Principal legislation

Identify the principal transfer pricing legislation.

Article 213(II) of the Moroccan General Tax Code (GTC) provides that where a company has ties of dependence with companies located in or outside Morocco, the profits indirectly transferred, either by way of increases or decreases in the purchase or sale prices or by any other means, shall be included in the corporate results.

To this end, profits indirectly transferred shall be determined by comparison with those of similar companies or by direct assessment on the basis of information available to the administration.

Article 214(III-A) compels the above-mentioned companies to provide to the tax administration, through electronic means, the transfer pricing documentation following the terms and conditions yet to be prescribed by regulation.

Article 214(III-B) provides that for operations fulfilled with companies located outside Morocco, the Moroccan Tax Administration (MTA) can request from the Moroccan entity a list of documents and information enabling it to assess whether prices of intragroup transactions have been set in compliance with the arm’s-length principle.

The administration’s request for that information shall be made in the forms mentioned in article 219 of the GTC. The taxpayer has a 30-day period following the date of reception of the aforementioned request to submit the information and documents requested to the administration.

If no answer is given during the aforementioned period of time or if the taxpayer fails to submit the requested elements, the dependency link between companies is presumed as existing and established, and the tax inspector has grounds to reassess the taxable basis of the Moroccan taxpayer.

Enforcement agency

Which central government agency has primary responsibility for enforcing the transfer pricing rules?

The Directorate General of Taxes of the Kingdom of Morocco is responsible for enforcing the transfer pricing rules when a tax audit occurs.

OECD guidelines

What is the role of the OECD Transfer Pricing Guidelines?

The MTA expressly refers to article 9 of the OECD convention model and its commentaries in its doctrine.

However, as long as Morocco is no more than a special observer on OECD bodies, the implementation of OECD Transfer Pricing Guidelines is not an absolute. In the event of a conflict the MTA will not consider itself bound by the stated position of OECD members.

Covered transactions

To what types of transactions do the transfer pricing rules apply?

Articles 213(II) and 214(III) of the GTC applies to all transactions (eg, sale and purchase of goods, provision of services, payment of royalties) carried out between related companies.

Arm’s-length principle

Do the relevant transfer pricing rules adhere to the arm’s-length principle?

The Moroccan GTC implicitly refers to the arm’s-length principle within article 213(II) of the GTC. It can therefore be concluded that the MTA adheres to this principle.

Base erosion and profit shifting

How has the OECD’s project on base erosion and profit shifting (BEPS) affected the applicable transfer pricing rules?

Morocco officially joined the Inclusive Framework on BEPS on 5 March 2019. However, its internal implementation is yet to come. Thus, to make a statement about its new position regarding profit shifting practices, Morocco has implemented the formal transfer pricing documentation requirement both upon request and during a tax audit. Although the content has yet to be determined by a government regulation (as explained by circular note No. 729 published on 25 January 2019), we expect it to be globally in accordance with the OECD Guidelines.

Pricing methods

Accepted methods

What transfer pricing methods are acceptable? What are the pros and cons of each method?

The MTA’s commentary remains relatively brief regarding the appropriate method for determining transfer prices between two companies in the same group. It does not go beyond stating the principle that the price should be at arm’s length.

In practice, one can observe that four of the five methods recommended by the OECD - comparable uncontrolled price (CUP), resale minus, cost-plus and transactional net margin method - are globally understood and accepted by the tax authorities.

The CUP method is quite indisputable when comparability has been made. It of course requires the highest level of similarity when assimilating volumes, products and services specificities, market circumstances and transaction details (Incoterms, date etc).

However, the Transactional Net Margin Method (TNMM) is as easy to use as it is to challenge. In other words, conceiving a benchmark (margin rates) is a readily achievable task, but it is quite easy for the MTA to challenge it.


Are cost-sharing arrangements permitted? Describe the acceptable cost-sharing pricing methods.

There is no prohibition on cost-sharing arrangements in Morocco. However, for tax purposes the deductibility of the charges will be subject to justification. Such an agreement may also lead to some issues from a regulatory point of view (eg, foreign exchange rules).

Best method

What are the rules for selecting a transfer pricing method?

There are no specific rules for selecting a transfer pricing method. However, the methods used by taxpayers are often related to the result of a functional analysis (eg, cost-plus for manufacturing entities or service providers).

The MTA tends to favour the CUP method as well as ratios analysis (close to the transactional net margin method) in case of a tax audit.

Taxpayer-initiated adjustments

Can a taxpayer make transfer pricing adjustments?

It is possible for a taxpayer to make transfer pricing adjustments after the books are closed, but before the tax return is filed.

Safe harbours

Are special ‘safe harbour’ methods available for certain types of related-party transactions? What are these methods and what types of transactions do they apply to?

There is no text similar to that of the European Union Joint Transfer Pricing Forum guidelines on low value adding services in Morocco. Thus, the taxpayer should be ready to defend and justify the compliance of all its intragroup transactions prices.

Disclosures and documentation


Does the tax authority require taxpayers to submit transfer pricing documentation? Regardless of whether transfer pricing documentation is required, does preparing documentation confer any other benefits?

As of 2020 and pursuant to article 214(IIIA) of the GTC, Moroccan companies engaged in intragroup transactions with associated companies located abroad are required to submit, electronically, documentation justifying their transfer pricing policy containing:

  • all the information pertaining to the related companies’ activities, their transfer pricing policy, their profit split and their activities on a global scale; and
  • the intragroup transaction-specific information that the verified company fulfils with the companies having the dependency links cited above.

Furthermore, regardless of that taxpayer’s compliance obligation, the tax authority may exercise its complementary request prerogative and compel the recipient to give information regarding:

  • the nature of the relations between the company taxable in Morocco and the company located outside Morocco;
  • the nature of services rendered or commercialised products;
  • the method used to determine the prices of the operations carried out by said companies and their justifying elements; and
  • the taxation system and taxation rates that the companies located outside of Morocco are subject to.

Preparing transfer pricing documentation in advance allows the taxpayer to work upstream on its transfer pricing policy and to show the MTA that transfer pricing is a well-known issue within the group.

Moreover, it allows the taxpayer to be relieved from the 30-day deadline, which is a short period in which to work if the documentation has not already been prepared. It also ensures that the MTA will not apply penalties and late payment interest.

The requirements of article 214(III) of the Moroccan GTC are quite similar to the requirements of a local file. Nevertheless - to date - they are not as precise as those described in Action 13 of the BEPS Project.

In practice, documents presented to the tax authority must be written in one of the two languages admitted by the kingdom: French or Classical Arabic. The majority of documents relating to Moroccan taxation are written in French.

Article 191 of the GTC provides that in the event of a breach of the provisions relating to the authority’s right to the documentation, a fine of 2,000 Moroccan dirhams is applicable, as well as a late payment penalty of 100 dirhams per day, up to a maximum of 1,000 dirhams.

Country-by-country reporting

Has the tax authority proposed or adopted country-by-country reporting? What are the differences between the local country-by-country reporting rules and the consensus framework of Chapter 5 of the OECD Transfer Pricing Guidelines?

There is no obligation to file country-by-country reporting in Morocco. However, Morocco became a Member of the Inclusive Framework on BEPS on 5 March 2019. As a consequence, Morocco will have to implement Guidelines from Action 13 (and therefore the country-by-country reporting obligation) shortly, since it corresponds to a minimum standard.

Timing of documentation

When must a taxpayer prepare and submit transfer pricing documentation?

Under article 214(III) of the Moroccan GTC and Circular Note No. 729, transfer pricing documentation must be transmitted automatically at the opening of a tax audit or within 30 days of receipt of a formal request from the MTA.

Failure to document

What are the consequences for failing to submit documentation?

The penalties for failing to submit documents at the tax administration request are indicated in answer 12.

Circular note No. 729, published on 25 January 2019, provides that where a taxpayer fails to submit transfer pricing documentation upon the administration’s initial request, the inspector in charge of the audit submits a formal notice after which the taxpayer is bound to comply within 30 days. Otherwise, the said note foresees a possible extension until the end of the general accounting audit.

For taxpayers who fail to submit the above-mentioned documentation there is no specific legal provision regarding its sanction other than the impossibility of the taxpayer submitting its transfer pricing documentation for the first time before the Local Tax Commission or the National Tax Appeals Board.

However, the substantial risk if a taxpayer fails to submit transfer pricing documentation is that the tax administration will use the provision of article 213(II) of the GTC to adjust the taxable basis on the basis of information available to the administration. Since there is no obligation for the tax administration to disclose its sources, such a failing may result in a huge and quite discretionary reassessment.

Adjustments and settlement

Limitation period for authority review

How long does the tax authority have to review an income tax return?

According to article 232(I) of the Moroccan GTC the statute of limitation is four years following the end of the financial year concerned.

However, in application of article 232(III) of the Moroccan GTC, whether the Moroccan entity has registered some loss carry-forward that has been deducted from a tax year subject to tax audit, the MTA can extend its tax audit to the last four closed years. This extension of the statutes of limitation could also be applied by the MTA in the event of value added tax (VAT) credit.

Rules and standards

What rules, standards or procedures govern the tax authorities’ review of companies’ compliance with transfer pricing rules? Does the tax authority or the taxpayer have the burden of proof?

According to article 220(I) of the GTC, the burden of proof lies with the tax authority. On this basis, the legislator compels the inspectors to motivate the adjustments made to the taxable base. This article is the essence of the adversarial principle in tax law.

Disputing adjustments

If the tax authority asserts a transfer pricing adjustment, what options does the taxpayer have to dispute the adjustment?

Following a tax audit, the MTA may send the taxpayer a ‘proposal of reassessment’. The taxpayer has 30 days to deny this proposal or to accept it.

If the taxpayer does not answer the proposal within the 30-day period, it can still formulate a claim within six months.

The tax administration has three months to take a position on the taxpayer’s claim and draft a second tax notification (taking into account all or part of the taxpayer’s comments)

After this period the taxpayer may be entitled to continue the procedure judicially before the Moroccan courts.

Relief from double taxation

Tax-treaty network

Does the country have a comprehensive income tax treaty network? Do these treaties have effective mutual agreement procedures?

On this point, we should note that Morocco has made its reservations known on the subject of introducing a mutual agreement procedure. Morocco has reserved the right not to include article 9 paragraph 2 of the OECD model tax convention in its convention.

Consequently, whether or not penalties for absent or insufficient documentation are imposed, it is unlikely that the Moroccan tax authority will adjust the reconstituted profit for the amount of transferred profit already taxed abroad.

Only a few of the existing double tax conventions expressly provide for this possibility. The conventions entered into with the following states are examples: Austria, Bulgaria, Denmark, the United Arab Emirates, Poland, Portugal, Romania and Senegal.

Requesting relief

How can a taxpayer request relief from double taxation under the mutual agreement procedure of a tax treaty? Are there published procedures?

There are no specific published procedures on relief from double taxation. Consequently, a general claim would have to be introduced before the central MTA located in Rabat, with minimal chance of success.

When relief is available

When may a taxpayer request assistance from the competent authority?

The taxpayer may request assistance from the competent authority once it has been established that double taxation has effectively occurred (ie, after the edition of the tax rolls).

Limits on relief

Are there limitations on the type of relief that the competent authority will seek, both generally and in specific cases?

This is not applicable in the case at hand.

Success rate

How effective is the competent authority in obtaining relief from double taxation?

There are no statistics available on this topic. However, from our experience, a well-documented claim (ie, proof of the tax paid abroad) usually leads to tax relief in Morocco, provided that there is a tax treaty between both countries.

Advance pricing agreements


Does the country have an advance pricing agreement (APA) programme? If so, is the programme widely used? Are unilateral, bilateral and multilateral APAs available?

Article 6 of Finance Act No. 100-14 for the budgetary year 2015 introduced two new articles (article 234-bis and 234-ter of the Moroccan GTC) providing the possibility of concluding an APA with the tax authorities for a period not exceeding four financial years.

Decree No. 2-16-571, issued on 3 July 2017, provides detailed rules for the implementation of the APA procedure. These regulations concern unilateral APAs. However, the conclusion of bilateral or multilateral APAs is possible, but requires existing double tax agreements with the jurisdictions of the related parties’ countries.


Describe the process for obtaining an APA, including a brief description of the submission requirements and any applicable user fees.

Before applying to an APA, the company may hold a preliminary meeting with the tax authorities to examine the conditions under which the agreement may be concluded, in particular the type and nature of the information necessary for analysis of the pricing policy and the schedule of meetings, as well as the questions regarding the arrangements for concluding the agreement.

The application must be submitted at least six months before the opening of the first financial year of the period relevant to the application.

If the tax authority fails to respond within a six-month period, but finally endorses the taxpayer’s request, the entry into force of the APA is deemed to be at the opening of the fiscal year for which it has been requested.

The company’s application should specify:

  • the listing of companies associated with the applicant company;
  • the operations subject to the agreement;
  • the period covered by the APA; and
  • the proposed transfer pricing methodology and its underlying assumptions.

The application must be accompanied by documents that will allow the tax authorities to examine the request, in particular:

  • the general framework of the associated companies’ activities, more precisely:
    • the organisational structure of all associated companies and their legal relationships, as well as the capital allocation of these companies;
    • the company’s business plan;
    • the financial and tax documents of the associated companies certified by the competent authorities, covering the last four financial years;
    • the accounting standards applied by the associated companies that have a direct impact on the proposed transfer pricing method; and
    • a description of the associated companies’ activities;
  • a general description of the functions performed, assets used and risks assumed by the associated companies;
  • a detailed description of the intangible assets held by the associated companies;
  • a description of the economic market, and the scope of the activity of the associated companies and of all controlled transactions;
  • contractual arrangements between the associated companies;
  • cost-sharing agreements between the associated companies;
  • APA entered into by the applicant with other foreign authorities and the tax consultations established by those foreign entities;
  • identification, analysis and selection of comparables and the justification of possible adjustments of the comparability; and
  • the proposed transfer pricing methods and their detailed hypotheses, as well as its adjustment conditions.

The company may support its request with any additional information or documents it considers relevant, and the tax authorities may also request that the applicant company provide additional information to enable it to analyse the case.

In the event of validation of the terms of the agreement by the parties concerned, the agreement must specify:

  • the period covered by the agreement and its date of entry into force;
  • the precise description of the operations covered by the agreement;
  • the description of the method used to determine the transfer price;
  • the arrangements for monitoring the agreement and the information to be provided in the follow-up report (see below);
  • the basic assumptions for the determination of the transfer price; and
  • the cases of revision and of cancellation of the agreement.

A follow-up report must be filed annually at the head office of the tax administration and must contain:

  • a detailed statement of the calculation of the transfer prices provided for in the agreement;
  • a summary statement of any changes made to the conditions of exercise relating to the transactions covered by the agreement;
  • a copy of the organisational structure of the associated companies and their legal relationships, as well as the capital allocation of such enterprises; and
  • a copy of the annual activity report of the associated companies.
Time frame

How long does it typically take to obtain a unilateral and a bilateral APA?

As the procedure for setting up a unilateral APA is relatively new, there is no available feedback at present. However, as the application must be submitted at least six months before the opening of the first financial year of the period relevant to the application, we expect a six-month term to obtain the tax authorities’ approval.


How many years can an APA cover prospectively? Are rollbacks available?

The APA provisions are applicable for four fiscal years from the date the APA has been applied. There are no rollbacks available.


What types of related-party transactions or issues can be covered by APAs?

APAs in Morocco may cover any related-party transactions.


Is the APA programme independent from the tax authority’s examination function? Is it independent from the competent authority staff that handle other double tax cases?

The APA request is examined by the MTA and there is no written provision guaranteeing that information delivered during the application period will not fall into the hands of the tax inspector’s teams. However, it should be pointed out that the APA programme is handled by the Tax Legislation Service, which does not have a tax examination function (in the tax reassessment sense) and strongly respects the confidentiality of information provided by the taxpayer.

Advantages and disadvantages

What are the key advantages and disadvantages to obtaining an APA with the tax authority?

The objective of the agreement, which is to enable a multinational company to ensure that the prices set in the framework of its intragroup transactions comply with the arm’s-length principle, perfectly matches the expectations of the companies that are calling for greater legal and tax security.

Drawbacks may occur in cases of failure of negotiations with the MTA (in the sense that the MTA owns sensitive information about the taxpayer) or if an economic change makes it difficult to respect the provisions of the agreement for the taxpayer.

Special topics


Is the tax authority generally required to respect the form of related-party transactions as actually structured? In what circumstances can the tax authority disregard or recharacterise related-party transactions?

Not relevant to the cases at hand.

Selecting comparables

What are some of the important factors that the tax authority takes into account in selecting and evaluating comparables? In particular, does the tax authority require the use of country-specific comparable companies, or are comparables from several jurisdictions acceptable?

From our experience, the MTA would be more inclined to accept a study based on a pan-African set of comparables. It must be noted that most of the time, when it comes to realising a pan-African study, the majority of the comparables available in databases come from Morocco.

Secret comparables

What is the tax authority’s position and practice with respect to secret comparables? If secret comparables are ever used, what procedures are in place to allow a taxpayer to defend its own transfer pricing position against the tax authority’s position based on secret comparables?

Article 213(II) of the Moroccan GTC provides that the administration may proceed by direct assessment on the basis of information at its disposal. Based on this provision the MTA may use its own set of comparables, but it is not under any obligation to share this information with a taxpayer.

From our experience, the taxpayer may easily challenge the use of secret comparables by using a transparent and well-documented study that is strong on the technical side.

Secondary adjustments

Are secondary transfer pricing adjustments required? What form do they take and what are their tax consequences? Are procedures available to obtain relief from the adverse tax consequences of certain secondary adjustments?

The MTA may use secondary transfer pricing adjustment by qualifying a primary adjustment as a deemed distributed income abroad. Consequently, the reassessment would include a withholding tax reassessment.

Also, if the transfer pricing adjustment has an impact on turnover, it will have implications for CIT and VAT.

In case of a tax audit, according to article 220 of the Moroccan GTC, the Moroccan entity must provide a written answer to the adjustments within 30 days of receiving the tax notice. Consequently, the entity could contest the tax adjustment by justifying its transfer pricing policy (for example by providing its transfer pricing documentation).

It may be possible to end this procedure by reaching a settlement with the MTA over the final amount of the reassessment. Such an agreement could avoid a lengthy period of tax litigation with an uncertain outcome. Indeed, making such an agreement with the MTA would end the tax litigation.

There is no article in the Moroccan GTC providing for such procedure. Therefore, a settlement could be reached with the MTA at any stage of the legal procedure.

In practice, the majority of tax audits are concluded with a settlement.

Non-deductible intercompany payments

Are any categories of intercompany payments non-deductible?

Thin capitalisation rules apply on interest payments between two companies in the same group.

The tax deductibility of interest paid by the company should be granted within the following limits:

  • the amount of the shareholder loan does not exceed the amount of share equity capital (ratio 1:1); and
  • the interest rate does not exceed the rate annually fixed by the Ministry of Finance during a tax year (2.19 per cent for 2019).

What legislative and regulatory initiatives (besides transfer pricing rules) has the government taken to combat tax avoidance with respect to related-party transactions? What are the penalties or other consequences for non-compliance with these anti-avoidance provisions?

The 2017 Finance Act implemented the concept of ‘abuse of right’ in Moroccan tax law, notably in order to grant the MTA the power to challenge schemes set up by related parties in order to avoid payment of Moroccan tax.

In case of tax reassessment related to such tax avoidance the penalties applicable are:

  • 100 per cent of the amount of tax avoided;
  • 20 per cent of the tax due; and
  • interest on late payment of 0.5 per cent per month.

In the event of tax audit, in practice we have noted that the MTA focuses on related-party transactions, in particular to combat tax avoidance.

Location savings

How are location savings and other location-specific attributes treated under the applicable transfer pricing rules? How are they treated by the tax authority in practice?

Not applicable to the cases at hand.

Branches and permanent establishments

How are profits attributed to a branch or permanent establishment (PE)? Does the tax authority treat the branch or PE as a functionally separate enterprise and apply arm’s-length principles? If not, what other approach is applied?

Transactions carried out between a company and its PE in Morocco are treated as an intragroup transaction between two independent companies.

Exit charges

Are any exit charges imposed on restructurings? How are they determined?

Not applicable to the cases at hand.

Temporary exemptions and reductions

Are temporary special tax exemptions or rate reductions provided through government bodies such as local industrial development boards?

Moroccan companies operating with export free zone (EFZ) status gain the following benefits on their export turnover.

Special tax regime applicable to export activity

A Moroccan entity performing export activity (exportation of good and services) benefits from the following tax advantages:

  • Regarding CIT:
    • total exemption during the five first successive tax years, from the date corresponding to the beginning of their activity; and
    • reduced CIT rate from 17.5 per cent beyond this period;
  • Regarding VAT:
    • total exemption (without limitation).
Export free zone

Moroccan companies operating with export EFZ status gain the following benefits on their export turnover:

  • regarding CIT:
    • a total exemption during the five first successive tax years, from the date corresponding to the beginning of their activity;
    • its CIT rate is reduced to 8.75 per cent during the following 20 tax years; and
    • its CIT rate is reduced to 17.5 per cent beyond this period;
  • regarding VAT:
    • total exemption;
  • withholding tax:
    • exemption for the dividend paid to a foreign entity; and
  • business licence tax (local tax):
    • exemption for the first 15 years.
Casablanca finance city status (CFC)

Installation in an EFZ is not automatic and requires authorisation from the authorities in charge of the said area.

Note also that services companies (financial institutions and professional service providers) and holding companies with CFC status benefit, in respect of their export revenues and net capital gains, from the sale of foreign securities for the financial period, from:

  • a total exemption from corporate tax for a period of five consecutive years, starting from the first year they have been granted CFC status; and
  • a reduced CIT rate of 8.75 per cent beyond this period.

Entitlement to advantages granted to services companies with CFC status takes effect from the financial period in which the CFC status is granted.

Export revenues eligible for exemption are those related to the last service rendered on Moroccan territory for the direct and immediate purpose of exporting. Moreover, ‘service exports’ means operations used or consumed overseas for which revenues are generated in foreign currencies.

Regarding VAT, the export turnover of CFC entities benefits from total exemption.

In terms of personal income tax, CFC entities’ employees can benefit from a special regime: application of a 20 per cent flat tax rate for a period of five years from the beginning of their activity and their employer obtaining CFC status.

However, in case of application of this special tax regime, the taxable basis ofr personal income tax will be the gross amount of the wage (including the employee’s part of social contribution), without any deduction.

Update and trends

Tax authority focus and BEPS

What are the current issues of note and trends relating to transfer pricing in your country? Are there particular areas on which the taxing authority is focused? Have there been any notable legislative, administrative, enforcement or judicial developments? In particular, how is the OECD’s project on base erosion and profit shifting affecting both policymakers and tax administrators?

Tax authority focus and BEPS41 What are the current issues of note and trends relating to transfer pricing in your country? How is the OECD’s project on base erosion and profit shifting affecting both policymakers and tax administrators?

As part of the implantation of the OECD BEPS project and to get in line with international standards regarding transfer pricing practices, Morocco has introduced a mandatory transfer pricing documentation provision for companies having direct or indirect dependency ties with companies located outside Morocco with which they conduct transactions. This documentation is appended to the OECD’s local file and we expect the legislator to transpose other obligations related to Action 13 of the BEPS project.