A group that manufactures in Morocco and sells across Europe has two companies and one profit. Where that profit is reported is not a matter of where the invoices are addressed. It is decided by which entity performs the functions, owns the assets and carries the risks that produce the margin, and by whether the group can demonstrate that when asked.
The question is worth taking seriously in this particular pairing because the received wisdom is out of date. Morocco is habitually described as the low tax leg of a manufacturing structure and the Netherlands as the expensive one. For a successful group in 2026 that is often the wrong way round.
Morocco’s rates, and the bracket that reverses the assumption
Article 19 of the Code Général des Impôts, in the 2026 edition published by the Direction Générale des Impôts, sets the standard rate of corporate income tax at twenty per cent. A rate of thirty five per cent applies to companies whose net profit is equal to or above one hundred million dirhams, and forty per cent applies to credit institutions and similar bodies, Bank Al Maghrib, the Caisse de dépôt et de gestion, and insurance and reinsurance undertakings. The transitional schedule in article 247 (XXXVII-A), which moved the old rates step by step towards these, reaches them for financial years opened from 1 January 2026.
The thirty five per cent bracket carries specific exclusions. Service companies with Casablanca Finance City status benefiting from the regime in article 6 are outside it, as are companies operating in the industrial acceleration zones, and companies incorporated from 1 January 2023, other than public establishments and enterprises and their subsidiaries, that commit under a convention signed with the State to invest at least one and a half billion dirhams over five years from its signature, provided the investment is in tangible fixed assets and those assets are retained for at least ten years from their acquisition.
There is also a stability condition working in the other direction. Where net profit falls below one hundred million dirhams, the twenty per cent rate applies only where the profit remains below that figure for three consecutive financial years. That rule is set aside where the profit reached the threshold because of the non current income referred to in article 9 (I-C-1°). Outside that case, a group whose Moroccan profit oscillates around the threshold does not oscillate between rates: it moves up in the year it crosses and comes back down only once profit has stayed below it for three consecutive financial years.
Set against that, Dutch corporate income tax under article 22 of the Wet op de vennootschapsbelasting 1969 is nineteen per cent on the first two hundred thousand euro of taxable profit and twenty five point eight per cent above it. A Moroccan manufacturer outside the excluded categories and earning above the threshold is taxed at thirty five per cent while its Dutch distributor is taxed at twenty five point eight. Shifting margin to Morocco because Morocco is cheaper is, at that scale, simply false.
The acceleration zones, and what the exemption buys
Article 6 of the Code provides that companies carrying on their activities in the industrial acceleration zones, governed by law 19-94, benefit from total exemption from corporate income tax for the first five consecutive financial years from the date they begin operating, subject to the exclusions listed in the same paragraph, which include construction and assembly sites, credit institutions and insurers. Article 6 of the finance law for 2020, reproduced in the official edition of the Code, replaces the expression export free zones with industrial acceleration zones throughout, so older material using the former name refers to the same zones, although the regime attached to them has since been amended, including by the finance law for 2023.
Two features of that exemption decide whether it is worth building a structure around. It runs from the start of operations, not from incorporation, and it is five years, after which the ordinary rates apply. And because zone companies are excluded from the thirty five per cent bracket, a profitable zone manufacturer continues at twenty per cent after the exemption ends rather than moving to thirty five.
That second point is the more valuable one and it is the one most often left out. The exemption is a five year benefit. The exclusion from the upper bracket carries no time limit in article 19, and for a group that expects to exceed one hundred million dirhams of Moroccan profit it is worth considerably more over time than the five years of nothing at the start.
Casablanca Finance City runs on a different clock
Under article 6 of the Code, service companies with Casablanca Finance City status, other than the credit institutions and insurance and reinsurance undertakings excluded by reference to the relevant decree law, benefit from total exemption from corporate income tax for five consecutive financial years from the first year in which the status is granted.
The Code then adds a sentence that changes the planning entirely. The exemption ceases to apply at the expiry of the first sixty months following the incorporation of the companies concerned.
Those two periods are measured from different events. The five years run from the grant of the status, the sixty month ceiling runs from incorporation, and whichever expires first ends the benefit. An existing company that obtains the status three years after it was formed does not obtain five years of exemption. It obtains two. Groups that incorporate first and apply later lose the months that have already run.
The functional analysis decides the split, and Morocco audits it
None of the rates matter until the margin has been allocated, and that allocation is a transfer pricing question with a Moroccan procedural edge.
Article 210 of the Code requires companies having direct or indirect dependency links with companies situated outside Morocco, with which they carry out transactions, to make available to the tax administration the documentation justifying their transfer pricing policy at the date the accounting audit begins. Article 214 (III-A) specifies that documentation as a master file and a local file, and requires it from companies whose declared turnover, or whose gross assets at the close of the year, are equal to or above fifty million dirhams. The obligation is set at the start of the audit, not during it. Where the documentation is not produced in whole or in part, the inspector invites the company, in the form provided by article 219, to produce what is missing within thirty days of receiving the request.
That timing changes what the documentation has to be. A file still being assembled when an inspector arrives already misses the date the Code sets, and the studies, comparables and functional analysis that support a margin have to exist as a standing document, updated, in a form that can be handed over on the first day.
The substantive question underneath is the ordinary one. If the Moroccan entity buys its own materials, owns the production assets, carries inventory and market risk and develops the product, it is a full manufacturer and it earns the residual profit. If it converts materials it does not own to a specification it did not set, it is a toll or contract manufacturer earning a routine return, and the residual belongs elsewhere. Groups frequently document the second and operate the first, and the mismatch is what an audit finds.
The Dutch distributor, and what it has to be
The same discipline applies at the other end. A distributor that takes title, holds stock, sets prices, carries credit and currency risk and builds the customer relationships earns a real margin and can defend it. A distributor that invoices customers on terms decided in Casablanca, holds no inventory and bears no risk is a limited risk entity, and a limited risk entity earning a full distribution margin is the mirror image of the same error.
This is where the choice of jurisdiction becomes secondary. The Dutch company is attractive for reasons that have nothing to do with rate arbitrage: the participation exemption in article 13 of the Wet op de vennootschapsbelasting 1969 from a holding of five per cent, subject to the further tests of that article, access to European market infrastructure, and a treaty network that supports sales into many jurisdictions from one place. Those advantages survive scrutiny. A margin allocated to a company that does not perform the corresponding functions does not.
In one mandate the entire European distribution margin sat in a company whose only employee was a director resident elsewhere. The commercial team, the pricing decisions and the customer contracts were all in the manufacturing country. The structure was not aggressive on paper. It simply described a company that did not exist in the way the file said it did.
Dividends home, and a treaty that adds less than expected
Moroccan withholding on dividends is set at ten per cent by article 19 (IV-B) of the Code, applied to the products of shares, corporate rights and assimilated income listed in article 13, but that rate is subject to the transitional schedule in article 247 (XXXVII-C): amounts distributed from 1 January 2026 bear eleven point two five per cent, and the ten per cent applies to amounts distributed from 1 January 2027. The ten per cent of the same article also applies to the gross products received by non resident individuals or companies listed in article 15, and twenty per cent applies to fixed income investment products and Sukuk certificates.
The convention between the Netherlands and Morocco was signed at Rabat on 12 August 1977 and entered into force on 10 June 1987. Its article on dividends limits source taxation to ten per cent of the gross amount where the recipient is a company whose capital is wholly or partly divided into shares and which directly owns at least twenty five per cent of the capital of the paying company, and twenty five per cent in all other cases, with the reduced rate available only where the relationship between the two companies was not created or maintained primarily to obtain it. Morocco has signed the Multilateral Instrument but, on the OECD list of signatories and parties as of 15 September 2026, has not deposited an instrument of ratification, so the Multilateral Instrument does not modify the 1977 text.
Read against the domestic rate, the treaty adds little on the way out of Morocco, and on the rates now legislated only for distributions made in 2026. Those bear eleven point two five per cent domestically, which the treaty caps at ten for a qualifying parent. From 2027 the domestic ten per cent equals the treaty rate for a qualifying parent and is well below the twenty five per cent cap otherwise.
What the treaty does supply is the other direction. Because a convention providing for dividends exists, a Moroccan parent can rely on article 4 of the Wet op de dividendbelasting 1965 to avoid the fifteen per cent Dutch withholding under article 5, provided it holds, at the time the dividend is made available, an interest that would qualify for the participation exemption or the participation credit if it were established in the Netherlands, it is the beneficial owner, and none of the exclusions in the third paragraph of article 4 applies, including the one for an interest held with the main purpose, or one of the main purposes, of avoiding tax that would otherwise be levied on another person, where there is an artificial arrangement. Morocco also allows a credit for foreign tax under article 19 bis of the Code where a convention applies, within the fraction of Moroccan tax attributable to the foreign income.
Getting the money out is a documentary exercise
The Office des Changes published a new General Instruction for Foreign Exchange Transactions with effect from 1 January 2026, which repeals the General Instruction of 2 January 2024. Foreign investments in Morocco financed in foreign currency in accordance with its article 173 benefit from a convertibility regime guaranteeing complete freedom to transfer, among other items, the income they produce and the proceeds of their sale or liquidation.
Income for this purpose includes dividends or profit shares distributed by companies incorporated under Moroccan law and profits realized by Moroccan branches of foreign companies. Banks are authorized to settle investment income to non resident foreign persons without limitation in amount or in time, whatever the method by which the investment was financed, and the settlement is made net of Moroccan taxes due.
Before executing the transfer of dividends the bank must obtain the balance sheet and profit and loss account for the year concerned, visaed by the tax administration including by electronic visa through the platform of the Direction Générale des Impôts, the minutes of the general meeting or the decision of the sole shareholder recording the distribution and its amount, and the list of foreign shareholders with their identity, nationality, address and holdings. For a non resident foreign parent the income transfer does not depend on how the investment was funded. The proceeds of a sale or liquidation are a different matter: the convertibility guarantee attaches to investments financed in foreign currency, and where the investment sold or liquidated is outside that regime the dirham proceeds, after the taxes due, are paid into a convertible term account or made available to a seller resident in Morocco, unless a foreign national sells to another foreign national or to a Moroccan resident abroad and the price is paid directly abroad. That exit follows funding evidence created when the investment was made.
That is the through line of the whole structure. The margin is where the functions are, the documentation has to exist before it is asked for, and the money leaves on the strength of records the bank can check, some of them created years earlier. None of those is a rate question, and all three are decided long before the first invoice.
This article is informational and does not constitute tax advice. Each engagement is subject to scope and applicable regulation.