OPCI, CFC, Transfer pricing … What the tax measures of the...

Between extension of the tax framework for OPCIs and modification of the CFC regime, the measures of the 2021 PLF go in the direction of supporting investment and tax harmonization.

The PLF documents have not yet been posted on the websites of the Ministry of Finance and Parliament. However, the measures concerning OPCIs, the CFC tax regime and transfer prices in this bill were communicated to the Fellow by a reliable source and confirmed by a high level source at the level of the Administration. Here’s what they cover:

Casablanca Finance City (CFC) tax regime changes

In order to comply with international tax standards, the draft finance law provides for a measure to exclude certain financial companies from the CFC tax regime. Two categories of companies are concerned:

1– credit institutions

2 – insurance and reinsurance companies and insurance and reinsurance brokerage companies

It is also proposed to limit the duration of the old CFC tax regime until December 31, 2022. The 2020 finance law provided that the old CFC tax regime in force remains applicable to companies having obtained the CFC status before January 1, 2020, without time limit. This measure was deemed non-compliant with the international standards that Morocco has undertaken to implement.

Greater transparency towards international bodies

By virtue of the agreements concluded with the partner countries, the Moroccan tax administration has the right to information for tax purposes from foreign administrations. The response time meeting the international standard is 90 days. The finance bill provides for the suspension of the verification period in the event of the sending of requests for tax information to a foreign tax administration having an agreement or a convention with Morocco, within the limit of 180 days. It is also planned to interrupt the limitation period in the event of the aforementioned requests for information being sent. The objective is to improve the action of the administration for the implementation of tax information sharing with the administrations of partner countries.

The 2018 finance law made it possible for taxpayers to request prior tax consultations to rule on the regime applicable to their situation. Requests are limited to the following:

1-legal and financial arrangements relating to the investment projects to be carried out

2-restructuring operations of companies and groups of companies located in Morocco

3-transactions to be carried out between companies located in Morocco and having direct or indirect dependency links

4-transactions likely to constitute an abuse of rights

On these points, one of the measures of the 2021 PLF proposes to specify that these requests can only target transactions carried out in Morocco.

Documentation on transfer pricing only for large companies

Morocco also aims to improve the transfer pricing system in accordance with the recommendations of the OECD. Currently, any company, regardless of its size, has the obligation to make documentation on its transfer pricing policy available to the tax authorities. This concerns all companies having direct or indirect dependency links with companies outside Morocco.

Given the heavy cost that this compliance can have on small and intermediary companies, one of the measures of the finance bill aims to limit this obligation to companies with a declared turnover, or an amount of gross assets appearing in balance sheet at 50 million dirhams. A sanction is also proposed in the event of failure to produce documentation relating to transfer pricing. It is announced at 0.5% of the amount of the transactions, with a minimum amount of 200,000 dirhams per fiscal year concerned.

OPCI: the regime extended by two years

Launched in the 2017 finance law, the transitional tax regime was put in place between January 1, 2018 and December 31, 2020 to encourage the contribution of buildings to OPCIs carried out. But with the delay in the publication of the texts and application circulars governing OPCIs, the tax system will be extended by two more years to encourage their establishment and development.