The tax convention between Morocco and the United Arab Emirates, signed on 9 February 1999, provides a privileged framework for investors in both countries. Reduced rates on dividends (5 to 10%), interest (10%), and royalties (10%), combined with the absence of corporate tax in UAE free zones, make this treaty a strategic lever for structuring bilateral financial flows.
Background and Scope of the 9 February 1999 Convention
The double taxation avoidance agreement between the Kingdom of Morocco and the United Arab Emirates entered into force to eliminate double taxation on income and prevent tax evasion. It applies to persons resident in one or both contracting states and covers income tax, corporate tax (IS) in Morocco, and equivalent taxes in the UAE.
This bilateral treaty is particularly significant given the growing economic ties between the two countries. Emirati investments in Morocco — real estate, tourism, infrastructure — and Moroccan businesses seeking to establish a presence in the Middle East directly benefit from its provisions.
Key Advantages for Investors
The major advantage of this convention lies in combining two factors: reduced treaty rates on the Moroccan side and the absence of corporate tax in UAE free zones (Dubai, Abu Dhabi, Sharjah). In practice, an investor structuring operations from an Emirati free zone can benefit from a particularly competitive overall tax burden.
Dividends: 5% or 10% Depending on Shareholding
The convention provides for reduced withholding tax rates on dividends paid by a Moroccan company to a UAE resident:
- 5% of the gross dividend amount when the beneficial owner directly holds at least 10% of the capital of the distributing company;
- 10% in all other cases.
By comparison, Moroccan domestic law applies a 11.25% withholding tax in 2026 (10% from 2027) on dividends paid to non-residents. The treaty benefit is therefore significant, especially for substantial shareholdings.
Interest: 10% Cap
Interest arising in Morocco and paid to a UAE resident is taxable in the source state at a maximum rate of 10%. Moroccan domestic law provides for a 10% withholding rate on interest (gross income) paid to non-residents; the 10% treaty cap therefore provides no reduction.
Royalties: 10% Cap
Royalties (patents, trademarks, software, know-how) are also capped at 10% withholding tax. The standard Moroccan rate is 10% (withholding on gross income paid to non-residents); the convention merely confirms this cap.
Comparative Table: Treaty Rates vs Moroccan Domestic Law
| Income Type | Moroccan Domestic Law | Morocco-UAE Convention | Saving |
|---|---|---|---|
| Dividends (shareholding ≥ 10%) | 11.25% (2026) | 5% | 6.25 points |
| Dividends (other) | 11.25% (2026) | 10% | 1.25 points |
| Interest | 10% | 10% | 0 points |
| Royalties | 10% | 10% | 0 points |
Salaries, Pensions, and Other Income
Salaries are generally taxable in the state where the activity is performed. A Moroccan employee seconded to the UAE for more than 183 days during a 12-month period will be taxable in the UAE — where personal income tax is zero for the majority of income types.
Pensions paid in respect of prior employment are taxable in the beneficiary’s state of residence. A Moroccan retiree established in the UAE will therefore in principle escape Moroccan taxation on their private pension, subject to specific rules applicable to public pensions.
Practical Case Studies
UAE Holding Company Investing in Morocco
A holding company incorporated in the Dubai International Financial Centre (DIFC) or the Abu Dhabi Global Market (ADGM) holds 25% of the capital of a Moroccan company. When dividends are distributed, the Moroccan withholding tax is limited to 5% (shareholding ≥ 10%). The Emirati holding, based in a free zone, bears no corporate tax in the UAE. The total tax burden on dividends is therefore reduced to the sole Moroccan levy of 5%.
Moroccan Company Exporting to the UAE
A Moroccan digital services company invoices a UAE-based company for its services. Royalties paid from the UAE to Morocco bear no withholding tax in the UAE. In Morocco, this income is included in the taxable profit subject to corporate tax. The convention avoids any double taxation by assigning the right to tax exclusively to the service provider’s state of residence.
Exchange Regime and IGOC Transfers
Morocco’s General Instruction on Foreign Exchange Operations (IGOC) governs fund transfers between Morocco and abroad. For dividends paid to non-resident Emirati shareholders, the transfer is unrestricted once the payment of the treaty withholding tax is justified and a UAE tax residency certificate is presented.
Convertible dirham accounts opened in the name of non-residents can receive dividends, interest, and disposal proceeds, which can then be freely repatriated to the UAE. Emirati investors must ensure they hold a tax residency certificate issued by the UAE Federal Tax Authority (FTA) to activate treaty rates.
Key Considerations
- Economic substance: Moroccan tax authorities may deny treaty benefits if the Emirati structure lacks genuine substance (offices, employees, actual business activity).
- Limitation of benefits clause: verify whether the convention contains anti-abuse provisions limiting the benefit of reduced rates for interposed structures.
- Filing obligations: withholding tax must be declared and paid within Moroccan statutory deadlines, even at the reduced treaty rate.
- 2026 corporate tax reform: with Morocco’s shift to proportional corporate tax, effective domestic rates are evolving. It is essential to recalculate the treaty advantage on a case-by-case basis.
Conclusion
The Morocco-UAE tax convention is a powerful tool for optimising the taxation of bilateral flows. The combination of reduced rates on the Moroccan side and the UAE’s favourable tax environment makes it one of the most attractive treaties in Morocco’s treaty network. Expert guidance remains indispensable to secure each structure and ensure compliance with filing obligations on both sides.
Read also
- Morocco’s Tax Conventions: Complete Guide
- International Dividend Taxation
- Dividend Transfers and IGOC
- Foreign Investments in Morocco
Upsilon Consulting — Accounting firm in Casablanca. We support Moroccan and Emirati investors in the tax structuring of their bilateral operations, the application of tax conventions, and compliance with Morocco’s exchange control regime.
