Transfer Pricing Morocco | Documentation, Compliance & Audit Guide

By Zakaria Korte, Korte Law in association with Amereller

Multinational groups with operations in Morocco are facing a more structured and assertive transfer pricing environment. Morocco has aligned much of its framework with OECD standards while preserving key local specificities in law and practice. This article provides a practical overview of the legal basis, documentation expectations, areas of audit focus, the availability of advance pricing agreements, and concrete steps to strengthen audit readiness—tailored for finance and tax leaders managing Moroccan subsidiaries or branches.

Morocco's Transfer Pricing Legal Framework (Article 214-III CGI)

Article 214-III of the Moroccan General Tax Code (Code Général des Impôts, or CGI) empowers the tax authorities to adjust a Moroccan entity's taxable profits when it is dependent on, or has control over, related entities and transactions are not priced at arm's length. In substance, the rule targets situations where profits are shifted out of Morocco through non-market pricing or conditions.

The article permits the administration to reconstitute taxable income by reference to the conditions that would have prevailed between independent enterprises. In practice, this translates into a need for Moroccan taxpayers to:

Demonstrate the arm's-length nature of intercompany charges and margins.
Substantiate the existence of a real benefit for intercompany services received.
Maintain contemporaneous documentation that explains group transfer pricing policies and their application to Moroccan functions, assets, and risks.
Produce supporting evidence—contracts, invoices, service reports, and benchmarking—upon request during an audit.

Documentation Requirements: Master File and Local File

Morocco has adopted the OECD's two-tier documentation approach in practice, comprising a Master File and a Local File.

Master File. This group-level document describes the global business, value drivers, supply chains, legal and ownership structure, intangibles strategy, intercompany financing framework, overall transfer pricing policies, and consolidated financial and tax positions.

Local File. This Morocco-specific document focuses on the local entity's functions, assets, and risks; detailed descriptions of intercompany transactions; contracts and pricing policies; and economic analyses supporting arm's-length pricing.

In addition, auditors expect robust underlying evidence:

Intercompany agreements executed before or at the time of transactions.
Service substantiation such as work orders, deliverables, time records, and reports.
Invoicing and cost-base traceability tying charges to cost pools and allocation keys.
Benchmarking evidencing that margins or fees are consistent with comparable uncontrolled transactions.

OECD Alignment and Moroccan Specificities

Morocco is broadly aligned with OECD transfer pricing principles. Key Moroccan specificities include:

Substance and benefit test emphasis. Moroccan auditors frequently focus on whether intercompany services delivered a clear, measurable benefit to the Moroccan entity.
Formality of documentation. Strong weight placed on formal contracts and contemporaneous evidence.
Local comparables where available. Authorities may challenge comparability if local market conditions are materially different.
Holistic review of profitability. Persistent losses or thin margins are likely to be scrutinized.
Consistency across taxes. Transfer pricing positions should align with indirect tax and withholding tax treatment.

Common Intercompany Transactions Under Scrutiny

Management fees

Auditors assess whether group-level management activities confer a specific benefit to the Moroccan entity. They request detailed evidence such as calendars, workplans, deliverables, and time allocations. Allocation keys must be objective and linked to cost drivers.

Technical and shared services

IT support, engineering, R&D support, and back-office functions require a demonstrable link between services rendered and Moroccan operations.

Royalties and intangibles

Payments for trademarks, technology, software, and know-how attract high scrutiny. Evidence should show that the royalty base and rate reflect the value of intangibles actually exploited in Morocco.

Intra-group financing

Loans and guarantees receive attention when interest is substantial or capital structure appears thin.

Cost recharges and pass-throughs

Focus is on transparency of the cost base, exclusion of shareholder costs, and the arm's-length nature of any markups.

Advance Pricing Agreements (APA) Availability

Morocco has established an APA mechanism allowing taxpayers to agree in advance with the tax administration on transfer pricing methods for specified controlled transactions.

Scope: APAs can generally be pursued on a unilateral basis.
Process: Pre-filing discussion, formal application, evaluation, negotiation, and execution.
Term: APAs typically apply prospectively for a set number of years and may be renewable.
Benefits: Significantly reduces audit risk, provides pricing certainty, and can streamline defense for related dealings.

Tax Audit Approach and Penalties

Morocco's tax authorities use a risk-based audit selection approach with intensified focus on transfer pricing:

Early requests for service evidence. Invoices alone are not sufficient.
Transaction-by-transaction scrutiny. Individual fees may be challenged even where total profitability appears reasonable.
Data consistency checks. Authorities compare TP data to statutory accounts, VAT returns, customs data, and payroll information.
Comparables and method challenges. Expect probing on choice of tested party and selection of comparables.

Where adjustments are proposed, additional corporate income tax may be assessed with late-payment interest and penalties. Settlements are possible, but strong documentation is the best mitigation.

Practical Compliance Recommendations

Anchor policies in Moroccan facts. Start with a robust functional analysis of the Moroccan entity.
Formalize intercompany agreements. Execute clear, up-to-date contracts for each significant transaction.
Strengthen service substantiation. Retain engagement plans, reports, ticket logs, and time sheets.
Right-size allocation keys. Use drivers that correlate with benefits and document the rationale.
Benchmark with Moroccan sensibilities. Select comparables thoughtfully and refresh periodically.
Integrate with indirect tax and customs. Coordinate characterization across income tax, VAT, and customs.
Operationalize the files. Treat Master File and Local File as living documents.
Assess APA suitability. Consider APAs for high-value or contentious streams.
Run mock audits. Periodically test your package and identify gaps.
Governance and training. Establish clear internal controls and train local finance teams.

Recent Developments and Trends

Heightened enforcement on services and intangibles. Authorities increasingly request granular evidence of benefits.
Greater use of data analytics. Cross-checks across tax returns, customs data, payroll, and financial statements.
BEPS-aligned documentation culture. The expectation of two-tier documentation and contemporaneous evidence has solidified.
Growing interest in APAs. APAs are viewed more favorably for standardized service fees or brand royalties.
Focus on substance and local decision-making. Pricing outcomes must reflect Morocco-based value creation.
Integration with global transparency initiatives. Consistency of positions across jurisdictions matters more than ever.

Conclusion

For multinational groups operating in Morocco, transfer pricing success hinges on aligning global policies with Moroccan realities, presenting convincing evidence of value, and anticipating audit expectations. By operationalizing documentation and governance around Morocco's requirements, multinationals can reduce disputes, safeguard margins, and achieve durable certainty for intercompany services and other controlled transactions.

For expert guidance, contact Korte Law.

Transfer Pricing in Morocco: Documentation and Audit Readiness