Moroccan foreign investment legislation

1. All-sector limitations on the entry of FDI including screening and prior approval procedures

General

The 1995 Investment Charter outlines a highly liberalised environment for foreign investors. In most sectors foreign investment is permitted. As of September 1, 2004, funds held by non-resident foreign individuals in term convertible dirham accounts were allowed to be transferred without restriction no later than March 31, 2005. Morocco has accepted its status under IMF Article VIII on January 21, 1993. Following Morocco?s application to adhere the OECD Declaration on International Investment and Multinationals Enterprises, a negative investment list has been submitted to the OECD in 2007.

Approval and Screening Requirements

There is no horizontal requirement for prior approval in the Investment Charter.

2. Limitations on foreign purchase of domestic shares (portfolio investment)

In Morocco, the issuing of capital market securities by non-residents is subject to authorisation. There are no controls on the sale of Moroccan securities by non-residents. Proceeds from such sales may be transferred freely, provided that the relevant purchases are financed by foreign exchange inflows or other comparable means. In other cases, the proceeds must be deposited in a convertible dirham account and may be transferred abroad over a five-year period. The issue of bonds or other debt securities by non-residents in Morocco is prohibited.

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3. Restrictions on transfers abroad of the proceeds of the liquidation of a foreign direct investment

In Morocco, there are no controls on transfers made directly through the banking system of the proceeds of the liquidation or sale of foreign investment, including capital gains, when such investment is governed by the convertibility arrangement (financing by sale of foreign exchange or other comparable methods). For the liquidation of any investment not falling under this category, the relevant proceeds must be deposited in a convertible time deposit account denominated in dirhams.109 The holders of this account can sell them to foreign resident or non-resident nationals. Profits and investment incomes can be transferred regardless of the means of financing. The original holders of the term convertible accounts as well as new purchasers including Moroccans residing abroad can use these accounts for any expenditure in dirhams in Morocco without limitation.

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4. Sectoral limitations to establishment of FDI, including reciprocity

Morocco reserves the right under GATS to limit foreign participation in the capital of large banking institutions in cases where the holding could lead to taking over control. Approval to perform as an insurance intermediary is only given, subject to an opinion by the Advisory Committee on Insurance, to natural persons of Moroccan nationality and to legal persons governed by Moroccan law with their headquarters in Morocco and with at least 50 per cent of the capital held by natural persons of Moroccan nationality or legal persons under Moroccan law; the person in charge must be a Moroccan national.111 Limitations in the service sector often relate to the terms and conditions on market access and in particular:

· commercial presence and starting a business under Moroccan laws (sectors of maritime fisheries, telecommunications, cinematographic or entertainment production, etc); 
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• physical presence (the board of directors in the audiovisual sector must include at least a certain number of Moroccan nationals);

• managers and board of directors must hold the Moroccan nationality (the Pedagogic Administration for Private Higher Education);

• limiting foreign capital participation in certain categories of activity (cinematographic or entertainment production) acquisition of a vessel flying the Moroccan flag and a fishing license for this vessel, insurance companies) etc;

• the service sector is also characterised by the obligation to acquire an operating license, an authorisation to practice, an approval, an obligation to achieve a result, etc.

Provision of professional services (ex: lawyers, doctors, engineers, geometricians, topographers, architects, etc.): these are regulated services whose priority is granted to locals. Market access for foreigners is conditioned by the obligation of residence, qualifications, election of residence near the national professionals and/or the existence of a bilateral agreement authorising nationals from each of the two States to perform their profession within the territory of the other State. Financial Sector: Morocco reserves the right not to authorize a takeover by a foreign capital of a large Moroccan bank.

• Impossibility for undertakings for collective investment in transferable securities (UCITS) of holding foreign securities in their portfolio.

• Impossibility for Morocco-based branches of foreign banks to operate on the basis of the capital of the parent company.

• To have head office in Morocco in order to perform a commercial presence

natural persons: to hold the Moroccan nationality moral persons (insurance agents or broking companies) must be established in Morocco At least 49% of moral persons must be held by natural persons of Moroccan nationality or moral persons established according to the Moroccan law with their representatives of Moroccan nationality.

Telecommunication Sector: An installation and operation license for public telecommunication networks hiring the public domain or using a radio-electric frequency spectrum is required commercial presence is required for mobile telephone services and radio-paging.

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5. Acquisition of real estate for FDI purposes by foreign investors

In Morocco, foreign nationals may purchase real estate, except farmland, with funds from foreign exchange accounts.114 This acquisitioned should be financed by the sale of foreign exchange on the exchange market or comparable methods with funds from foreign exchange or a convertible dirhams account. Farmland may be leased for a period up to 99 years and permission can also be given for foreigners to buy farmland in order to use it for purposes (e.g. tourism) other than agriculture.

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6. Exception to national treatment of foreign-controlled enterprises

Exporting companies are fully exempt from corporate income tax for 5 years and then have a 50 per cent tax reduction on profits from exporting.116 Enterprises located in the Tangier Free Trade Zone in Morocco are eligible for exemption from all registration taxes and stamp duty for constitution or augmentation of capital and for land acquisition, are exempt from licence tax for 15 years, are exempt from profits tax for the first 5 years and a reduced tax rate of 8.75 per cent thereafter, and are exempt from VAT on imported goods.117 It is not clear whether these incentives are available on equal terms to domestic and foreign investors.

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7. Performance requirements on foreign direct investors

In Morocco, exporting companies are fully exempt from corporate income tax for 5 years and then have a 50 per cent tax reduction on profits from exporting.