Morocco Investment Incentives

EnterpriseMorocco: Manufacturing & Off-Shoring Guide Moroccan American Trade & Investment Center

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GOM Incentives


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Government of Morocco (GOM) Incentives

A dynamic legal framework governs Morocco's investment environment. The Investment Charter includes provisions designed to improve the business climate by providing operational instruments to support investment. These instruments exist in the form of incentives and advantages provided by the Government of Morocco to provide backing to the investor.

INVESTMENT CHARTER

The features of the Investment Charter are as follows:

Simplification and streamlining of administrative procedures

Guaranteed transfer of profits and earnings from sales including added values

Lower cost of investment and taxes levels

Preferential treatment benefiting export enterprises

Contract system granting additional advantages

Promotion of employment

THE LEGAL ENVIRONMENT OF INVESTMENT

LAW ON PATENT RIGHTS AND INTELLECTUAL PROPERTY

Morocco is a member of the World Intellectual Property Organization and signatory of the Bern Royalties Convention, the Paris Convention for Intellectual Property and universal royalties as well as the Brussels, Madrid and The Hague agreements. The Moroccan Office of Patent and Commercial Property (OMPIC) enforces both national and international legislation.

LAW 6/99 PURSUANT TO FREEDOM OF PRICING AND COMPETITION

This law is designed to guarantee freedom of pricing through competition, free market access and the lifting of all barriers and restrictions as well as transparency and fairness in business relationships through the promotion of a competitive culture.

BILATERAL AGREEMENTS WITH MORE THAN 30 COUNTRIES CONCERNING

Protection and guarantee of investments.

The avoidance of double taxation on income and capital.

COMMERCIAL COURTS

The commercial courts are the primary agents ensuring an environment conducive to international business in Morocco. The courts fit into the national legal structure with the mission making the working environment more secure for domestic and foreign operators.

Entirely committed to the application of free trade practices, Morocco plans to progressively eliminate customs duties in order to create a free trade zone with the European Union by 2010. Morocco already has a set of FTAs or PTAs with several countries as the USA, Turkey, and several Arab nations (Great Arab Free Trade Agreement).


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GOM WILL CONTRIBUTE TO THE COST OF INVESTMENT

GOM WILL CONTRIBUTE TO THE COST OF INVESTMENT IF THE PROJECT MEETS ONE OF THE FOLLOWING CRITERIA:

Large investments exceeding 200 million Dh in value

Projects that create 250 jobs or more

Projects in specified less developed regions, including industrial estates

Projects that result in the transfer of technical know-how

Environment protection projects

Some activities in the textiles sector The government grants a number of investment subsidies

Up to 20% land subsidy

Up to 5% external infrastructure subsidy (connection to roads, electricity, sewage, etc.). This can reach up to 10% for certain activities in the textiles sector.

Up to 20% of professional training expenses.

SUPPORT FROM THE HASSAN II FUND

The Hassan II Fund for economic and social development provides oversight and/or partial financing for industry sector investment programs, in particular:

Textile industry Leather industry Automobile equipment and electronics industry Environmental consciousness in industrial activities

This contribution is made through 2 different channels:

Direct financing : • 50% of the landscaped ground cost (up to a maximum of 27.78USD /m2) • 30% of the ready-to-use buildings (up to a maximum of 166.67USD/m2) • 100% of the land cost (up to a maximum of 27.78USD /m2) if aid is requested to

purchase the land Indirect support:

• Provide ready-for-use offices within a landscaped zone through a property developer in return for a competitive price

These advantages are provided through an agreement with the Moroccan government. Interested companies must drop off the dossier at the ministry of trade industry and economy upgrading including the company’s articles of incorporation, investment references, a detailed presentation of the project showing the amount of the investment and the number of job to be created. The deputy of the ministry of finance, industry and Hassan II fund reviews the dossier. The investors receive a response within 30 days.


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Investment incentives by sector In addition to the general investment incentives that apply to all sectors, certain priority sectors enjoy special advantages or are subject to a development agreement with the government. Among these sectors are the following:

Construction • Construction companies are exempt from corporate tax (IS) for

the construction of low-cost housing. • Exemption from commercial license tax for all commercial or

industrial activities during the first five years of activity, including: land, new construction, continuing construction, and equipment acquired during the operation.

• Exemption from urban tax for new construction, continuing construction, and equipment related to the operation for the first five years.

Mining • Mining companies that sell their products to other firms for export processing are

eligible for a 50% reduction in IS during the first five years of exporting. • Mining companies are authorized to create a depletion allowance of 50% of the profit

before tax. 20% of this fund can be used as a social fund (e.g. to cover dismissal compensation for surplus workers).

Exporting companies • Companies exporting products and services are exempt from corporate tax (IS) for a

period of five years. Thereafter, firms pay 50% of the standard IS rate.

Agriculture • Companies dealing in agriculture or stock breeding, and

agricultural cooperatives, are exempt from corporate tax until December 2010. Agricultural equipment and products are exempt from value-added tax (TVA).

Hotel companies • Hotel companies are eligible for an exemption from corporate tax (IS) for the first

five years of operation with respect to that part of the turnover generated in foreign currency. Thereafter, firms pay 50% of the standard IS rate.

Handicraft companies • Companies dealing in traditional arts and handicrafts are eligible for a 50% reduction

in corporate tax.

Textiles • Textile companies are exempt from the corporate tax and commercial license tax for

the first five years. • Thereafter, firms pay 50% of the standard IS rate. Among other incentives, textile

companies receive a rebate of 20 cents/KWH on electricity costs, and a 50% refund of their social security premiums.


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Hydrocarbons • Oil companies enjoy a total exemption from corporate tax (IS) for a ten-year period,

beginning from the start date of regular production for each license area. • All equipment, materials, products and services necessary for exploration and

extraction operations are exempt from customs duties and value-added tax (TVA). • The holders of an extraction license are exempt from commercial license tax and

urban tax. • The profits and dividends of the holders of an extraction license and the shareholders

of subcontracting companies are exempt from the tax on income from shares, dividends and similar revenues, and are freely transferable out of Morocco (without limitation) for foreign entities.

Real Estate Development • Reduction of the rate of “peines et soins charges” to 2.5% of in-site works costs

related to drinking water, electricity and cleansing networks • Import duties exemption on equipments • Exemption from land registration fees • Subsidies on land (50% of Hotel land price with a maximum subsidy of 250 DH/m2)

• Exemption from VAT on purchase price of capital goods • Total exemption from corporate tax for five years and a reduction of 50% beyond this period on the turnover generated in foreign currency by hotels companies • Import duties exemption on capital goods for projects of which the investments exceeds 200 million dirhams • Financial participation of the Government in the training of the hotel staff

INVESTMENT OF MORE THAN 200 MILLION dh

Companies investing above or equal to 200 million MDH are exonerated from import and value added tax applicable to the required capital goods, equipment and tools directly imported by the company itself or on its behalf. Geographic investment incentives (industrial zones, free zones) Industrial zones

• Companies situated in the following economic zones benefit from a 50% reduction

in corporate tax (IS) and income tax (IGR) for the first five years of operation: Al Hoceima, Berkane, Boujdour, Chefchaouen, Es-Smara, Guelmim, Jerada, Laayoune, Larache, Nador, Oued eddahab, Oujda-Angad, Tangiers, Assilah, Fahs- Beni Makada,Tan-Tan, Taounate, Taourirt, Tata, Tetouan.

• Companies and other enterprises operating in Tangiers, Assilah, and Fahs-Beni Makada benefit permanently from a 50% reduction in IS and IGR.


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INSTITUTIONAL RESOURCES

Regional Investment Centers • Simplification of formalities for the company’s creation • Explanation of set-up process for investors • Speeding up the set up of the “regional one stop shop” • Their function is twofold, i.e. to assist the creation of enterprises and help investors

by procuring all the relevant information pertaining to regional investment, and closely observing all the applications and administrative deeds required for the execution of projects entered into with the Government. At the same time, they propose amicable solutions for instances in the event of litigation between public administration and the investor.

Interministerial Investment Commission Chaired by the Prime Minister and managed by the Department of Investments, this commission constitutes a review and arbitration tribunal. It is empowered to hand down rulings on any impediment pertaining to investment projects and to implement any measure designed to improve the investment environment.

Legal Framework Protection of Property Rights

• The U.S.-Morocco FTA, signed in June 2004, contains some of the strongest Intellectual Property protections in any free trade agreement. In December 2004, the Moroccan parliament passed amendments to its existing intellectual property legislation that brings Morocco into compliance with its TRIPS commitments.

• Morocco has a non-discriminatory legal system that is accessible to foreign investors. The commercial courts, established in 1998, have begun to mitigate the weakness in commercial proceedings. A system of commercial arbitration was also created in April 1998.

• Secured interests in property are recognized and enforced through the "Administration de la Conservation Fonciere." The GOM has also passed a law permitting the development of a secondary mortgage market.

Labor • Moroccan labor law and practice draw from French models. Tripartite negotiations

between government, management, and labor resulted in a new Labor Code that went into effect on June 7, 2004. A major reform package in April 2003 reduced the workweek from 48 to 44 hours and increased the minimum wage by 10 percent.

• Morocco has ratified the ILO convention covering the right to organize and bargain collectively, and any group of eight workers can organize. Article 14 of the Constitution gives workers the right to strike, but no detailed law exists to define it. For a union to engage in collective bargaining it must have at least 35 percent of the enterprise's workforce as registered members. The Ministry of Interior occasionally intervenes, especially if the government believes strategic interests are threatened. There are mandatory procedures governing the settlement of disputes, though the government settles them on a case-by-case basis. The number of workdays lost to strikes has diminished markedly from over 135,000 in 2000 to less than 23,500 in 2004.

• The official national unemployment figure is 10.9 percent with urban unemployment at approximately 17.5 percent. The minimum wage is currently 2010 dirhams per month, approximately 240 USD.


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Banking System • From the beginning of the 90s, the Moroccan financial system has undergone several

reforms. These have aimed at making the system more efficient at financing the productive sector and creating a competitive climate between the banks as well as reducing the cost of mediation.

• The contributions of the banking law of 6th July 1993— The new law is characterized by three main innovations:

− The unification of the legal framework.

− The creation of three institutions: The National Council of Money and Savings (CNME), the Committee of Credit Establishments (CEC), the Commission of Credit Establishments (CDEC).

− The protection of lenders and borrowers by a range measures (respect for the rules of careful management, new conditions of activity,).

• Other measures:

− This liberalization takes its place within the framework of a new monetary policy founded, no longer on a quantitative control of credit, but rather a control by cost. Among these measures, it is possible to quote: the removal of restrictions on credit in 1991, the liberalization of interest rates, and relief of the obligatory bank ratios.

− The suppression of a number of monopolies was also implemented. This is the case for example, of the operations with Moroccan residents abroad (RME), for the Crédit Populaire du Maroc (CPM), or export insurance for the Banque Marocaine pour le Commerce Extérieur (BMCE BANK), an activity transferred to an independent company.

− Reinforcement of the autonomy of the Central Bank and its powers in of control and supervision

− A broadening of the field of control of the Bank Al Maghrib (BAM) over off-shore banks, over micro-credit associations and for certain establishments solely over matters of accounting and careful management

− A complete overhaul of the composition and the attributions of the CEC and the CNME

− Obligation to introduce internal controls

− Widening of the role of the auditor (extended control by credit establishments of the accounting and careful management dispositions and evaluation of the internal control system)

− Revision of the rules governing crisis management (designation by the Governor of the BAM of a temporary administrator and in the event of an irremediably compromised situation, compulsory liquidation with the nomination of the liquidator by the court on the proposal of the Governor)

− Reinforcement of protection of depositors

− Creation of a commission for the coordination of financial sector supervising authorities


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Government of Morocco Directory

Office of the Prime Minister

Le Premier Ministre, Palais Royal Touarga, - Rabat -Maroc Tel: + 212 (0)37 21 94 00 Fax: + 212 (0)37 76 86 56 www.pm.gov.ma

Ministry of Commerce, Trade and Economy Upgrading Tel: + 212 (0) 37 76 18 68 / (0)37 76 15 08 Fax: + 212 (0) 37 76 62 65 www.mcinet.gov.ma

Ministry of Tourism Centre d'Affaires - Aile Sud Lot 1 C17, Avenue Ennakhil -Hay Riad Rabat -Maroc Tel : +212 (0) 37 57 78 00 / +212 (0) 37 57 79 00 Fax : +212 (0) 37 57 79 01 Email: [email protected] www.tourisme.gov.ma

Office des Changes (Foreign Exchange Bureau) 31, Avenue Patrice Lumumba - Hassan

Rabat -Maroc Tel: +212 (0)37 72 20 72/+212-(0)37 72 20 73/ +212 (0)37 72 28 06 Fax +212 (0)37 72 12 85 www.oc.gov.ma National Agency for the Promotion of SMEs

10, rue Ghandi, Bp .211 - Rabat -Maroc Tel: +212 (0)37.70.84.60 Fax: +212 (0)37.70.76.95 Email: [email protected] www.anpme.ma

General Confederation of Companies of Morocco (CGEM)

Angle avenue des FAR et rue Mohamed Errachid - Casablanca - Maroc Tel : +212 (0)22.25.26.96/97/98/99 Fax : +212 (0) 22.25.38.39 E-mail : [email protected]

www.cgem.ma Business Women’s Association of Morocco

Résidence Imane Center, Angle Rue Girardot, Rue Arrachid Mohamed et Bd My Abderrahmane, 8ème étage-Appt 2-Casablanca - Maroc Tel: +212 (0) 22 98 51 81 / +212 (0) 22 25 88 29 Fax : +212 (0) 22 99 04 92 E-mail : [email protected] www.afem.ma

Direction of Foreign Trade 32, Rue Honaine Angle Rue Michlifen - Agdal - Rabat Tel : +212(0)37 67 34 21 Fax : +212 (0)37 67 34 17 / +212 (0) 37 67 34 42 Email: [email protected] www.invest.gov.ma


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Regional Investment Center Directory


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The Moroccan American Trade and Investment Center (MATIC) was established under the Royal Patronage of His Majesty King Mohammad VI as a vehicle to promote the Moroccan-US FTA. MATIC is an American based non-profit trade association that assists the country of Morocco in its quest to encourage economic growth and stability through the promotion of its private sector. Through its Brand Morocco program, MATIC has identified strategies for firms electing to take advantage of the unique location that Morocco provides as a platform from which new business initiatives can be launched into markets throughout the region.

Please visit us at our website : www.moroccanamericantrade.com