Moving to Morocco for work raises several important tax questions. Where will your salary be taxed? When do you become a Moroccan tax resident? Is a salary paid outside Morocco taxable in Morocco? How can double taxation be avoided?
The answers depend on the employee’s personal circumstances, the duration of their presence in Morocco, the structure of their employment and, where applicable, the tax treaty between Morocco and their home country.
For international companies assigning or employing staff in Morocco, these issues should ideally be reviewed before the assignment begins.
Tax residence does not depend on the employee’s nationality. A foreign national may therefore become a Moroccan tax resident while retaining their foreign nationality.
Moroccan tax rules consider several factors when determining tax residence, including the availability of a permanent home in Morocco, the location of the individual’s centre of economic interests and the duration of their presence in Morocco.
The 183-day rule is therefore important, but it should not be treated as the only criterion for determining Moroccan tax residence.
Where an individual may be regarded as resident in both countries under their domestic laws, the applicable double tax treaty should also be reviewed to determine treaty residence.
Determining tax residence is important because it affects the scope of income that may be subject to Moroccan taxation.
For an expatriate employee, the analysis should cover not only the salary paid in Morocco but also any remuneration maintained abroad, bonuses, allowances, benefits in kind and other components of the employee’s compensation package.
The fact that part of an employee’s salary is paid into a foreign bank account does not necessarily mean that it falls outside the scope of Moroccan taxation.
It can be.Where an employee performs their duties in Morocco while part of their remuneration continues to be paid by a foreign employer, the overall arrangement must be reviewed.
The country in which the salary is paid is not, by itself, sufficient to determine where the income is taxable.
Factors such as the actual place of employment, the employee’s tax residence, the economic employer, the duration of the assignment, any recharge of the employee’s costs and the applicable tax treaty should also be considered.
Moroccan foreign exchange regulations also address expatriation and secondment arrangements under which remuneration may be paid both in Morocco and abroad. These arrangements should therefore be considered from both a tax and foreign exchange perspective.
Taxable employment income is subject to Morocco’s progressive personal income tax scale after applying the relevant rules for determining net taxable income.
The current annual tax brackets are:
The marginal tax rate should not be confused with the employee’s effective tax rate. Each portion of income is taxed according to the corresponding bracket.
For expatriate employees, the overall tax calculation may also depend on the structure of the compensation package and any taxable benefits in kind.
No.Double tax treaties frequently contain provisions dealing with short-term employment assignments, often involving a 183-day threshold.
However, the employee’s physical presence is generally only one of the conditions that must be considered.
Depending on the applicable treaty, it may also be necessary to determine who economically bears the employee’s remuneration and whether the remuneration is borne by a permanent establishment or entity in Morocco.
An employee should therefore not assume that spending fewer than 183 days in Morocco automatically eliminates Moroccan income tax.
The specific provisions of the relevant tax treaty should always be reviewed.
In some situations, the same remuneration may potentially be taxable in Morocco and another country.
Morocco’s double tax treaties are designed, among other purposes, to allocate taxing rights between countries and provide mechanisms to eliminate or reduce double taxation.
Depending on the applicable treaty, relief may take the form of an exemption or a foreign tax credit.
The relevant treaty should therefore be identified before the expatriation begins, with particular attention paid to the provisions governing employment income.
An expatriate compensation package often includes much more than basic salary.
It may include accommodation, a company car, insurance, school fees, flights, expatriation allowances, bonuses and other benefits.
Each component should be reviewed to determine whether it constitutes a taxable benefit, a reimbursement of business expenses or an item subject to specific tax treatment.
This analysis is important both for payroll compliance and for determining the total cost of the expatriate assignment for the employer.
A foreign employee may be hired directly in Morocco or remain employed by a foreign company under a secondment or personnel assignment arrangement.
These situations may have different tax, social security, employment and foreign exchange consequences.
For seconded employees, the analysis should cover the original employment agreement, the documentation governing the Moroccan assignment, the allocation of remuneration between Morocco and abroad, any intercompany recharge and the applicable social security arrangements.
Work and residence authorisation requirements for foreign employees should also be considered separately from the tax analysis.
Moroccan foreign exchange regulations contain provisions allowing eligible individuals to transfer certain employment income abroad.
For qualifying employment income, the transferable amount is determined taking into account the applicable tax and social security deductions.
Employees should therefore retain the supporting documentation required by their bank to establish the nature of the income and compliance with the applicable tax and social security obligations.
Foreign exchange considerations should ideally be addressed when structuring the expatriation package rather than only after salaries have been paid.
An expatriate assignment should ideally be reviewed before the employee begins working in Morocco.
The company should determine the employee’s likely tax residence, review the applicable tax treaty, define the compensation structure and identify which elements will be paid in Morocco and which will continue to be paid abroad.
The tax treatment of benefits in kind, Moroccan payroll and income tax obligations, social security position, work and residence authorisations and foreign exchange requirements should also be considered.
Where the employee’s costs are recharged by a foreign company to the Moroccan entity, the contractual and tax documentation supporting the recharge should also be reviewed.
Planning these matters in advance can reduce the risk of tax, payroll, social security or foreign exchange adjustments after the assignment has begun.
INDICAC Audit & Conseil supports Moroccan businesses and international groups with the tax, accounting and payroll aspects of expatriate employees working in Morocco.
Our assistance may include tax residence analysis, compensation package reviews, gross-to-net and employer cost simulations, Moroccan payroll, analysis of remuneration paid abroad, tax and social security compliance and foreign exchange considerations.
We can also coordinate with the group’s finance, HR and professional advisers abroad to ensure that the Moroccan aspects of the expatriate arrangement are properly managed.
Are you employing, seconding or planning to hire a foreign employee in Morocco?
Contact INDICAC Audit & Conseil to discuss the tax, payroll and regulatory implications of the assignment.
