Morocco Newsletter - Spring 2018

Established by Law No. 58-90 of February 26, 1992, Tangier's offshore financial centre (Morocco) is embedded in an international economic context with significant changes, especially in our region with the unification of the European market, as outlined by Mohamed BERRADA, former Minister of Finance. Meanwhile, the success of cities such as Hong Kong and Singapore could not be ignored.

Consequently, Morocco had to adapt its financial and legal regulations, in order to attract new international capital, modernise its financial system and contribute to the development of the north of the country, not only in terms of job creation but also through the creation of new services closely related to the existence of the offshore financial centre.

Choosing Tangier was not fortuitous as it enjoys an international reputation, thanks to its former status, also, the city is situated at the gates of Europe, bathed by the Mediterranean Sea and the Atlantic Ocean overlooking the Straits of Gibraltar with an eye towards Africa. Today, it can pride itself on having a road, rail, airport and hotel infrastructure, measuring up to its ambitions.

Law No. 58-90 is structured around two aspects: offshore banks and offshore holding companies. I will develop the second aspect.

The law has thus created a financial centre within the municipality of Tangier, offering considerable advantages to Portfolio management and Equity investment companies, who carry out all of their operations in convertible foreign currencies.

The main benefits include:

  1. When starting a company:

The foreign investor has the freedom to form their entity according to the legislation of their choice: they can opt for the SA (private company) or SARL legal status (LLC) complying with the Moroccan law, or applying the rules of another legislation. The only constraint lies in the obligation to use convertible foreign currencies for their share capital.

In addition, the acts of incorporation and capital increase, as well as the acquisition of property necessary for the establishment of the registered office and the branches, are exempted from registration and stamp duties.

Finally, this system remains open to Moroccan investors, subject to the approval of the Exchange Office. The latter, in its General Instruction, indicates the investment caps that it will authorise, namely 100 million dirhams for projects destined for Africa, and 50 million dirhams for the other continents.

An application for approval is submitted to the Ministry of Finance which has a maximum period of 90 days to notify its approval or refusal to grant the assent.

  1. Exchange rate regime

Holding offshore companies benefit from the freedom of exchange in their dealings with non-residents. They may, however, carry out transactions with residents, such as acquiring stakes in companies, provided they comply with the foreign exchange legislation.

In addition, income generated abroad is not necessarily repatriated to Morocco.

  1. Tax regime

 
  1. Corporate tax: offshore holding companies are subject to a flat-rate withholding tax of all other taxes on profits and income amounting to US $ 500 during the first 15 years following their installation. Subsequently, the corporate tax is applicable at the ordinary law rate.

The General Tax Code, however, has made a substantial change to the spirit of the law by restricting the application of this flat tax to the share of transactions with non-residents.

  1. VAT

Offshore holding companies are exempt from VAT and benefit from the right to deduction in proportion to the exempt turnover, for transactions carried out for the benefit of offshore banks, or non-resident natural or legal persons, and paid in convertible foreign currencies.

 
  1. Tax on proceeds from shares

Dividends distributed by holding offshore companies are exempt from the tax on the proceeds of the shares and similar income, in proportion to the benefits corresponding to the exempt turnover.

 
  1. Business tax

Buildings occupied by the head office and branches of offshore holding companies are exempted from the business tax.

 
  1. Employees

Employees' remuneration is subject to a withholding tax of 20% of the income tax.

In addition, the recruitment of offshore holdings is not limited to Moroccan citizens: employees of foreign nationality are recruited freely; they can opt for a social security scheme other than the Moroccan regime and have the right to import their vehicle temporarily which constitutes a customs advantage.

All these advantages make the offshore holding companies' system extremely attractive for foreigners or Moroccans willing to develop their investments abroad. This interesting financial instrument has been adopted by leading Moroccan groups.

Kouds BERNOSSI