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Morocco's Business Environment
Investment charter
Large scale projects:
The state will partially subsidize the following:
Land acquisition costs
Personnel training through a special investment promotion fund
Investment information and promotion agency:
A special agency will be created to inform and to assist investors. The agency will also promote Morocco throughout the world.
Customs tariff:
import duty on machinery and equipment is set at 2.5% or 10%.
Registration fees:
Exemption from registration fees for land acquisition transactions for investment projects. A fee of 2.5% will be applied to land acquisition for urban real estate development. Capital registration fees are 0.5%.
Income taxes:
IT maximum rate= 44%
Full exemption for the first five years of operation and 50% reduction for the period beyond, apply to all expert oriented companies.
A 50% exemption for the first five years of operations for companies that operate in less developed geographical zones and for crafts manufacturing companies.
Investment exemptions:
The maximum allowed exemption is 30% of the total project value and 20% of profits before taxes, considered deductible expenses.
Patent Tax:
Full exemption for the first five years.
Foreign investment:
Total transfer of profits after taxes without limitation as well as transfer of proceeds from sell offs and partial or full liquidation.
Full exemption of the VAT on all equipment, materials and tools.
Corporate taxes:
Full exemption for the first five years and a 50% reduction of the tax for the period beyond will apply to exporting companies. A 50% reduction for the first five years for companies that operate in less developed geographical zones and for crafts manufacturing companies.
Equipment material can be depreciated with declining balance depreciation.

Invest in Morocco
The Moroccan government actively encourages foreign investment and has made a number of regulatory changes designed to improve the investment climate in recent years. Morocco welcomes foreign participation in its privatization program and does not pre-screen or select foreign investment projects.
The October 1995 investment code applies equally to foreign and Moroccan investors with exception of foreign exchange provisions, which favor foreign investors. A special ministerial committee on investments presided by the Prime Minister was created in the beginning of 1999 to activate and ease implementation of investment projects.
The investment code also codifies the existing foreign exchange regulations providing essentially free repatriation of foreign exchange related to foreign investment. The code does not apply to agriculture ; foreign investment is now permitted in all sectors except agricultural land. Since independence, Morocco has worked diligently and assiduously to develop its commercial relations and partnerships by concluding both bilateral and multilateral accords. Three are already agreements I place with 12 European countries, 10 African countries, 8 Asian countries, 5 American and 5 Arab nations, reinforcing various policies and initiating trade and investment.
Morocco has made investment promotion one of the priorities of its economic policy. Legislative and regulatory provisions focus on removing the obstacles to the establishment of foreign companies. The umbrella legislation known as the investment charter, which became law in November 1995, establishes incentives with a view to harmonizing previously existing legislation (with the exception of the agricultural sector). In order to help simplify the administrative procedures for establishing foreign corporations and investments, plans are under way to for a single window facility and for an investment promotion agency. The importance of attached to investment promotion was recently confirmed at the highest level through the creation of a Council of Experts appointed by His Majesty King Mohammed VI, Charged with analyzing the obstacles to investment and submitting recommendations.
The investment charter sets “the basic goals of government action over the next decade with the aim of developing and promoting investments by improving the investment climate and conditions, reviewing the range of fiscal incentives and instituting investment incentives”. These measures can be summarized as follows:

Tax Incentives
Incentives linked to the establishment phase include:
Custom duties: Between 2.5 and 10 percent based on the list of material and capital goods.
Custom duties and PFI: There is an exemption for imports as parts of an investment of 500 million DH or more (approx. US$50 million).
Registration fee: Exemption for the acquisition of land intended for allotment operations and a 300DH fee for credit operation performed by financing corporations.
Value added tax (TVA): Exemption or reimbursement for capital goods, material and equipment locally or abroad.
Patent tax: Abolition of the variable tax and exemption for the first five years of operation for any individual or company engaging in professional, industrial or commercial activities. This exemption does not apply to local branches of companies that are not headquartered in Morocco or that have been awarded construction, supply or service contracts, credit institutions, insurance companies and real estate agencies.
Urban tax: An exemption for the first five years of operation for new construction or expansion of facility, machinery and production equipment, from the date of their completion or installation. This exemption does not apply t local branches of companies that not headquartered in Morocco, or that have been awarded construction, supply or service contracts, credit institutions, insurance companies and real estate agencies, with the exception of leasing agencies with regard to the equipment they acquire on behalf of their customers. Incentives linked to the operating phase include:
• Real Estate profit tax: Exemption on profits from the initial rental or property for residential purposes, or for the construction of low rent housing only.
• National solidarity Participation (PSN): Abolition of the PSN in connection with the corporate tax. In the event of a total exemption from corporate tax, a minimum contribution will be levied equivalent to 25 percent of the amount that would normally have been payable in the absence of the exemption.
• Corporate tax (IS) (35%): Exemption for companies which export goods (with payment of the minimum 8.75% contribution) for the first five years and a 50 percent reduction in IS after the end of that period, pro-rated according to the value export turnover in foreign currencies, as well as for exports of goods and services. Exemption for companies located in disadvantaged areas and for cottage industries are 50 percent for the first five years.
• General income tax (IGR) (max. 41.5%): Exemption for companies that export goods under the same conditions as mentioned above for the corporate tax (IS) and 80 percent tax abatement afterward.
• Investment provision: Funds set aside for investment are deemed deductible up to a limit of 30 percent of the value of the project and 20 percent of taxable benefit before tax.
• Amortization: Applies to equipment. It is worth noting that, by virtue of the amount involved or the number of permanent jobs created, companies with substantial investment may benefit from specific advantages in Government contracts.
There is in fact an unwritten rule that it may be possible to negotiate special conditions, on a case -by-case basis where major investments are involved. In terms of incentives in the case investments above 500 million DH (US$50 million), the Moroccan authorities will apparently consider reducing the trigger threshold to 200 million DH. In addition, certain areas in the north and south of the country have been identified for special tax benefits. Foreign companies may, for example, receive tax rebates in the Tangiers tax free zone.
Among other benefits, the following expenditures for the acquisition of the land required for investment plans, expenditures on external infrastructure, vocational training expenditures.
Financial Incentives:
In the case of government - company contract, partial exemptions are granted for the cost of acquiring the land needed to carry out an investment project, as well as expenses related to external infrastructures where the level of economic development warrants special Government assistance.

Investment Regime
Special provisions
Foreign Investments benefit from the following provisions (some of which are incorporated into the Investment Charter mentioned above):
The transfer of invested capital and retransfer without limitation of such income as: dividends, shares of profits, royalties, rental income for the benefit of foreign non residents, any income distributed by the Moroccan companies to their non-share holders or associates. Transfer operations are conducted by the banks after submitting to the Exchange Agency (Office des changes: ODC): a statement of bank domiciliation, accounting documents an substantiating legal documentation.
The freedom of disposition in respect of investment by foreign individuals or corporations, whether resident or non-resident, or foreigners with Moroccan residents.
Guarantee or retransfer of funds not invested, pending substantiation to the ODC of the actual amount of investment completed and the financing procedures.
No exchange restrictions on importing goods.
A fully liberalized system for the export of goods and services requiring visas no prior ODC visas.
Settlement regime between Morocco and foreign countries:
The exchange regulations allow all foreigners to open up the following types of accounts
Accounts opened exclusively for residents foreigners:
• Local currency (dirham) accounts
• Port of call accounts (for ships callings at Moroccan ports)
Accounts open to resident or non-resident foreigners: a) foreign accounts in convertible dirhams, dirham accounts open to foreign individuals or corporations, both resident and non-resident, do not require ODC authorization ; b) foreign currency accounts: may operate in a short position only with the approval of the ODC.
Accounts open to non-resident foreigners - suspense accounts are designated as such for accounts held by residents on behalf of non-resident foreigners. Capita accounts denominated in dirhams (DH), open to non-residents to receive funds which are not transferable under the exchange regulations. Special accounts opened in DH for non-resident individuals or corporations called upon to carry out work or deliver services in Morocco on a temporary basis.
Investment guarantees and double taxation agreements:
Morocco has signed agreements with many countries to guarantee foreign investments against all risk of nationalization and expropriation. Agreements have also been signed with a number of countries to avoid double taxation.

Offshore financial
Holding companies and offshore banks are eligible for numerous benefits under the free exchange and tax regime. For banks - either a lump sum tax payment of $35,000 free of any other taxes on profits and income, during the first 15 years following the signing of the agreement ; or corporate tax at the reduced rate of 10 percent during the first 15 years following the agreement ; for holding companies - a lump sum tax payment of $7,500 during the first 15 years following the agreement. Exemptions are also extended to share holders and customers of offshore entities. Many joint ventures have been established in the Tangiers offshore zone.
The tax free export zones were established by law 19-94, which provides for tax-free zones for export activities of a commercial or industrial nature as well as for related service, which are not subject to custom duties, exchange controls or international trade controls. Provision is also made for tax exemptions.

Banking system
The Moroccan banking system is composed of Bank AL Maghrib, 15 commercial banks, several development banks and specialized financial institutions. The three largest banks account for over 63 percent of banking assets and deposits and cover 55 percent of credit.
The 1993 banking law regulates banking and credit activities. All banks must be corporations and must be incorporated in Morocco. Other than the minimum capital requirement, Central Bank regulations consist of certain liquidity, solvency and legal lending limit ratios. Credit ceilings were lifted in 1991 and were replaced by indirect monitoring by means of changes in reserve requirements and controlled access to the Central Bank rediscount window. The legal lending limit is set at 7% of net capital funds. Recent changes, however, increased the level of legal lending limit fivefold for credits guaranteed by OECD (Organization Economic of Cooperation and Development) based banks.
Traditional commercial banking in Morocco has reached an advanced stage of maturity and sophistication. Moroccan banks offer a wide range of standard banking products. Several of them currently offer electronic banking services to their corporate clients and a wide array of consumer banking products including credit cards, automatic teller machines, and telephone banking. Most Moroccan banks are connected to the SWIFT global payment system allowing them quick execution of foreign currency transfers world-wide. Furthermore, banks are permitted to open foreign currency and convertible Dirham accounts to non resident individuals and companies.
They can also automatically repatriate earnings of foreign companies operating in the country. Through the assistance of commercial banks and special financial institutions, local financing is available to foreign investors on the same basis as to Moroccan companies.
In summary, there are several investor considerations:
• The banking network offers a wide range of services.
• Financing is available from semi- public and private institutions.
• Opportunities exist for long-term foreign investment.