Morocco is increasingly becoming a strategic target for international investors seeking to diversify real estate investment opportunities.
This is the result of many interacting
factors, particularly the fact that it
is by far the most politically stable
country in the region, with constant
economic growth, strong positioning
as a gateway to Africa with several
successful free trade zones, an
excellent geographical position
between Europe and Africa, a legal
framework based on the European civil
legal framework and foreign investor-friendly foreign exchange regulations.
The real estate sector still represents
more than 50 percent of Foreign
Direct Investment (FDI) in Morocco
in recent years according to
the United Nations Conference on
Trade and Development. The main
foreign investors are Chinese,
North American, Emiratis, French,
Spanish and German.
The main areas of real estate
foreign investments in Morocco
are the following:
- Healthcare: Since the 2015
healthcare liberalization law,
many foreign investments have
been made in this sector. Most of
them relate to the creation and
development of significant new city
projects, such as the Marrakech
healthcare city and the Saudi
German Hospital medical facility
for the new eco-city of Zenata.
- Hospitality: Hospitality has
long been associated with
Morocco and is driven by the
major tourist destinations of
Marrakech and Agadir. Investors
have continually invested in this
area and keep doing so. Many
projects have been launched
in the last year, in particular
in Tangier, Marrakech, Rabat,
Casablanca and Agadir. Almost all
major operators have a presence
in the country (Hyatt, Radisson,
Four Seasons, Fairmont, etc.) and
others, such as Hilton or Marriott,
are planning a return to Morocco
with expansionist strategies.
- Industrial (plants and logistics
units): Many European companies
are seeking to develop their
capacity in Morocco in order to
boost their sales through Africa.
Industrial projects are mainly
located in the Kénitra and Tangier
tax-free zones. Morocco is also
part of the Chinese government
project, “One Road One Belt,” and
the north of Morocco will host a
new city project dedicated to this
project, for which 400 international
investors are expected to apply.
This article briefly answers the
questions most commonly raised
by those with an interest in foreign
investments in Morocco.
What type of special
purpose vehicle or
holding company?
The real estate sector still
represents more than 50
percent of FDI in Morocco
in recent years.
First, Morocco does not generally
require investors to partner with
local shareholders and any foreign
company is free to incorporate
a company in Morocco without
restrictions on the percentage of
share capital to be held (except
for certain regulated activities).
A prior anti-trust merger clearance
process is usually required for any
joint venture projects since the
notification materiality thresholds
are very low.
Limited liability companies
are commonly used because
shareholders’ liability exposure
is capped to the amount of their
contribution to the share capital.
Two main legal entities are used:
- SARL company: in terms of share capital
requirements, there is no minimum share capital
requirement, and therefore the share capital can
theoretically be MAD1. Generally shares of companies
amount individually to at least MAD100. A SARL
company may be formed by only one shareholder
provided that its shareholder is not itself a sole
shareholding entity.
- SA company: a joint-stock company must have at
least five shareholders, who can either be corporate
entities or individuals. It must have a minimum
fixed share capital of MAD300,000 (MAD3 million
to proceed with public offering).
Many projects are made through investment
agreements which provide a detailed outline of
the project and which also include a shareholder
agreement. This SA corporate form must be privileged
for lodging any shareholders’ agreement.
Additionally, it is essential while structuring a joint ventured project to ensure that public authorizations
(eg, construction permits) are made in the name of the
project companies and that they own the real estate
asset or the going concern to secure the financing.
What type of registered office?
A registered office may be obtained through one
of the following:
- The purchase of owned property: it is possible for
foreigners to acquire land or buildings (except those
in the agricultural sector). Land ownership regimes
are very specific in Morocco and it is important to
obtain professional advice prior to any acquisition,
particularly for properties that are not registered
in the land registry. Acquisition of shares is to be
preferred to asset deals since the former is generally
subject to a more beneficial tax regime. The split of
real estate ownership and operation of the underlying
activity may also have tax implications, which should
be considered. In terms of projects on greenfield
sites, various legal constraints may apply which can
significantly affect the transaction structure or may
delay the signing of the contractual documentation
(guarantee of a promoter to be obtained, certain
initial work to be carried out on the plots of land).
- Lease agreement: leases can either be civil,
professional or commercial. Rents and charges are
freely negotiated between the parties. Commercial
leases offers security of tenure since the tenant
has a right of renewal of the lease upon expiration.
In practice, rents may be subject to a 10 percent
increase every three years. A 2016 law has made
significant changes in the Moroccan commercial
lease regime in order to balance the relationship
between the landlord and the tenant. Long-term
leases may give rise to tax constraints, to be
assessed on a case-by-case basis.
- Domiciliation agreement: this temporary
agreement is often used to incorporate a
company and start operations while looking for
suitable premises. For tax reasons, however, it
must remain temporary. Reform regarding where
companies may be domiciled is pending.
Are there controls for funds
into and out of Morocco?
Inflow of funds into Morocco
The foreign exchange regulations in Morocco
have been significantly relaxed over the last few
years. Generally, there are no limitations on foreign
investments, especially for inflow of funds into Morocco,
irrespective of the type of company, except in some
specific business sectors such as agriculture, fishery,
insurance or audio-visual.
The Foreign Exchange Charter provides for regular
reporting obligations from foreign investors and local
companies with a foreign shareholding.
Outflow of funds from Morocco
In terms of upstream of funds, the following main
forms of repatriation of funds for the benefit of foreign
investors are not subject to prior authorization by
the Foreign Exchange Office (FEO), provided that the
revenues to be upstreamed derived from an initial
investment financed in foreign currency and other
formalities have been met (including the effective
payment of any applicable taxes):
- rental incomes
- dividends
- profits made by Moroccan branches of
foreign companies
- interests on shareholders’ loans
- proceeds from sale of shares and assets or liquidation
of a Moroccan company
These new real estate
investment schemes are
expected to boost the real
estate sector further and to
create significant portfolios
in Morocco.
Where the form of repatriation is not expressly
provided for in the FEO instruction, prior approval
of the FEO is required.
Can foreign companies file for
a building permit?
According to the 2019 ‘Doing Business’ rating, Morocco
scores very highly (no. 30 out of 160 countries) on its
procedure, time and costs for obtaining a building permit.
As in many countries, a local architect must be
appointed for the filing of the request.
Depending on the size of a project and its impact in
terms of local jobs and key concerned sectors (such as
energy, education or healthcare), a prior agreement
may be made with the Kingdom of Morocco in order
to speed up the process for obtaining town planning
permits and to gain certain tax advantages. However,
these are subject to compliance with a series of
commitments (quota of local jobs to be met, related
infrastructures to be financed and built, etc.).
For most construction projects, several contractors
are involved and it is rare to have only one general
contractor that takes full liability for the entire project.
Is there a status that gives tax
advantages to foreign companies
with subsidiaries in Morocco?
The Casablanca Finance City status (the CFC Status)
offers various tax benefits. Similarly, Tangier and
Kenitra may offer advantages worth considering,
such as custom duties exemptions or payments in
foreign currencies.
Development of real estate
collective investment schemes
(OPCI) as the next step for foreign
investments
Based on the French model, real estate collective
investment schemes (OPCI) were recently introduced in
Morocco, subject to various laws and regulations.
The main purpose of these vehicles is the construction
or acquisition of real estate assets with a view to leasing
them to third parties.
The setting up of an OPCI is subject to prior agreement
from the Moroccan Stock Exchange Authority (AMMC),
and the OPCI has to be represented by a portfolio
management company (société de gestion) also
approved by the AMMC.
These new real estate investment schemes are expected
to boost the real estate sector further and to create
significant portfolios in Morocco, which may attract
foreign investors in the coming years.
Although it is fair to say that more needs to be done
before Moroccan REITs are fully effective, expectations
are high and there has been significant lobbying for the
2018 finance law to offer a more attractive tax regime
for investors.
Conclusion
Investing in Morocco is, for many real estate foreign
investors, the first step in an expansionist strategy
towards Africa. The country’s legal framework is adapting
fast in order to secure foreign investments and, where
gaps do exist, it follows the example of civil law countries.
The ongoing reforms in both the securities law and the
criminal code look set to strengthen the enforceability
of deeds of sale and title ownerships.