is equal or greater th
an ten thousand (10,000) dirhams and whose regulation is not justified by non-ne
gotiable check endorsable, negotiable, magnetic means of payment, bank transfer
or by electronic means.
October 15, 2008
Corporation Tax
II. Base Taxable Income Tax =

Unrecognised taxable products

The unrealized gains related to currency translation adjustments, liabilities ar
e taxable. They are evaluated on the basis of the latest exchange and reintegrat
ed into the taxable income.
October 15, 2008
Corporation Tax
II. Base Taxable Income Tax =

Deductible expenses unaccounted

The unrealized exchange gains reinstated last year are deducted from taxable inc
ome of the year to avoid double taxation.
October 15, 2008
Corporation Tax
II. Base Taxable Income Tax =

Allowances on capital gains from sale Tangible or intangible, except for bare la
nd. Abatement = 25% if 2 <d <= 4 = 50% abatement if d> 4 years. Total relief com
mitment to reinvest.
d = time elapsed between the date of acquisition of each item removed from the a
sset or transferred and that of his retirement or transfer its
October 15, 2008
Corporation Tax
II. Base Taxable Income Tax =
Other Non-Taxable tax rebates on non-deductible. The reversals of provisions in
their constitution reinstated. The products of interest in companies subject to
tax.
October 15, 2008
Corporation Tax
II. Base Taxable Income Tax =

Allocation of previous deficits

The fiscal deficit in any year may be deducted from the profits of subsequent ye
ars until the fourth year following the fiscal deficit. Deficits related to depr
eciation may be deducted regularly recorded without time limit.
October 15, 2008
Corporation Tax
GROSS INCOME TAX
==
ACCOUNTING RESULTS
+
Reinstatement from outside the non-accounting ___ DEDUCTIONS
October 15, 2008
Corporation Tax
INCOME TAX NET INCOME TAX == GROSS ___ tax losses carried forward
October 15, 2008
Corporation Tax
III. Calculation & Payment of Tax Rate x IS = Net Income tax rate normal IS: 35%
39.6% for credit institutions and
insurance companies.

Minimum Fee
The amount of tax due may be lower in each year, regardless of the taxable incom
e of the company concerned, a minimum contribution.
October 15, 2008
Corporation Tax
III. Calculation & Payment of Tax
The basis for calculating the minimum contribution shall be the net amount of th
e following products:
October 15, 2008
Turnover and other operating income Income from equity securities and other inve
stments Foreign exchange gains including currency translation liabilities Accrue
d interest and other financial products Other non-current operating subsidies an
d / or balance
Corporation Tax
III. Calculation & Payment of Tax
The minimum contribution rate General Rate: 0.5% Special Rate: 0.25% Minimum cha
rge: 1,500 dirhams.
October 15, 2008
Corporation Tax
III. Calculation & Payment of Tax
Installments
The company is required to be paid in four installments of the exercise, everyon
e is equal to 25% of the amount of hypothetical or actual tax due for the last f
inancial year. Payments of these amounts is made before the expiry of the 3rd, 6
th, 9th and 12th month following the date of opening of the current financial ye
ar.
October 15, 2008
Corporation Tax
III. Calculation & Payment of Tax
TAX DUE
=
Sup (IS, CM) - Installments paid.
October 15, 2008
Corporation Tax
III. Calculation & Payment of Tax
SPECIFIC RATE IS

8% flat rate on the net amount of turnkey contracts for non-resident companies.
10% on gross revenues earned by nonresidents. 10% on dividends (exempt if the be
neficiary is subject to the SI). 8.75% after five years to exempt the Free Zone.
10% option for offshore banks.

October 15, 2008

INCOME TAX
October 15, 2008
Income Tax
I. Income Professionals
Earned income is subject to income tax by three schemes:
- - -
Plan Actual Plan Net Profit Net Profit Simplified Plan Lump
What arrangements apply: depends on the volume of sales activity and exercised.
Certain activities are excluded from the package.

The fiscal year = calendar year. For corporations, the tax is on behalf of the s
enior partner.
October 15, 2008
Income Tax
II. Farm Income Profits from agricultural operations are exempt from all direct
taxes until December 31, 2010.
October 15, 2008
Income Tax
III. Wage income

Structure of Wages:

taxable items? items exempt?

Plan interest on housing loans Retirement Insurance Plan allowance internship gr

oss monthly exempt up to 31c DH 6000 until December 2010.
October 15, 2008
Income Tax
IV. Revenue & Profit Owners

Proprietary Income

Exemption for 3 years from the date of the permit to live = Taxable Rental Incom
e - 40% rebate

Land Profits

= Taxable capital gain property in discounted purchase price. Fixed rate: 20%, m
inimum 3% of the sales proceeds.
October 15, 2008
Income Tax
V. Income & Capital Gains Furniture

Securities income from movable capital Profits

Exempt Threshold: sale proceeds = DH 24.000/Année civil

October 15, 2008

Income Tax

Monthly net income taxable Scale Up 2000 2001 2 500 2 501 3 750 3 751 5 000 5 00
1 10 000 Beyond Scale 10,000 Annual Net Income taxed up to 24 001-30 001 45 001-
60 001 and Beyond 24 000 30 000 45 000 60 000 120 000 120 000
Rates 0% 15% 25% 35% 40% 42%
Amount to deduct 0300550925 1175 1375

Rate 0 15% 25% 35% 40% 42%

Amount to deduct 0 3600 6600 11 100 14 100 16 500
October 15, 2008
Value added tax
October 15, 2008
Value added tax
I. Scope

VAT taxes consumption is collected by the state and it is, in principle, all bus
iness operations performed in Morocco, as well as import operations. An operatio
n is performed in Morocco:
For product sales when delivery is made in Morocco. For services: when the servi
ce is operated or used in Morocco.
October 15, 2008
Value added tax
I. Scope

VAT taxes consumption

Certain transactions are taxable and exempt or other outside scope of VAT.

VAT is paid and borne by the final consumer The company acts as a collector of V
AT

October 15, 2008

Value added tax
I. Scope

Possibility to extend the scope

Some companies that have operations exempt from VAT may opt for the liability to
tax. These are mainly exporting companies and smaller providers and small manuf
acturers who achieve annual turnover or less 180,000.00 DH.
October 15, 2008
Value added tax
II. Taxable

Principle event
The event is the event which gives rise to the taxpayer's debt to the Treasury.
Two regimes are distinguished: The plan of redemption in which the VAT charged
is reported only when actually collected, The flow regime in which the taxpay
er is obliged to account for VAT as soon as it is charged or when it is collecte
d in advance.
October 15, 2008
Value added tax
II. = Taxable turnover.
The case of real estate: The taxable turnover is equal to the purchase price of
the item minus the cost of land by reference to updated coefficients set for the
calculation of land use.
October 15, 2008
Value added tax
III. Declaration & Payment

Notions
With deductibility: transactions that qualify for deduction allows the company s
ubject to recover input VAT. Without the right to deduct: the company supports t
he subject input VAT and the cost component considered. VAT deductible: VAT may
be deducted from taxable businesses that deal with deductibility.

October 15, 2008

Value added tax
III. Declaration & Payment

Rate
Standard rate: 20% DISCOUNT:
14% 10% 7% 0%

October 15, 2008

Value added tax
III. Statement & Payment

Deduction of VAT 'tax on the value added that the different components of the pr
ice of a transaction, tax is deductible from the value added tax applicable to t
his transaction. " Art.101
October 15, 2008
Value added tax
III. Statement & Payment

Proportional deduction: CA [(exempt + taxable) with deductibility] Author

____ __ __ ___ ___ __ ___ __ __ ___ ___ __ ___ __ __ ___ ___ __ ___ __ __ ___ __
_ __ ___ __ __ ___ ___ __ ___ __ __ ___ _
CA [(+ exon taxable.) With dr. DED] + VAT Casan dr.à d. + CA-overs
October 15, 2008
Value added tax
III. Statement & Payment

Reporting systems:
-
Monthly Statement CA> DH = 1,000,000 Quarterly Statement Suppliers nonresident S
tart activity. If CA <1000000
-
October 15, 2008
Value added tax
III. Statement & Payment

Reimbursement of VAT:
The refund of VAT credit is possible in some special cases: - AC exempt, with de
ductibility (eg exporters) - AC suspension arrangement - retirement.
October 15, 2008
Value added tax
III. Statement & Payment

Adjustment of VAT deductible:

Disposal of fixed assets. Variation of the deductible proportion. Receiving a cr

edit provider. Loss or willful destruction of the stock.

October 15, 2008

REGISTRATION LAW
October 15, 2008
Registration Fees
I. Persons subject

Formalities of registration Registration is a formality that can give some time

to the acts and conventions. The formality of registration upon payment of regis
tration fees.
October 15, 2008
Registration Fees
I. Persons subject

Sample Transactions: Transactions in capital: 0.5% Land acquisition: The acquisi

tion of 5% built premises: 2.5% Acquisition of goodwill: 5% Acquisition of share
s: 2.5%
October 15, 2008
LOCAL TAXATION
October 15, 2008
Patente - T.U. - T.E.
I. Tax patent

Persons subject
Any person or company, Moroccan or foreign, exercising a profession in Morocco,
an industry or trade. Unless that person or company is exempt by express provisi
on.
The tax fee patent occupation.
October 15, 2008
Patente - T.U. - T.E.
I. Tax patent

Taxable
The normal gross rental value and current premises, sites and facilities used fo
r the exercise of professions taxed. She is determined, either through leases an
d deeds of lease, either by way of comparison, either by way of direct assessmen
t. For plants, industrial plants, and service providers, the rental value may be
less than 3% of the cost of land, buildings, fixtures, equipment and tooling.
October 15, 2008
Patente - T.U. - T.E.
I. Tax patent

Rate of tax patents

The tax rate varies between 5% and 30% depending on the classification given to
the activity of the taxable entity. Merits of the tax of tithes and add surcharg
es, the respective numbers of ten and twelve, for a total additional 22% of the
principal.
October 15, 2008
Patente - T.U. - T.E.
EXAMPLE Patente
Company A operates an industrial plant (class 2 of Table B) where it uses the fo
llowing equipment which it owns: Land, cost 1,500,000 5,000,000 Construction dh
dh Fixed Gear 3 million dh Arrangement fixed equipment mobile equipment 400 000
600 000 dh dh

October 15, 2008

Determining the rental value: 10,500,000 x 3% = 315,000 dh Principal amount of t
ax patents 315,000 X 10% = 31 500 dh Decima and surcharges 31,500 X 22% = 6930 T
otal = 38 dh 430 dh
Patente - T.U. - T.E.
II. Urban Tax

Persons subject
Any person or company in respect of immovable property allocated to their profes
sional activity or any form of exploitation within the urban perimeter or periph
eral areas. Unless that person or company is exempt by express provision. For es
tablishments producing goods or services, the tax also applies to machinery and
equipment integral part of these institutions.
October 15, 2008
Patente - T.U. - T.E.
II. Urban Tax

Taxable
The tax is assessed on the rental value of property as determined by comparison
or direct assessment by the Committee on Census. The rental value is obtained by
applying the cost justified by the taxpayer or,€otherwise considered by the dir
ectors by way of comparison, the rate of 3% for land, buildings and fixtures, ma
chinery and equipment.
October 15, 2008
Patente - T.U. - T.E.
II. Urban Tax

Tax rate applicable to professionals: 13.5%

October 15, 2008
Patente - T.U. - T.E.
III. Tax aedileship

Scope
The charge of municipal administration is determined annually on buildings, buil
dings of all kinds as well as machinery and equipment located in the districts o
f the city tax enforcement.
October 15, 2008
Patente - T.U. - T.E.
III. Tax aedileship

Taxable
The charge of municipal administration is sitting on the rental value as a basis
for calculating the urban tax without exemption.
October 15, 2008
Patente - T.U. - T.E.
III. Tax aedileship

Tax rate
perimeters of urban centers and delimited - 6% of that value for properties loca
ted in peripheral areas of urban communes.
- 10% of the rental value for properties located in
October 15, 2008
Patente - T.U. - T.E.
EXAMPLE GMT - TE
Land: 10 million Construction: Equipment 40000000: 30000000 Determination of ren
tal values - land 10 million X 3% = 300 000 dh - construction and equipment tax
70 million X 3% = 2.1 million dh - Total = 2.4 million dh Application cap 50 Mdh
2,400,000 X 50,000,000 / 80,000,000 = 1,500,000 Amount of dh (after five-year e
xemption for UT): city tax 1,500,000 13.5% X dh = 202,500 tax aedileship 1,500,0
00 X 10% = 150 000 dh

October 15, 2008

INCENTIVES
October 15, 2008
INCENTIVES
1 - COMMON LAW

Declining balance investment allowance exemption of 36 months minimum contributi

on credit minimum contribution
October 15, 2008
INCENTIVES
1 - COMMON LAW

VAT
Purchase of property tax exemption / 24 months suspension Plan

October 15, 2008

INCENTIVES
1 - COMMON LAW

Five-year exemption of the patent:

Exemption from tax on patents for a period of five years from the commencement o
f the activity concerned. The exemption also applies for the same duration, terr
ain, buildings of every kind, additions of buildings, machinery, materials and t
ools acquired during the operation, directly or through leasing.
October 15, 2008
INCENTIVES
1 - COMMON LAW

Five-year exemption from the T.U:

New construction, additions to buildings and machinery and equipment forming par
t of the establishments producing goods or services are exempt from tax for a pe
riod of five years following the completion or installation.
October 15, 2008
INCENTIVES
2 - PROMOTION OF EXPORT Exemption of sales to the export of products or services
: 100% the first five years and then 50%.
October 15, 2008
INCENTIVES
3 - AREA OF CRAFTS 50% exemption of the first five years.
October 15, 2008
INCENTIVES
4 - EDUCATION SECTOR
50% exemption of the first five years.
October 15, 2008
INCENTIVES
5 - TOURIST INDUSTRY Exemption of turnover in foreign duly repatriated 100% the
first five years and then 50%.
October 15, 2008
INCENTIVES
6 - PROPERTY SECTOR Social Housing Area covered <= 100 m2 VIT or Transfer price
<= DH 200 000 IS / IR: VAT Exemption: exon. with the right to deduct / refund. D
.E.: Exemption of land. Initial Land / Investment Projects: 0%, 2.5%.
October 15, 2008
INCENTIVES
7
Provinces of Tangier, Asilah and Fahs Bani Makada
IS: Permanent reduction of 50%. IS: five-year reduction of 50%. Patente & City t
ax: exemption 15 years
October 15, 2008
INCENTIVES
8 - FREE ZONES

IS: Exemption 5 years and 8.75% 20 years. Dividends: nonresident exempt & 7,5% /
Resident Registration fee: 0% on capital and land. Patente & City tax: exemptio
n 15 years Continuation of benefits in case of change: 20 years.
October 15, 2008
INTERNATIONAL TAXATION
October 15, 2008
INTERNATIONAL TAXATION
Tax Treaties
Objectives:

Avoid double taxation encourage economic exchanges Prevent tax evasion through t
he exchange of information.
October 15, 2008
INTERNATIONAL TAXATION
Tax Treaties
Specific arrangements for taxation

Charges Interest Dividends Capital Gains

October 15, 2008
INTERNATIONAL TAXATION
Tax Treaties: Reduced taxation of dividends
Country Germany Poland Russia Spain Sweden Switzerland United Arab Emirates Bulg
aria South Korea Bahrain
Rate 5% 0% 7% 7% 7% 5% 5% 5% 5%
CONDITIONS The beneficiary holds at least 25% of the capital of the distributing
company. Any participation of Swedish origin in the capital of a company establ
ished in Morocco. The recipient holds at least 25% of the capital of the distrib
uting company. The recipient holds at least 25% of the capital of the distributi
ng company. The equity investment exceeds U.S. $ 500,000. The recipient holds at
least 25% of the capital of the distributing company. The recipient owns 10% st
ake in the distributing company. The equity investment exceeds USD 500,000 The b
eneficiary holds at least 10% of the capital of the distributing company.
October 15, 2008
QUESTIONS - DISCUSSION
October 15, 2008