Using a provider based abroad has become commonplace: consulting, software development, software licences, recharges from the parent company. But every such payment triggers tax obligations for the Moroccan company that pays, often overlooked until the first audit.
The principle: 10% withheld on the gross amount
The General Tax Code (article 15) subjects payments to non-resident persons to a 10% withholding tax, in particular:
- fees, commissions and payments for services used in Morocco or provided by a non-resident;
- royalties for the use of patents, trademarks, software or know-how;
- technical assistance payments and head-office costs recharged by a group company.
The withholding applies to the gross amount, excluding VAT. It is deducted by the Moroccan company at the time of payment, then declared and paid to the Treasury within the following month.
Paying in foreign currency, or into an account abroad, does not make the withholding disappear. This is a common misconception.
Who is responsible?
The Moroccan company that pays. If it did not withhold the tax, the tax authority can claim it directly from the company, with penalties, even if the provider was paid the full invoice.
When the contract provides that the provider must receive an amount net of any withholding, the Moroccan company bears the tax in its place: the amount to withhold is then grossed up, which increases the real cost of the service.
What tax treaties change
Morocco has signed double tax treaties with many countries. Depending on the nature of the payment and the applicable treaty, they may:
- reduce the withholding rate, particularly for royalties;
- remove taxation in Morocco, for example when the payment is business profit of a foreign company with no permanent establishment in Morocco.
It all depends on how the payment is classified. The same invoice may be read as a service, a royalty for the use of know-how, or technical assistance: the treaty treats them differently. The Moroccan tax authority frequently reclassifies services as royalties.
To benefit from a treaty, you need at least a certificate of tax residence from the provider in its country, current at the time of payment.
Do not forget VAT
The 10% withholding concerns the provider’s corporate or income tax. VAT follows separate rules: when a foreign provider with no establishment in Morocco renders a service used in Morocco, the Moroccan company must generally declare and pay the VAT on its behalf, then deduct it under the usual conditions.
Even when the treaty removes the withholding, this VAT obligation remains.
Management fees
Head-office costs and management fees invoiced by a parent company combine all the points to watch:
- withholding tax and the applicable treaty;
- VAT to self-assess;
- proof that the services are real and useful;
- an arm’s length price, under transfer pricing rules, covered in a dedicated article.
Without a clear contract, deliverables and a documented allocation key, the deductibility of these costs is regularly challenged.
The most frequent mistakes
- Not withholding because the payment is made in foreign currency.
- Applying a treaty without the provider’s residence certificate.
- Forgetting to self-assess VAT.
- Declaring or paying the withholding late.
- Invoicing group costs without being able to prove the services rendered.
In short
- 10% withheld on the gross amount, paid within the month following payment.
- The Moroccan company is responsible for the withholding.
- Treaties may reduce or remove the withholding, with proof of residence.
- VAT must be self-assessed, regardless of the withholding.
Ascensu secures its clients’ payments abroad as part of its tax returns service: classification of the payment, applicable treaty, withholding and VAT.
Official sources
This article is provided for general information, as at its publication date. It is not personalised advice: the rules change and every situation must be reviewed on its own facts.