Morocco Establishes Offshore Areas to Attract Foreign Investment
By Fraikech Associés
To attract foreign investment, Morocco has established offshore areas that have large tax incentives in different parts of the country, previously known as tax-free zones. Companies established in those areas benefit from reduced tax rates and social contributions.
Indeed, Morocco has established specialized tax-free zones all over the country. For instance, the Tanger Free Zone and Atlantic Free Zone welcome industrial companies, with priority to the automotive industry. Logistics is also promoted in the Tangiers area with the large port of Tanger Med. On the other hand, next to Casablanca’s airport is established an aeronautics free zone and in Casablanca, Casablanca Finance City that is mainly Africa orientated.
Following the Panama papers outbreak, however, the European Union has established 3 lists that classify countries according to their tax advantages and compliance with OECD rules, as part of its efforts to clamp down on tax avoidance and harmful tax practices.
The blacklist for tax heavens, the white list for tax compliant countries and the grey list for countries that need to improve their tax practice such as Morocco. Indeed, countries like Australia and Morocco were granted until the end of 2020 to amend or abolish their tax regimes.
As such, Morocco implemented changes in its tax regime on 18 December 2020, particularly to the tax advantages enacted to attract foreign investors in its tax-free zones. Following such changes, Morocco was taken out of the grey list and added to the white list.
The main amendments and/or incentives applicable to companies (the “Companies”) that will be established in the areas previously known as tax-free zones are as follows:
- Those zones have changed names as they are called going forward Zones d’Accélération Industrielle (i.e. zones assisting with the industrial development).
- The percentage of sales in Morocco has been increased to 15%. To set up a branch in those areas, the Companies’ business must be aimed at exporting either their products or services. They may, however, sell their products and services up to 15% of their total sales in Morocco;
- The Companies are exempted from VAT.
- Previously, the Companies didn’t pay corporate income tax for the first 5 years of operation and then paid the corporate income tax at the reduced rate of 8.75% (the highest rate of corporate tax in Morocco outside of those zones is set at 31%). Now, the Companies pay a reduced rate of corporate income tax of 15%; and
- A flat rate of 20% income tax is applicable to employees that are employed in those areas.
Please note that, as stated above, Morocco has set up a financial centre called Casablanca Finance City which enables the companies that are granted a CFC license to also enjoy the above-mentioned tax advantages. The Companies that obtain the CFC license before 31 December 2022, however, will keep enjoying the previous tax incentives.
Finally, please note that to qualify for a CFC license, a company must have a minimum of 1,000,000 Euros turnover that is made, for at least half of it, with other African countries.