“That’s not the way business taxes work,” explained my accountants. “What?!” I exclaimed internally, as everything I thought I knew about Moroccan taxes came crashing down. “That’s good to know,” I expressed verbally, thanking them for the clarification.
Humility and a learning spirit are two critical elements to operating a company as a foreigner in Morocco. The learning process for anything can be hard, and learning to operate a business is no exception. Operating a business will vary from city to city, with rules and regulations required in one city but not in another. Below are some ideas to make your business experience a little easier.
*Disclaimer: This information is based on personal experience and may not reflect the experience of every foreigner.
Can a foreigner start a business in Morocco?
Yes, and if you are planning to stay in Morocco for an extended period of time, then you will most likely be required to start one. Foreigners desiring to stay in Morocco for longer than a year or two have a few visa options. One is to work as a contracted worker with an established business - oftentimes these are teachers working at schools, but other options exist. Another visa option is to work remotely for a foreign company. Yet another option is to start a for-profit business. Multiple business types exist with varying levels of liability. The type of business affects the tax burden as well as the ability to hire employees.
How much does it cost to set up a company in Morocco?
The cost to set up a company involves registration fees and initial capital. Registering the business on your own is the cheapest. However, the most efficient is to hire an accountant to register the business for you. The accountant fee can vary anywhere from 5,000 to 15,000 MAD. As part of the registration process, you will need to deposit capital funds into your business bank account - approximately 50,000 to 100,000 MAD, or more depending on the type of business. Once your company is officially registered, you will need funds to operate your business. Your capital funds can be used for these operating expenses, or you may find that you have to use some personal funds to help the company at the beginning.
Is it easy to do business in Morocco?
The requirements to operate a company as a foreigner often differ from the requirements for Moroccans. This usually involves certain business documents and rules that are not required for locals. One of the major differences is related to accounting. Morocco is primarily a cash-based country, and cash does not have a paper trail. However, as a foreigner, you be required to track cash expenses. There are justified and non-justified expenses related to doing business, and these expenses affect the company’s tax burden. If you spend business money and do not receive an official receipt (a non-justified expense), then you will pay higher (double) taxes. It is not always possible to receive official receipts, as not all local businesses are able or willing to issue them. Another factor to consider is spoken language; understanding either Moroccan Arabic or French are necessary if you are planning to operate a business in the country. Finally, there are rules and regulations for each sector of business. Tourism is popular in Morocco and is heavily regulated such that not just anyone can open a tourism agency. Schools fall under the Ministry of Education, so there are certain requirements for the type of space that can be used.
How much does it cost to operate a business in Morocco?
Two major factors to consider are monthly expenses and taxes. Once your business is registered, you will need to hire an accountant to help you file taxes and other paperwork. The monthly accounting fee can vary from 500 to 1000 MAD per month (plus VAT), then 700 to 2000 MAD (plus VAT) for end-of-year processes. Accountants in Morocco end up doing a lot more legal work, so aside from any employees you hire, your accountant may be the person(s) with whom you interact most frequently. Other monthly expenses include rent and utilities. When you first start your business, you may be given a period of 6 to 24 months where you do not have to rent an office space; however, after that, you will need to rent space. Value added tax (VAT), is the amount of business income tax your business owes, and depends on the sector;
Services - 20%
Transportation - 14%
Hospitality (Hotel or Riad) - 10%
Artisanal - 0%
As a business owner, you are able to recover tax for expenses directly related to your company; utilities are the most common tax recovery. However, this is an area where I was greatly surprised to learn that I did not recover tax on all expenses related to the business; tax spent on clients is not recoverable. Small businesses pay VAT every quarter, but large businesses pay every month.
In many places, VAT is already included in the price (hotels, for example). However, it is always a good idea to ask a vendor if tax is or is not included in the price. In one of the early days of doing business, we were given a price, and then after a significant amount of work was done we were told that tax had not been included in that price.
Is Morocco a good place to do business?
Morocco tries to be a favorable place to do business. Most, if not all businesses, are given a grace period before they are required to make a profit. There are also some business-related taxes that do not come into effect for a number of years; one tax kicks in after five years - a 20% yearly tax on the rental space. Rules and regulations for businesses depend on the city, and you may find that some cities are easier to operate a business than others (Casablanca seems to have more lenient regulations). Business operating expenses will likely be lower than in your home country, as labor costs are cheap, and the cost of living (depending on the city) is low. As a result, there are fewer financial risks and burdens in comparison to doing business in other countries.
What cultural differences exist in doing business?
This depends on your passport country, but for me personally, there are a few main differences. For one, when I send emails to Moroccans, I never receive a confirmation from them that the email has been received. Second, it is not uncommon for prices and charges to be revealed after work has been done, rather than mentioned before work is commenced. Finally, this is more of a personal difference, but no one has been here to hold my hand as I navigated through doing business. Rather, I have had to bear the burden of asking questions, and humble myself when my errors are corrected.
What other questions do you have about opening and operating a business in Morocco? We would be happy to cover these in a future article.
