Setting up a branch of a foreign company in Morocco is governed by Article 37 of the Moroccan Commercial Code. Indeed, this code requires that any branch of a foreign company in Morocco must be registered in the trade register. This legal structure represents a strategic option for international businesses looking to establish a presence in Morocco without creating a separate legal entity.
Foreign companies wishing to operate in Morocco therefore have two options:
- Establish a subsidiary under Moroccan law (as an LLC, for example);
- Set up a branch of a foreign company in Morocco.
It should be noted that in both cases, the representative entities in Morocco are classified as permanent establishments. The choice between these two options depends on the parent company’s strategy, the expected duration of operations in Morocco, and the tax considerations specific to each situation.
Upsilon Consulting can handle all the formalities involved in setting up your branch in Morocco. Contact us.
Definition and Purpose of a Branch of a Foreign Company
A branch of a foreign company is an establishment that forms an integral part of a group while enjoying a degree of management autonomy. In other words, a branch is a secondary presence, generally in a different geographic area (usually in another country). Unlike a subsidiary, a branch is not a new company: it is an extension of the parent company on Moroccan territory.
The purpose of setting up a branch is to develop business activity. A branch abroad makes it possible to:
- Improve relationships with local clients;
- Carry out specific contracts over a short period;
- Manage assets held by the company in the country in question;
- Test a new market before committing to a larger investment through a subsidiary.
No Separate Legal Personality
However, a branch does not have a separate legal personality. Its legal identity is a direct extension of its parent company. Legally, it is the same entity. This means the parent company is directly liable for all debts and commitments incurred by the branch in Morocco.
This absence of a separate legal personality offers certain advantages. Indeed, the branch of a foreign company can act on behalf of its parent company in certain situations, including:
- First, fulfilling contractual obligations (for example, under a public or private contract);
- Second, making and receiving payments on behalf of its parent company;
- Additionally, benefiting from the client references and market track record of its parent company, which is particularly useful when responding to tenders in Morocco.
Difference Between a Branch and a Subsidiary
A subsidiary is generally preferred for long-term operations. Below is a comparison of the key differences between a subsidiary and a branch of a foreign company:
| **Comparison point** | **Branch** | **Subsidiary** |
| Separate legal personality | No, the branch enters into contracts and acts in the name and on behalf of its parent company, with no distinction between their legal identities. | Yes, it is a legally separate entity. |
| Autonomy and management | The branch is financially dependent on its parent company. Their funds are fully merged.
However, it must have a manager. | The subsidiary is autonomous in terms of both management and finances. |
| Liability | The parent company is liable for all debts of the branch. | Liability is limited to the shareholders' contributions. |
| Taxation in Morocco | Subject to Corporate Tax (on the share of profits earned in Morocco). Withholding tax on profit remittances. | Subject to Corporate Tax. Withholding tax on distributed dividends. |
| Accounting obligations | Tax obligations only (must prepare a tax balance sheet and file tax returns) | Tax obligations
Publication of accounts and general meetings |
| Share capital | No separate share capital required. | Minimum share capital required depending on legal form. |
In summary, a branch of a foreign company in Morocco is better suited for one-off or short-term projects, while a subsidiary is more appropriate for long-term operations with a desire for autonomy. For a full overview of the incorporation process, see our guide on creating a company in Morocco.
Tax Obligations of a Branch in Morocco
A branch of a foreign company in Morocco is subject to several tax obligations that should be well understood before setting up operations.
Corporate Tax (IS)
The branch is subject to corporate tax on Moroccan-source income only. The corporate tax rate varies according to the amount of net taxable profit. The branch must file its tax return within three months of the end of each fiscal year.
It is important to note that the branch must maintain separate accounting records for its operations in Morocco, even though it does not have a separate legal personality. These records will serve as the basis for calculating corporate tax.
Value Added Tax (TVA)
A branch of a foreign company is subject to VAT under the same conditions as any business operating in Morocco. It must charge VAT on its services and sales of goods carried out in Morocco and file monthly or quarterly returns depending on its turnover.
Withholding Tax on Profit Remittances
When the branch transfers its profits to the parent company abroad, these transfers are subject to a withholding tax. This withholding tax constitutes a final, non-recoverable tax. The applicable rate may be reduced under the double taxation treaties signed by Morocco with numerous countries.
Other Tax Obligations
The branch is also required to:
- Pay the professional tax (formerly known as “patente”);
- Pay the communal services tax;
- File declarations relating to salaries paid to staff employed in Morocco.
How to Set Up a Branch of a Foreign Company in Morocco?
The steps for setting up a branch of a foreign company in Morocco are as follows:
- Apply for a negative certificate: request a negative certificate from OMPIC with the desired name for the branch in Morocco.
- Prepare the minutes: draft minutes from the management bodies of the parent company authorizing the creation of the branch. These minutes must state the name of the branch, its registered office, and its legal representative in Morocco.
- Tax domiciliation: provide a tax domiciliation address in Morocco (this can be done through a domiciliation service).
- Tax registration: register the minutes of the branch’s creation with the tax authorities.
- Court filing: file with the clerk’s office of the competent commercial court.
- Legal publication: complete the legal publication formalities in a legal announcements journal and the official gazette.
- Obtain a tax identification number: once registered, the branch obtains its tax identification number (IF) and its ICE number.
Required Documents
The documents required to set up a branch of a foreign company in Morocco are:
- Certified copies of the parent company’s articles of association in French (or translated into French by a sworn translator);
- An extract from the parent company’s trade register, stamped and signed by the issuing authority;
- Copy of the passport(s) of the parent company’s legal representative(s);
- Copy of the passport(s) of the branch manager(s) in Morocco;
- A copy of the power of attorney for the person handling the formalities;
- Domiciliation certificate or lease agreement for the branch’s registered office.
All documents originating from abroad must be legalized and apostilled in accordance with the Hague Convention, then translated into French by a sworn translator.
Advantages and Disadvantages of a Branch
Advantages
A branch of a foreign company in Morocco offers several notable advantages:
- Simplicity of creation: the formalities are less burdensome than creating a subsidiary, as there is no share capital to establish or articles of association to draft;
- Flexibility: a branch can be closed more easily than a subsidiary when a project ends;
- Parent company references: the branch directly benefits from the reputation and references of the parent company when bidding on tenders;
- Reduced accounting obligations: no requirement to hold general meetings or publish annual accounts.
Disadvantages
On the other hand, a branch of a foreign company has certain disadvantages:
- Unlimited liability: the parent company is liable for all debts incurred by the branch;
- Local perception: the branch may be perceived as less committed to the Moroccan market than a locally incorporated subsidiary;
- Withholding tax: profit remittances to the parent company are subject to withholding tax, which may represent an additional tax cost;
- Activity limitation: the branch can only carry out activities covered by the parent company’s corporate purpose.
Why Choose Upsilon Consulting?
Upsilon Consulting is a chartered accounting firm based in Casablanca, specializing in supporting foreign companies in Morocco. We handle all formalities involved in setting up your branch, from the negative certificate application through to obtaining your tax identification number.
Once the branch is established, our firm can also take care of your bookkeeping, tax and social security filings, and overall compliance with applicable laws. Contact us for personalized support.
Frequently Asked Questions
What is the difference between a branch and a subsidiary in Morocco?
A branch is not a separate legal entity; it is an extension of the parent company and operates under its name and liability. A subsidiary is an independent Moroccan company with its own legal personality, share capital, and limited liability. The choice depends on the level of commitment and risk the foreign company is willing to accept.
What are the tax obligations of a branch of a foreign company in Morocco?
A branch is subject to corporate income tax (IS) on profits generated in Morocco, VAT on taxable transactions, professional tax, and employer payroll taxes. Additionally, profit remittances to the parent company are subject to a withholding tax, unless reduced by an applicable double taxation treaty.
How long does it take to set up a branch of a foreign company in Morocco?
The process of setting up a branch of a foreign company in Morocco typically takes between 2 to 4 weeks, depending on the completeness of the documentation and the responsiveness of the relevant authorities. Key steps include obtaining a negative certificate, registering with the trade register, and securing a tax identification number. Engaging a specialized firm such as Upsilon Consulting can help streamline the process and ensure all legal and administrative formalities are handled efficiently.
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