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Morocco, one of America’s oldest allies, is a highly attractive place for foreign investment. Its excellent location and trade agreements with the EU and countries in Africa and the Middle East, as well as its geostrategic location for easy access and communications, make it a preferred regional business center. In addition, the country’s social and political stability, skilled labor pool, and soaring gross domestic product are assets that any serious investor or business will find very competitive. Morocco has implemented the following laws and incentives for businesses:
Regional Investment Centers:
Morocco’s proactive business climate is energized by its 16 Regional Investment Centers (RICs), which serve as “one-stop shopping centers” for foreign businesses wanting to enter the Moroccan market.
RICs are located in major cities throughout the country and are linked by an electronic commerce system -- called the “E-Government Cyber Network” -- to key government ministries. Trained staff at each RIC assists new businesses in the preparation of license applications and other documents. With the support of a RIC, a start-up business can be fully licensed and up and running within two days.
Morocco - U.S. Free Trade Agreement:
Of course, the biggest incentive for businesses hoping to invest in Morocco is the 2004 Morocco - U.S. Free Trade Agreement, a measure that offers American exporters greater access to Moroccan markets, and gives U.S. businesses based in Morocco virtually unlimited access to markets in Europe, North Africa, the Middle East, and Turkey.
Taxes and Tariffs:
At the core of Morocco’s effort to entice foreign business is the 1995 Investment Charter Law, whose simplified tax code superseded dozens of antiquated investment laws. The tax incentives within the Investment Charter include a 2.5 percent discounted tax rate for land acquisitions intended for housing developments; a 0.5 percent tax on any company contributing to capital formation or capital increase; and an exemption from registration fees associated with the purchase of land intended for capital investment.
As an additional incentive measure, Morocco simplified the country’s customs schedule, applying two flat-rate tariffs on all imported machinery, parts, equipment, capital goods, and accessories bought into Morocco to expand a business.
The Charter also shields foreign investors from paying value added tax (VAT) on imported equipment, materials, and goods; and exempts start-up firms from license fees, corporate taxes, and general income taxes for five years. Thereafter, new businesses are required to pay a tax that is deeply discounted.
Morocco has also reformed many of its labor laws and clarified employment rules. The government is improving the country’s pool of skilled labor by stepping up funding for public learning institutions that offer vocational training.
Government Sponsored Development Programs and Safeguards:
The State Enterprise Contract, a relatively new business incentive program offered by the Moroccan government, underwrites the cost of on-the-job vocational training, land acquisition, and building construction for qualifying start-up businesses.
Another cash grant program, the Hassan II Fund — named for the former Moroccan King — rewards new enterprises that venture into selected markets, including electronics, information technology, vehicle subcontracting, leather processing, and ready-to-wear clothing.
The Petroleum Code is another government program that offers generous support to oil exploration firms searching for new sources of hydrocarbons. Under the terms of the Petroleum Code, companies that discover energy reserves in Morocco are only required to pay franchise duties of 5 percent and 10 percent, respectively, on the production of natural gas and oil.
As a result of the Free Trade Agreement and WTO accession process, Morocco is moving to protect foreign investors. These legal safeguards are offered in the form of “sectoral codes” that regulate business sectors ranging from mining to handicrafts. With rare exceptions, these codes are applied equally to domestic and foreign investors.
Several of Morocco’s sectoral codes have recently been revised to attract international companies. These incentives provide selected sectors — mining, export industries, tourism, real estate, handicrafts, and maritime — with partial or total exemptions from the VAT, income tax, and import duties.
Additional sectoral incentives are available to businesses that invest in one of Morocco’s several Free Trade Zones (FTZs). The biggest FTZ, in Tangier, offers a variety of incentives to investors who set up businesses on undeveloped FTZ land. These incentives include exemptions from: duties and taxes associated with the acquisition of land, license and “urban taxes” for 15 years, VAT on all exported goods, and corporate taxes for five years, with a reduced 8.75 percent corporate tax thereafter.
In the early 1980s, the government began an ambitious privatization program that called for the sale of many state-run enterprises, including portions of the energy sector. The 1989 Privatization Law accelerated the sale of state-owned sectors; to date, the sales push has resulted in the commercial acquisition of 114 companies.
Intellectual Property Rights:
Morocco is truly a “business-friendly” environment. Its strong Intellectual Property Rights (IPR) legislation, promotion of economic reforms, expanding privatization program, and willingness to build long-term trade and investment ties make it an excellent venue for locating operations to penetrate regional markets.