In brief: Dividends in Morocco are subject to a 15% withholding tax on their gross amount under the General Tax Code (CGI). Inter-company dividends between entities subject to corporate tax may be exempt with a certificate of share ownership. Double taxation treaties may reduce the rate for non-resident shareholders.
Dividends in Morocco
The term dividend refers to the share of profits that a company distributes to its shareholders or partners. A company must distribute dividends to shareholders in proportion to their holdings. In everyday language, the term “profit distribution” is sometimes used.
In this article, we analyze the taxation of dividends, and specifically the withholding tax on dividends in Morocco. But first, let us review some legal foundations. We also provide a comparison between salaries and dividends in the case of a sole-member LLC (SARLAU) managing partner.
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Dividends in Morocco - Legal Foundations
The regulations governing the remuneration of company directors in Morocco are an area that requires careful consideration when choosing between salary and dividends. It is important to note that there is no specific regulation strictly governing directors’ remuneration, particularly in large companies.
Legal Foundations Governing Dividends in Morocco
Dividend distribution in Morocco can be carried out in all types of companies. The law sets out precise rules for public limited companies (SA).
Accordingly, under the provisions of Article 331 of Law 17-95 on public limited companies, “After approval of the financial statements for the fiscal year and confirmation that distributable amounts exist, the ordinary general meeting determines the share allocated to shareholders in the form of dividends.”
The profit that a company may distribute consists of the net income for the fiscal year:
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reduced by:
prior losses
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appropriations for the legal reserve
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statutory reserves
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increased, where applicable, by the retained earnings carried forward from previous fiscal years.
Frequently Asked Questions
What is the withholding tax rate on dividends in Morocco?
The standard withholding tax rate on dividends in Morocco is 15%. This rate applies to distributions of profits to shareholders, whether they are individuals or legal entities. However, dividends paid to companies subject to Corporate Tax in Morocco are exempt, provided the recipient provides a certificate of share ownership with its tax identification number.
Are dividends paid to non-residents subject to withholding tax?
Yes, dividends paid to non-residents are subject to withholding tax. If Morocco has signed a double taxation treaty with the recipient’s country of residence, the treaty rate applies. In the absence of a treaty, the standard Moroccan rate applies in full.
What constitutes a deemed distribution of dividends in Morocco?
Deemed distributions include concealed income, unjustified remuneration and expenses, and benefits granted to shareholders identified during a tax audit. These adjustments are subject to withholding tax even if they do not cover reported deficits.
How can a company benefit from the exemption on inter-company dividends?
To benefit from the exemption on dividends received between companies subject to Corporate Tax, the recipient company must provide the paying company with a certificate of ownership of shares, which includes the recipient’s Corporate Tax identification number. Without this certificate, the standard withholding rate applies.
It should be noted that the general meeting may only decide to distribute a dividend once it has approved the financial statements for the fiscal year. This approval:
- legally validates the fiscal year’s accounts
- and confirms the existence of distributable profits or reserves.
The same provisions also apply to LLCs (SARL).
Furthermore, for other types of companies, the law does not specify the terms for dividend distribution in Morocco. Thus, the terms for profit distribution in partnerships and civil companies are governed by the provisions of the Dahir of Obligations and Contracts.
| *In all cases, once a company is subject to [Corporate Tax,](/en/corporate-income-tax-in-morocco/) the withholding tax rules on dividends apply. These rules apply whether the company is subject by law or by election.* |
Tax Regime for Dividend Distribution
According to the provisions of Article 13 of the General Tax Code, “Income from shares, equity interests, and similar revenue subject to withholding tax (…) includes:
I.- Income from profit distributions by companies subject to Corporate Tax, such as:
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- dividends, interest on capital, and other similar participation income;*
- amounts distributed from profit appropriations for capital amortization (…);
- liquidation surplus (…);
- reserves distributed.”
| ***Note that the text uses the general concept of "income from shares," which is not limited solely to dividends in Morocco but covers all similar distributions (statutory interest, liquidation surplus, etc.)*** |
What Share Income Is Subject to Withholding Tax?
Companies that distribute dividends in Morocco (or income from shares in general) must apply a withholding tax on the gross amount of these dividends. To this end, the distributing company must:
- Apply the withholding tax on dividends;
- Pay this withholding tax to the Treasury within 30 days;
- File an annual summary return of withholding taxes paid.
As a result, the company pays the shareholder the amount net of withholding tax.
Furthermore, the scope of withholding tax extends beyond dividends alone. It also covers all income from variable-return securities. This income includes:
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Dividends, interest on capital, and other similar participation income. These are the amounts that a general meeting allocates to a shareholder or partner when distributing profits.
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Amounts distributed from profit appropriations for:
capital amortization, or
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the redemption of shares or equity interests;
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the liquidation surplus increased by reserves built up within the last ten (10) years. In this case, the distributor must apply the withholding tax even if these reserves were previously capitalized;
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reserves distributed. For more details on the liquidation surplus,
Triggering Event for Withholding Tax
The triggering event for withholding tax on income from shares is:
- Actual payment. This refers to the direct transfer of funds to the shareholder or partner through cash payment.
- Making funds available to shareholders. Making funds available means that the paying party holds the amount to be distributed at the beneficiary’s disposal, without the possibility of retraction. In tax terms, it is therefore equivalent to an actual payment.
- Recording in an account. This refers to recording in partners’ current accounts, beneficiaries’ bank current accounts, or current accounts agreed upon in writing between the parties.
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Dividends Paid by Companies Established in the CFC and Industrial Acceleration Zones
In 2022, companies established (1) in the Casablanca Finance City zone and (2) in Industrial Acceleration Zones benefited from a permanent exemption from withholding tax on dividends. This exemption applied to corporate shareholders and also covered dividends from Moroccan sources.
Starting in 2023, the Finance Act introduced the elimination of this permanent exemption. The 2023 Finance Act limits the application of the permanent withholding tax exemption to dividends from foreign sources distributed to non-residents.
These measures apply to dividends and other similar participation income distributed from fiscal years beginning on or after January 1, 2023.
Withholding Tax on Dividends in Morocco Paid to Non-Residents
The profits of establishments operated by a foreign company in Morocco are treated as dividends in Morocco. As a result, the establishment must apply withholding tax on the amounts it pays or makes available to the head office.
The same applies to profits that the company offsets against amounts the head office has lent or advanced.
This rule applies subject to the provisions of double taxation treaties.
Consequently, companies must apply withholding tax on these profits.
Hidden Dividend Distributions
These are adjustments to reported results made following a tax audit as part of the rectification procedure. This notably includes:
- concealed income;
- unjustified remuneration and expenses;
- benefits granted to shareholders.
These adjustments are subject to withholding tax, even if they do not cover reported deficits. However, adjustments relating to depreciation and provisions do not give rise to withholding tax, since the corresponding amounts were not disbursed. The same applies, among others, to adjustments relating to:
- fees that are duly justified but not reported on the appropriate schedule of the tax return;
- cash payments for justified expenses of ten thousand (10,000) MAD or more.
Withholding Tax Rate on Dividends in Morocco - Tax Treaties
When a company pays dividends in Morocco to another company subject to Corporate Tax, the withholding tax does not apply. However, Article 6 of the General Tax Code specifies that to benefit from this exemption, the recipient company subject to Corporate Tax must provide a certificate of ownership of the shares that includes its Corporate Tax identification number.
Furthermore, when a company pays dividends to non-residents, two scenarios are distinguished:
- Countries with which Morocco has a double taxation treaty: the provisions of that treaty must be applied;
- In the absence of a treaty: The standard rate applies
Further Reading
Before distributing dividends, check your corporate tax position — Our corporate tax rate calculator shows the applicable rate, minimum contribution and CSS to help you optimise profit distribution.
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