Casablanca Finance City (CFC) : What you should know

Casablanca Finance City (CFC) is a Moroccan financial center with a privileged tax status. It sees itself as a financial and economic hub for financial and service activities on the African continent.

Indeed, Casablanca Finance City authority (CFCA) manages the financial center at the crossroads of Africa and Europe. The authority that manages this place has, moreover, partnership agreements with some major international financial centers. The center is currently home to financial companies and service providers. In addition, several regional headquarters of multinationals are located there.

Casablanca Finance City works to promote the expertise of its members at the African level. Indeed, the managing authority promotes synergies and interesting business opportunities that registration can have. Thus, we can notice from reading the published documents an emphasis on the advantages of the CFC network.

Casablanca Finance City (CFC) – Advantages highlighted

According to its promoters, the installation of a company at CFC has the following advantages:

First, in terms of doing business:

Casablanca Finance City (CFC) aims to facilitate the business of companies through a one-stop administrative window. An installation in this financial zone allows :

  • Easy mobility of people: Indeed, companies established in this zone benefit from a facilitated process for the recruitment of foreign staff. Companies with CFC status are exempted from the ANAPEC attestation procedure for the absence of national candidates. Candidates are, moreover, exempted from the production of diplomas and reference certificates. Finally, CFC guarantees this recruitment authorization within 3 working days;
  • Mobility of capital: The companies established in CFC can benefit from a fluidity of management of foreign currencies. They:
    • Can benefit from the opening of a foreign currency account;
    • Have total freedom to dispose of funds in foreign currency from foreign sources.
    • Benefit from an improved business travel allowance

Read to understand the Moroccan exchange rate regime (normal): Foreign Investment in Morocco

  • An alternative dispute resolution tool through the International Center for Mediation and Arbitration of Casablanca

Second, community relations :

CFC promotes its large community of over 200 businesses as a competitive advantage.

This community is made up of leading companies operating in diversified business sectors in more than 50 African countries. CFC is setting up a digital communication system. In addition, CFC organizes monthly events that serve to create synergies between the different members.

Finally, tax advantages :

Companies based in Casablanca Finance city (CFC) benefit from tax advantages compared to the common law system. These advantages include corporate income tax and income tax for employees.

 

Casablanca Finance City (CFC) – Special tax status

Despite the fact that the Moroccan government has had to make changes to this status to leave the European gray list, the CFC status remains advantageous.

CORPORATE INCOME TAX (IS)

Companies located in Casablanca Finance City are subject to corporate income tax (I.S.). Thus, these companies benefit from :

  • Total exemption from the corporate income tax for a period of 5 consecutive fiscal years;
  • A specific tax rate reduced to 15% after 5 years.

The companies established in CFC benefit from an exemption of the minimum contribution during the first 5 years. After this period, the law imposes a minimum contribution of 0.5% of the turnover. The minimum contribution is the minimum amount of tax to be paid.

The tax benefits start to accrue from the decision of the CFC Commission to grant CFC status.

Read also: Who are the companies located in the CFC zone?

 

INCOME TAX (IR)

The employees of a CFC company have the possibility to opt for the payment of the R.I. at the flat rate of 20%.

Under the normal regime, salaries are taxed at a progressive scale with a marginal rate of 38%.

In addition, it should be noted that the RI is applied on :

  • Gross salaries and miscellaneous remuneration
  • Indemnities and benefits in cash or in kind;
  • In general, any compensation received by the employee.

If the employee has other income, he must also file his global income tax return (in accordance with the provisions of Article 82 of the Moroccan General Tax Code (C.G.I))

Employees who wish to do so may opt for the ordinary law regime (in particular employees who, because of other benefits, may be taxed at a lower rate).

Taxation at the rate of 20% is granted for a maximum period of 10 years from :

Casablanca Finance City (CFC) – Other tax advantages

  • Corporations located at CFC are exempt from withholding tax on dividends when dividends are paid to non-residents ;
  • CFC companies are exempt from registration fees on capital transactions (update: this measure has been generalized to all companies)

Upsilon Consulting can help you to obtain the CFC status. CONTACT US

 

IN OUR BLOG

Branch in Morocco : what you should know

Establish a Company in Morocco

PUBLIC LIMITED COMPANY IN MOROCCO: How it works

 

Branch in Morocco : what you should know

A branch in Morocco is an independent establishment that is part of a group. Unlike a subsidiary, a branch does not have a separate legal personality. The branch in Morocco has, by law, a certain degree of management and executive autonomy.

A foreign company can carry on business in Morocco without creating a company under Moroccan law.

It should be noted that a branch is considered under tax law as a permanent establishment which has tax obligations, particularly with respect to corporate income tax.

 

Branch in Morocco

The branch office in Morocco is legally an emanation of the legal personality of its parent company. As a result, it may execute contracts entered into by the parent company and be liable for such obligations. Thus, a contract, for example, won by a multinational company in its name, can be executed by its branch which is legally considered as the same entity. It :

Does not have an independent legal personality;
Can contract and execute on behalf of the parent company;
Is legally confused with the parent company.

However, the responsibility of the parent company remains fully engaged by the actions of the successor.

Read also: La succursale – CasaInvest

 

How is the creation of a branch in Morocco?

Because the branch depends on an existing parent company, its creation is quite simple.

It does not require the creation of a new legal entity and therefore does not need the establishment of statutes.

First of all, the branch in Morocco must obtain a certificate relating to its name. Then, a report of the management bodies of the parent company must be drawn up. This minute must contain certain mandatory information:

Name of the branch: A branch in Morocco must first obtain a negative certificate;
Head office of the branch in Morocco: It should be noted that branches can benefit from a domiciliation ;
Legal representative in Morocco who must be named in the minutes of incorporation.

Then, the minutes of incorporation of a branch in Morocco are registered with the tax authorities.

In addition, the branch must within fifteen days file the minutes to the secretariat-greffe of the court. An extract of this deed containing certain information (the date of the deed, the names, first names and domiciles of the former and new owners, the nature and head office of the fund …) is registered at the commercial register.

After that, according to article 37 of the Commercial Code, the branch must be registered in the local commercial register of the place where the business is subject to the law. In addition, proof of registration must be filed with the local register of the place of the branch with a specification from the commercial register of the principal place of business.

The branch office must register the business within three months of opening the branch.

Finally, there is the obligation to advertise in a newspaper of legal announcements and in the official bulletin, to join the CNSS and to inform the exchange office.

What is the legal status of a branch?

As indicated above, the branch does not legally have its own legal personality. In all cases, its assets and liabilities are attached to those of the parent company. All the assets and profits at its disposal go directly to the main company, which can dispose of them as it sees fit.

 

What is the tax status of the branch?

For tax purposes, profits made by a branch in Morocco are taxed in Morocco.

It is subject to corporate income tax according to the terms of common law and to general income tax.

In addition, the branch must keep its own accounts despite the fact that it has no equity capital.

Regarding its corporate status, generally the manager is a person from the parent company who is in charge of managing the branch. He is directly attached to the main company and is therefore subject to its corporate law. However, employees are governed by the labor laws of the country in which they work.

This means :

  • Work or services invoiced by a permanent establishment are not subject to any withholding tax.
  • As far as VAT is concerned, it is subject to the common law system.

In addition, branches in Morocco carrying out projects limited in time may opt for a flat-rate scheme. In this case, they are taxed at a flat rate of 8% of the market amount.

 

What are the differences between a branch and a subsidiary?

There are several differences to mention in the case of a branch :

  • A subsidiary is a legal entity separate from the parent company. As such, it has legal personality. However, the branch does not have such independence;
  • The subsidiary will be incorporated as a company under Moroccan law. The subsidiary will be incorporated as a company under Moroccan law. Consequently, it will be subject to the obligation to hold shareholders’ meetings and/or must have an auditor. Moroccan law fully applies to the activities of the company according to its legal form. The branch office is exempt from these obligations;
  • Unlike the company, a branch has no share capital;
  • The subsidiary (company) is managed according to its form by a manager or a board of directors. In a branch, a legal representative has local powers but remains under the guardianship and responsibility of the parent company’s managers;
  • In a company, the financial liability of the partner (parent company) is in principle limited to the subsidiary’s share capital contribution. However, in a branch the exposure of the parent company is unlimited;
  • Upon liquidation of the subsidiary, the applicable procedures are those given by Moroccan law. A branch is closed by decision of the parent company’s management bodies.

 

CONCLUSION

In fine, a branch is a permanent establishment of an existing company. It is created with the aim of extending and representing the parent company elsewhere.

It has several advantages such as the simple formalities for its creation or an economic advantage insofar as its capital is minimal for its creation and its extension abroad.

Establishing a branch in Morocco is a good choice. Indeed, being a country in which companies find their place, the branch can be a step for the establishment of a company wishing to expand abroad.

 

If you have a project to create a branch: Contact us.

 

Income Tax calculation – Progressive scale

Income Tax calculation in Morocco

How to calculate the corporate tax (Moroccan) when you have both an export turnover and a local turnover at the same time?

A question to which the new circular 729 (no official translation into English available) does not answer. At least not yet until the second part of this circular is published.

The fact is that the new scale introduces the progressivity rule for the part of the tax base corresponding to turnover benefiting from a capped rate.

This is our position at Upsilon Consulting:

Case N°1: Company benefiting from a turnover taxed only under the progressive capped scale (Service exporter, Hotels collecting only in foreign currencies…)

Assuming that the net result is MAD5,000,000. The calculated IS will be:

IS = 300,000*10%+4,700,000*17.5%= 852,500 dirhams.

CASE N°2: Income Tax calculation – Company realizing only turnover taxed at the normal rate (Normal company, no export, no measures)

IS = 300,000*10%+(1,000,000,000-300,000)*17.5%+(5,000,000-1,000,000,000)*31%=1,392,500 dirhams

CASE N°3: Income Tax calculation – Company whose turnover is partly taxed according to CASE N°1 and partly according to CASE N°2

This is where Income Tax calculation gets a little complicated. We need clarification of the circular (however, in the meantime, some companies already have to file their returns).

Example: A hotel with both a turnover in foreign currency duly repatriated (and therefore benefiting from the ceiling) and a turnover in dirhams.

Let’s take the following case: 90% of the turnover in foreign currencies, and 10% in dirhams.

Let’s say that the total result is still MAD5,000,000.

We had a dispute of opinions between professionals as follows:

First opinion: As the share of the relative result of the turnover in dirhams is < 1 million (5,000,000 *10%), we must apply 17.5% on the whole result being above the scale.
The calculation would be:

IS = 300,000*10%+4,700,000*17.5%= 852,500 dirhams.

That is not the option we have chosen.

Second notice: Calculate tax on a pro rata basis
Calculated IS = 90%*(300,000*10%+4,700,000*17.5%)+10%*(300,000*10%+(1,000,000-300,000)*17.5%+(5,000,000,000-1,000,000)*31%) = 90%*852,500+10%*1,392,500 = 906,500 dirhams.

This calculation method seems to be the one favored by the automatic calculator integrated into SIMPL-IS.

See the original article in French