Branch in Morocco

Branch in Morocco: What you need to know

11 July 2021

In Morocco, a branch office is defined as a legal entity registered in the Commercial Register. it is considered as the legal vehicle of another company (either local or foreign), also called the parent company, and has a certain autonomy of management.

As a result, it is legally bound to the parent company and can contract and execute a contract on behalf of the parent company. Still, it cannot have a separate legal personality. It is managed by a director appointed by the parent company.

When a new entity is set up in Morocco, whether foreign or not, it may opt for the status of a branch.

A Moroccan company may also set up a branch office in Morocco. However, this branch must be geographically separate from the parent company, for example, in Casablanca and Tangier...

Under what conditions can a foreign company create a branch in Morocco? Discover in this article all the features of this legal form.

 

 

Branch in Morocco: Why choose this legal form?

 

Several choices are available to investors wishing to set up in Morocco. However, the legal form most favored by foreign companies is that of the branch rather than the subsidiary.

Some foreign companies also opt for other legal forms such as the SAS, PLC or the LLC

 

Branch in Morocco: What are the upsides of this legal form?  

Opening a branch office in Morocco offers many benefits:

A legal form favored by project owners, the branch office is the optimal legal entity for large projects or turnkey contracts.

Indeed, this type of project often requires heavy investments and necessary guarantees that the parent company can provide

Protected by the parent company, the branch is thus supported in the event of difficulties, particularly of a financial nature.

As the branch does not have a separate legal personality, it is up to the parent company to provide the branch with the necessary guarantees, as the case may be. 

In addition to protecting the parent company, the branch always controls the third parties relationship (suppliers, customers, ...). In Morocco, it also enjoys other upsides, such as the simplicity of the administrative formalities of incorporation. 

A great opportunity for companies wishing to develop their business in Morocco. Since no capital is required for this legal form in Morocco, the company's development is an attractive economic option that directors should give priority to. 

With a branch office located in a strategic and high-potential area in Morocco, the entity will benefit from a head start over its competitors who are not yet there. 

 

 

The downsides of a branch office in Morocco 

Despite its many upsides, the branch office has some disadvantages that should not be overlooked and should be known when setting up such a structure. 

Indeed, as we have already seen, the branch is protected by the parent company in case of difficulties. But this support could, in some instances, impact the parent company if the issues, either legal or financial, are significant.

As guarantees are provided by the parent company on behalf of the branch, banks, among other partners, prefer to deal directly with the parent company rather than negotiating with the branch when it comes to essential contracts. 

In Morocco, as with all other companies, the branch is liable for VAT (value-added tax). In addition, like any other Moroccan company, the branch will have to file its returns before the social security (CNSS).

 

 

Setting up a branch in Morocco in 5 steps. 

 

There are five essential steps to setting up a branch in Morocco. For the company to be considered as created, it must be registered in the trade register. For this, the managers will have to go through several steps.

First of all, it is necessary to ensure that a negative certificate is issued. The application for this document is made at the OMPIC. The company's directors must fill out two forms. One is related to the names, while the other one informs about the signs. 

After choosing the name, it is time to draft the minutes of the shareholder meeting approving the formation of the branch. Since it is a document with legal value in case of litigation, the drafting of the minutes respects a specific formalism, hence the insertion of particular mentions.

These minutes must indicate in its heading the registered office, the name of the branch, the activity, and the legal representative. 

Still, within the framework of the procedure of formation of a branch in Morocco, it is necessary to proceed with the filing of the incorporation documents, the legal publicity, the opening of a bank account in Morocco (the directors can choose the bank of their choice). 

Once all these steps are completed, it will be possible to start the activity of this foreign company in Morocco through its branch. The new branch will then appear in the official bulletin and in a local newspaper.

 

Branch creation in Morocco

 

 

Branch in Morocco: tax regime and specificities

 

Tax regime 

Subject to corporate income tax, branches are considered by the tax office as foreign entities but are liable to the Moroccan law tax regime.

Since January 2021, entities located in industrial acceleration zones and those with CFC status are taxed at a uniform rate of 15% beyond the five-year exemption period.  

 

Specificities

It is established that the branch office must be registered in the trade register of the place where the business is operated. The registration of the branch is required for its director within three months of the opening of the branch in Morocco. 

The branch has other specificities because it is proper for the branch to keep its accounts independently even though it has no equity capital. 

On the other hand, if the branch director is directly attached to the parent company abroad, the employees are governed by Moroccan labor law. 

From a legal point of view, the branch is liable to the commercial code of Morocco.

 

 

What is the difference between a company and a branch in Morocco? 

 

If you are wondering whether to choose a company or a branch in Morocco, this section is mainly dedicated to you.  

As far as the company is concerned, which is distinct from the parent company, it has its own legal personality. With a liability limited to its contributions, the subsidiary, also registered in the Moroccan trade court code, has management and financial autonomy and can enter into agreements without involving the shareholders. 

On the other hand, the branch is not endowed with legal personality and contracts in the name and on behalf of its parent company. 

If the company can claim a certain autonomy towards the parent company, this is not the case for the branch, which is dependent on the parent company. The branch does not have the same management autonomy as the company.

Moreover, the head office can be held liable in certain situations. 

 

 

Conclusion 

 

In other words, the branch is a legal vehicle underwhich a foreign entity can operate in Morocco without having to incorporate a company.

With a certain autonomy of management and although the branch director is directly attached to the head office, it does not have a distinct legal personality. It enjoys the protection of the parent company in case of financial or legal difficulties. 

The parent company might also provides guarantees for some agreements with banks or partners.

The branch is subject to corporate income tax, has tax obligations, and is considered a permanent establishment under Moroccan tax law. 

The branch is tailor-made for foreign companies that want to operate in Morocco without having to incorporate a company under Moroccan law. 

In any case, Setting up a branch office in Morocco seems a wise choice for foreign entities wishing to establish themselves in the Kingdom

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