TaxNewsFlash-Africa

March 20, 2009
No. 2009-01

Morocco: Tax Provisions in the 2009 Finance Act Include Transfer Pricing Documentation Requirements

In Morocco, the 2009 Finance Act (loi de finances n°40-08 pour l'année budgétaire 2009, promulguée par le Dahir n° 1-08-147 du 2 moharrem 1430), was enacted with its publication in the Moroccan gazette of 31 December 2008 (Bulletin officiel n° 5695 bis).

The following discussion provides a summary of certain tax provisions in the 2009 Finance Act.

Requirement for Preparation of Transfer Pricing Documentation

The 2009 Finance Act concerns provisions of Article 214 of the Moroccan general tax code (Code général des impôts) which sets forth provisions authorizing the Moroccan tax authorities to require Moroccan companies doing business with companies outside Morocco to provide certain information and documents relating to:

The nature of the relationship between the two companies—that is, the one that is a taxable entity in Morocco to the one located outside Morocco

The nature of the services provided or the products marketed

The methodology used to determine the prices of the transactions between the companies and the elements that justify the methods

The tax regimes and tax rates applicable to the companies located outside Morocco

Under this new provision, Moroccan companies that conduct related-party transactions must, if requested, be able to produce the required transfer pricing documentation within 30 days following the request.

The documentation must be produced only if requested by the Moroccan tax authorities, generally in relation to a tax audit.

Favorable Tax Regime for Offshore Holding Companies

Offshore holding companies may benefit from a favorable tax regime which imposes income tax on income from all activities at an all-inclusive income tax that corresponds to the equivalent, in Moroccan dirhams (MAD), of US $500 per year. The regime also provides a tax exemption from all other taxes and duties imposed on profits or income for the first 15 years from the date of the entity’s setup.

Article 7-VIII of the Moroccan tax code, as amended by the 2009 Finance Act, provides that to qualify for the benefits under this regime, a company’s corporate purpose must focus exclusively on managing portfolios of securities of nonresident companies and purchasing stakes in such companies. Also, to benefit from the favorable tax regime, a company must denominate its share capital in a foreign currency and conduct transactions with offshore banks or nonresident legal entities or individuals in convertible foreign currencies.

Tax Deductions for Companies in the Event of Increases in Capital

With a view to consolidating the cash flows of small and mid-size companies—whether in a profit- or loss-making position—that are subject to corporate income tax, Article 7 of the 2009 Finance Act provides a corporate income tax deduction of 20% of the amount of any increase in share capital realized by such companies for the period January 1, 2009, through December 31, 2010.

The deduction is subject to certain conditions, such as it applies for companies having a sales turnover for each of the previous four fiscal years ending before January 1, 2009, of less than MAD 50 million (approximately €4.5 million), excluding value added tax (VAT).

The 2009 Finance Act provisions also stipulate that such capital increases are subject to a fixed-sum registration duty of MAD 1,000 (approximately €90), instead of the typical 1% registration rate.

For more information, contact a tax professional with Fidal Direction Internationale* in Paris:

Yves Robert, Tax Partner : +33.1.55.68.15.76, yrobert@fidalinternational.com

Mohamed Mahjoubi, Tax Manager: +33.1.55.68.16.53, mmahjoubi@fidalinternational.com

*Fidal is a French law firm that is independent from KPMG and its member firms.

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