In brief: Morocco has signed over 65 bilateral tax treaties aimed at avoiding double taxation and preventing tax evasion. These agreements determine which State has the right to tax income, set the applicable withholding tax rates, and provide for information exchange mechanisms between tax authorities.
What is a tax treaty?
A tax treaty (or double taxation agreement) is a bilateral treaty concluded between two sovereign States. Its main objective is to prevent the same income from being taxed twice: once in the country where the income originates, and a second time in the country of residence of the beneficiary.
These treaties are generally based on the OECD Model or the United Nations Model and cover all direct taxes: corporate income tax, personal income tax, and sometimes wealth tax.
What does a tax treaty cover?
Morocco’s tax treaties typically address the following points:
1. Allocation of taxing rights
The treaty determines, for each category of income (business profits, dividends, interest, royalties, service fees, etc.), which State has the right to tax and at what rate.
2. Elimination of double taxation
Two methods are generally provided:
- Exemption method: the country of residence exempts income already taxed in the other State.
- Tax credit method: the country of residence grants a tax credit corresponding to the tax paid in the other State.
3. Reduced withholding tax rates
Treaties often provide for withholding tax rates lower than the standard domestic rates (10% in Morocco) on dividends, interest, and royalties.
4. Permanent establishment concept
The treaty defines the criteria under which a foreign company is considered to have a permanent establishment in the other State, and is therefore taxable in that State.
5. Exchange of information
The tax authorities of both countries may exchange information to combat fraud and tax evasion.
6. Mutual agreement procedure
In the event of a dispute, taxpayers may request the initiation of a mutual agreement procedure between the two administrations.
Examples of tax treaties signed by Morocco
Morocco has one of the most extensive treaty networks in Africa. Here are five examples of major treaties:
| Country | Treaty | Key points |
|---|---|---|
| France | Treaty of 29 May 1970 | Dividends: 15%, interest: 10/15%, royalties: 5/10% |
| Spain | Treaty of 10 July 1978 | Dividends: 10/15%, interest: 10%, royalties: 5/10% |
| Netherlands | Treaty of 12 August 1977 | Dividends: 10/25%, interest: 10/25%, royalties: 10% |
| Canada | Treaty of 22 December 1975 | Dividends: 15%, interest: 15%, royalties: 5/10% |
| Germany | Treaty of 7 June 1972 | Dividends: 5/15%, interest: 10%, royalties: 10% |
How to benefit from a tax treaty?
For a company to invoke a tax treaty, it must:
- Prove its tax residence in one of the two contracting States by providing a certificate of tax residence issued by its tax authority.
- Verify that the income concerned falls within the scope of the treaty.
- Comply with the filing requirements set out in the Moroccan General Tax Code.
Important: treaty ≠ automatic exemption
The existence of a treaty does not necessarily mean a full exemption. Each treaty is different and rates vary depending on the nature of the income and the conditions provided. It is therefore essential to analyse the specific provisions of the applicable treaty before making any payment to a non-resident.
Conclusion
Tax treaties are a fundamental tool for companies operating internationally. At Upsilon Consulting, a chartered accountancy firm in Casablanca, we support our clients in analysing and applying these treaties to optimise their tax position in full compliance.
Contact us for a personalised analysis of your situation.
Further reading
Service Offshoring in Morocco: Tax Benefits and Setup
Create a Company in Morocco: Practical Guide
Withholding tax on foreign service providers
