Transfer pricing documentation


The 2021 Moroccan Finance Act tightened transfer pricing documentation requirements.

In this article we specifically address the following points:

  • First, legal and regulatory framework in force in Morocco for transfer pricing
  • Second, tax measures adopted in the 2021 Finance Act regarding transfer pricing documentation.

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Overview of transfer pricing documentation in Morocco

Morocco has made significant regulatory efforts in order to comply with the international standards. The 2021 Finance Act is a perfect example of these efforts.  Indeed, this Finance Act has introduced new transfer pricing measures.

These measures are intended to complement the current transfer pricing tax provisions.

Note that these measures apply to Moroccan companies that are not at arm’s length with foreign companies. These measures also apply to Moroccan branches of foreign companies.

The 2021 Finance Act provides more insight on the following elements:

  1. First, the scope of the transfer pricing documentation requirements ;
  2. Second, the content of the transfer pricing documentation ;
  3. Finally, the introduction of a penalty for failure to produce transfer pricing documentation.

Summary of previous regulations

Noted that Article 214 of the Moroccan General Tax Code requires Moroccan companies that do not deal at arm’s length with foreign companies, to prepare transfer pricing documentation. This obligation has been in effect since the 1st of January, 2020.

The purpose of this documentation is to substantiate that intra-group transactions take place at arm’s length.

In addition, by virtue of the law, this documentation must contain:

  • First, information on the overall activities of related companies,
  • Second, information on the overall transfer pricing policy adopted,
  • Third, information on the distribution of profits and activities on a global scale,
  • Finally, information specific to the company’s transactions with its related counterparts located abroad.

In the event of a tax audit, the company must submit the documentation within 30 days of the auditor’s request.

Content of transfer pricing documentation

The 2021 Finance Act specified in Article 214-III of the General Tax Code that companies must provide the administration with a dossier containing:

  • First, a master file containing information relating to:
    • First, the overall activities of related companies ;
    • Then, the overall transfer pricing policy adopted ;
    • Finally, the distribution of profits and activities on a global scale;
  • Second, a local file containing information specific to the transactions that the audited company carries out with Group companies.

Note that, as per the provision of 2021 Finance Act, these requirements are specific to companies that:

  • Have a turnover of fifty (50) million dirhams or more (excluding VAT)
  • Or have a total gross assets on the balance sheet at the end of the relevant financial year higher than or equal to the previous threshold (fifty million dirhams).

Penalty for failure to produce transfer pricing documentation

Article 214 of the General Tax Code states that failure to produce the documentation will result in a penalty of :

  • 0.5% of the amount of transactions relating to the non-produce documentation
  • with a minimum amount of 200,000 MAD per year.

By virtue of the provisions of Article 210, in the event of failure to communicate these documents within deadlines:

  • the non-arm’s length relationship between the concerned companies is deemed by the tax authorities to be confirmed
  • these companies lose the right to present the missing documentation to the recourse committees (loss of right for appeal)

Upsilon Consulting’s services

We assist our clients in drafting transfer pricing documentation adapted to the Moroccan context.

Our approach is based on the following key elements :

Analysis of the economic model of the group’s subsidiaries

Understanding the business model

We identify the business model adopted by the group and the functions covered by the Moroccan subsidiaries. We also collect the necessary information in order to understand the various intra-group transactions.

Compliance of the model with international transfer pricing guidelines

Preparation of a documentation compliant with the transfer pricing guidelines issued by the OECD: Indeed, our approach focuses on the  analysis of the adopted business model’s compliance the OECD’s guidelines regarding transfer pricing.

Compliance with the Moroccan tax authorities’ policies

The documentation includes specific information requested by the Moroccan tax authorities in the context of audits.

Functional analysis of risk allocation

We perform functional risk analysis based on information provided by our clients’ management.

In this step of our approach, we focus on the flows’ nature and link them to the functions and associated risks assumed by the Moroccan subsidiary and to the assets and means used.

Following this analysis, we can draft a description of the functions and risks of local subsidiaries. This will allow us to support the transfer pricing policy currently adopted.

Upsilon Consulting assists you in the entire process of gathering and validation of relevant facts. We prepare a dossier that can also be used as a foundation for defense in the event of a tax audit.

Identification of comparable methods and valuation based on the arm’s length principle

During this step, we conduct an in-depth study of the transfer pricing policy:

  • First, identifying the appropriate transfer pricing methods to use in our analysis of the intra-group transactions carried out by the Moroccan subsidiary. In the absence of financial databases for Moroccan companies, we search for comparable entities on the basis of the financial statements available in the commercial register ;
  • Second, detailed verification of the selected comparable companies and evaluation of the arm’s length margin. Indeed, once we confirm the existing comparability, we proceed to a statistical analysis of their financial information. The objective is to determine the arm’s length interval on the basis of profit ratios.


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