Over recent years, the Kingdom of Morocco has created a legal and regulatory framework very attractive for foreign investors and similar in several matters to the European legal framework. In addition to its political stable environment, a recent series of tax treaties with numerous countries and reforms in almost all of its sectors of activities, in conjunction with its creation of successful free trade zones such as Tangier Free Trade Zone and Casablanca Finance City, have allowed it to decidedly become a gateway for Africa. It has been recently recognised as the first African financial place by Jeune Afrique. Its selection as privileged partner of China within the context of the one road one belt policy should strengthen this trend.

Investment regulatory framework

Investing in a Moroccan commercial company does not require a foreign investor to partner with a local shareholder. There are no restrictions in the percentage of share capital it can hold. A local wholly-owned subsidiary of a foreign investor is a possible structuring option. Whereas in specific activities (such as phosphate), a partial or full state ownership may be maintained, a trend towards a liberalised economy can be observed over the recent years.

If the contemplated investment falls within the scope of a regulated activity, its completion will be conditional upon the authorisation of the relevant regulator (prior authorisation of the Ministry of Economy may also be required when the seller is a state-owned entity). Any foreign investment project is likely to be notified to the Competition Council prior to its completion if one of the following conditions is fulfilled:

• The total global turnover (excluding tax) of all the companies or groups of legal entities that are party to the contemplated transaction is in excess of MAD750 million
• The total global turnover (excluding tax) generated in Morocco by at least two of the companies or groups of legal entities concerned is in excess of MAD250 million
• The companies who are involved in the contemplated transaction are generating together more than 40 percent of a given market or a substantial part of it.

Acquisition of a stake in a listed company is subject to specific takeover regulations. Specifically, if an investor acquires, alone or in concert, directly or indirectly, over 40 percent of an issuer’s voting rights, a public takeover bid on all the share capital and voting rights of the target company may be triggered.

Repatriation of funds

As long as you invest foreign currencies in Morocco you can upstream such amount abroad without a prior authorisation of the foreign exchange office. This is a cash in cash out mechanism.

The following forms of repatriation of funds for the benefit of foreign investors are not subject to the prior authorisation of the foreign exchange regulator:

• Dividends
• Profits made by Moroccan branches of foreign companies
• Rental incomes
• Interests on shareholders’ loans, and
• Proceeds resulting from sale of shares and assets or liquidation of a Moroccan company

Their repatriation is uncapped and is not subject to any time limit provided that:

• The revenues to be upstreamed derived from an initial investment financed in foreign currency
• This initial investment falls within the list of allowed “foreign investments” set out in the foreign exchange office circular
• The related payable taxes have been duly and timely paid (including applicable withholding taxes)
• The required file of documents has been provided in a timely manner and required form to the relevant local bank by the foreign investor and/or the concerned Moroccan company

As an exception, payment of management fees, research, and development costs to a foreign company requires the approval from the foreign exchange office (unless the Moroccan entity is located in a free tax zone which offers this flexibility). Non-compliance with these rules can lead to the concerned sums being frozen for several years.

Therefore, the structuring of the financing of the payment of the purchase price as well as the contemplated forms of future cash upstream shall be carefully reviewed.

Tax legal framework

Morocco has executed tax treaties with several countries providing for the absence of double taxation. Generally, foreign investment will trigger the payment of tax registration and stamp duties (amount depending on the nature/value of assets). Since 1st January 2018, the new Finance Act has provided for a new exemption on the registration duties in case of sale of shares which can be a good incentive for restructuration and share and purchase transactions.

Moroccan companies have to pay a yearly corporate income tax of 30 percent. Daily internal operations are subject to a value added tax of 20 percent. Investors should conduct a deep tax review of their project and the target to assess their underlying tax cost. Tax audits and reassessments are regularly carried out by tax authorities even post acquisition completion. Nevertheless, Morocco offers free trade zones (Tangier Free Trade Zones and Kenitra Free Trade Zones) with tax exemptions. A 10 percent withholding tax applies on a range of cash upstreams (subject to applicable tax treaties). No tax consolidation exists in Morocco.

Employment law

Employment law is complex, it governs the relationships between employees, their representative bodies and employers. Trade Unions are very active in Morocco and termination of employment relationships must strictly comply with several conditions. The recruitment of foreign workers must seek prior approval of the Employment Ministry. Salaries must be at least equal to a minimum legal hourly amount (MAD13.46 per hour in the industry and services sectors and MAD69.73 per day in the agricultural sector). The law provides for a 44 hour maximum workweek, with the daily work not to exceed ten hours unless otherwise authorised by law.

Forms of local investment vehicle

In almost all sector of activities there is no requirement for a local partner. Limited liability companies are namely the société anonyme and the société à responsabilité limitée. The liability exposure of the shareholders is limited to the amount of their contribution to the share capital, unless they interfere in the management of the company as shadow managers. Unlimited liability companies, namely the société en nom collectif, may only be contemplated for tax optimisation purposes. A société anonyme must have at least five shareholders, who can either be corporate entities or individuals, and a fixed share capital amounting to a minimum of MAD300,000 (MAD3 million to proceed with public offering). A quarter of the capital must be paid up upon subscription.

In a société anonyme, the structure of the management can be either a one-tier management with a board of directors (conseil d’administration) or a two-tier management structure involving a supervisory board (conseil de surveillance) and a management board (directoire).

A société à responsabilité limitée may be formed by only one shareholder provided that its shareholder is not a sole shareholding entity. No minimum share capital is required which justifies the success of this vehicle for any new player. No obligation to pay up one quarter of the share capital is required unless the share capital exceeds MAD100,000.

Several steps have to be followed when setting-up a company: from obtaining a specific certificate (certificat négatif), which certifies that the contemplated corporate name is not used by another company, opening a local bank account, to the achievement of the KYC process of the bank (which may require a physical meeting with the foreign legal representative), around three weeks are necessary to obtain the certificate of registration of the company. Regional Investment Centres ease the registration process by acting as “one stop shop administrations” in charge of collecting the required documents and data and doing the tax and social registration.

Arbitration

Morocco is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and the 1965 Washington Convention on the Settlement of Investment Disputes. Morocco has a new regional centre for arbitration, Casablanca International Mediation & Arbitration Center (CIMAC). It aims to bring a modern and streamlined alternative dispute resolution system for Morocco to become a place for arbitration in Africa.