Transfer Pricing and Free Zone Companies in Morocco

A company located in an industrial acceleration zone (IAZ) in Morocco is subject to the same transfer pricing obligations as any company under the ordinary regime. Once its turnover excluding VAT or its gross assets reach MAD 50 million, it must keep two files: a master file and a local file. These files justify its transactions with related companies established outside Morocco (Article 214-III-A of the General Tax Code). Its preferential regime exempts it from nothing. In fact, it makes the company more visible during a tax audit.

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Companies in a free zone that belong to international groups constantly carry out intra-group transactions. Examples include purchases of materials, service recharges, brand or licence royalties, intra-group loans and contract processing. All of them fall under transfer pricing rules. Morocco has significantly tightened its framework: a documentation obligation since the 2021 Finance Act, a specific penalty, then Decree No. 2.22.1020 of 27 November 2025 (published in the Official Bulletin, French edition No. 7480 of 5 February 2026), which sets out the precise content of both files. This article explains what an IAZ company actually has to produce, within which deadlines, and what it risks.

What is transfer pricing?

Transfer pricing is the price at which related companies belonging to the same group invoice their transactions. The reference principle is the arm’s length principle. In other words, prices between related entities must match those that independent companies would agree in comparable circumstances. The tax administration ensures that profits are not artificially shifted from one jurisdiction to another.

The notion of dependency link is broad. It covers legal dependency, such as capital ownership or decision-making power. It also covers de facto dependency. This can result from a monopoly or from economic dependency, for example for the supply of raw materials or parts. A Moroccan subsidiary can therefore be considered related to a foreign supplier even though no capital link exists between them.

Who is concerned: the dual MAD 50 million threshold

The obligation to prepare transfer pricing documentation does not apply to all companies. It applies to companies that meet two cumulative conditions:

• having direct or indirect dependency links with companies located outside Morocco, and carrying out transactions with them;
• declaring turnover excluding VAT of MAD 50 million or more, or showing gross balance-sheet assets of MAD 50 million or more at the close of the financial year concerned.

The two thresholds are alternative, not cumulative. Take a services company with low turnover but heavy industrial assets. This is common for a production unit in an IAZ. Such a company falls within the obligation on the gross-assets criterion alone. Conversely, a company below both thresholds does not escape scrutiny: the administration retains a right of communication (Article 214-III-B of the Tax Code). Within thirty days, it can request the nature of the relationships between the entities and of the services or products. It can also ask for the pricing method and its supporting elements. Finally, it can request the tax regimes and rates of the foreign companies concerned.

No provision exempts companies in industrial acceleration zones from these obligations. The Morocco free zone tax regime covers corporate income tax, VAT and customs duties — it creates no exemption in transfer pricing matters.

What Decree No. 2.22.1020 changed

Until 2025, Article 214-III-A of the Tax Code set out the principle of the two files without detailing their content. The implementing decree had been announced, but not published. This is now done. Decree No. 2.22.1020 on transfer pricing documentation of 27 November 2025 (published in the Official Bulletin, French edition No. 7480 of 5 February 2026) sets the list of documents and how they must be submitted. It explicitly aligns Morocco with OECD standards and with Action 13 of the BEPS project.

The master file

The master file describes the group as a whole. First, it shows the legal organisation chart and the location of entities. Next, it describes the activities and the value chain. It then lists intangible assets (brands, patents, know-how) and their location. Finally, it covers intra-group financial activities (loans, guarantees, cash flows) and the group’s consolidated tax and financial position.

The local file

The local file focuses on the Moroccan entity only. It sets out its place and functions within the group and the details of controlled transactions with related parties. In addition, it gives the financial information needed to check the arm’s length principle. For each significant transaction, the company must describe the operation and provide the contracts. It must also explain the pricing method, the comparability analysis, and any adjustments with their justification.

Practical points

Several practical points deserve the attention of finance departments:

• the decree sets a threshold of MAD 1 million excluding tax per category of transaction, above which a detailed analysis is required in the local file;
• filing is done electronically;
• the files may be written in Arabic, French or English. This helps subsidiaries of European and Asian groups in Tangier, which can reuse group documentation without a full translation;
• the decree also provides for submission of all documents within seven months of the close of the financial year, without waiting for a request from the administration. This is the biggest change in practice. Documentation is no longer gathered at the time of an audit: it becomes a periodic filing obligation.

The five methods recognised by the administration

Morocco’s Transfer Pricing Audit Guide, published by the General Tax Directorate (DGI), adopts the five OECD methods. However, the choice is not free. It must follow from the functional analysis and the comparability analysis, and remain consistent with the real nature of the transaction.

Method	Principle	Typical use case in a free zone
Comparable uncontrolled price (CUP)	Compare the price charged between related entities with that of an identical transaction on the open market	Sale of a standard component also sold to third-party customers
Resale price	Start from the resale price to the end customer, minus an arm’s length gross margin	Distribution entity reselling without transformation
Cost plus	Apply an arm’s length mark-up to the production costs incurred	Production or contract-processing unit working for the parent company
Transactional net margin (TNMM)	Compare a net margin indicator relative to a relevant base: costs, sales or assets	Most common method for limited-risk subsidiaries
Profit split (PSM)	Split the combined profit between the parties according to their respective contributions	Highly integrated operations or jointly developed intangibles

The DGI guide states that the administration cannot set aside the comparability study submitted by the company without discussing it on the merits. In other words, a serious, documented analysis that matches the functions actually performed is a real line of defence. It is not a mere filing formality.

The seven situations of indirect profit transfer covered by Article 213-II

The basis for a reassessment is not the documentation: it is Article 213-II of the General Tax Code. It covers companies with direct or indirect dependency links with companies located in or outside Morocco. In that case, indirectly transferred profits are added back to declared taxable income and turnover. The method used does not matter: higher or lower purchase or sale prices, or any other means.

The DGI guide lists the situations that typically trigger this adjustment:

• inflated purchase prices for goods and services imported or acquired locally;
• understated sale prices for goods and services exported or sold locally;
• reduced or inflated interest rates on intra-group financing;
• excessive prices for royalties and other fees;
• excessive or fictitious management fees;
• debt waivers or waived income;
• various offsetting operations.

For an IAZ entity, the first three and the fourth are the most frequent. Management fees recharged by the parent company and brand royalties account for most of the discussions during audits.

Why an IAZ company is particularly exposed

A company in an industrial acceleration zone enjoys a full corporate income tax exemption for its first five financial years. After that, its taxation depends on the company’s situation. This creates a rate gap with group entities abroad, or with ordinary Moroccan companies. Transfer pricing risk analysis targets exactly this kind of configuration first.

This is not an assumption. The DGI’s Transfer Pricing Audit Guide lists this among the very first steps of an audit. Indeed, the inspector must “identify the tax regime applied (ordinary regime, specific regimes, exemptions…)”. The IAZ regime is therefore, quite literally, one of the first items placed in the file, even before the first on-site visit.

A risk in both directions

The logic works both ways. On the one hand, a group may be tempted to artificially locate profit in the low-taxed entity: this is the classic BEPS pattern. Here it works in favour of the Moroccan entity. Even so, the parent company’s tax authority may still adjust in the other direction. On the other hand, the opposite temptation appears as the exemption ends: squeezing the Moroccan margin in favour of a foreign entity. In both cases, poorly justified transfer pricing weakens the company during a tax audit in a free zone It can even cost the company the economic benefit of the regime.

There is also a risk of double taxation. A reassessment in Morocco without a corresponding adjustment abroad results in the same profit being taxed twice. Article 214-II of the Tax Code and the double taxation treaties signed by Morocco provide for an adjustment mechanism. However, triggering it requires solid documentation on the Moroccan side.

Transfer pricing in Tangier: automotive suppliers, contract manufacturers and service centres

The issue is particularly sensitive in the Tangier free zones. There, almost all operators are subsidiaries of foreign groups. Most of their business is with other group entities. Three profiles dominate:

• Automotive suppliers at Tanger Automotive City: wiring, seats, plastics, on-board electronics. Inputs often come from the parent company or from a group purchasing centre, and output goes back to European assembly plants. The purchase price of components and the sale price of the finished product are therefore both transfer prices.
• Contract manufacturers at Tanger Free Zone: textiles, aerospace, mechanical subcontracting. These entities often work under industrial subcontracting contracts in a free zone, sometimes with materials supplied by the principal. The cost plus method is the most widely used. Still, a comparability analysis must justify the mark-up, rather than budgetary habit.
• Service centres and back offices at Tanger Tech (Cité Mohammed VI) and Tetouan Shore: IT, engineering, accounting, customer relations. They invoice services to group companies, with classic issues around cost recharges and margins on low value-adding services.

In all three cases, the administration first checks the consistency between the functions actually performed in Tangier, the assets used, the risks assumed and the remuneration received. Take a subsidiary presented as a limited-function contract manufacturer. If it actually designs products, bears inventory risk and negotiates with end customers, it cannot be paid like a contract manufacturer. This is the most frequent point of friction.

The firm has a branch in Tanger Free Zone. For an on-site review, talk to a free zone chartered accountant in Tangier, or discover our accounting and tax support in Tangier.

Securing things upstream: the advance pricing agreement

Rather than having the discussion during an audit, a company can hold it upstream. The advance pricing agreement (APA) was introduced in 2015 in Articles 234 bis and 234 ter of the Tax Code, with its terms set by Decree No. 2-16-571 of 3 July 2017.

Before the transactions take place, the APA sets a series of criteria: calculation method, comparables, adjustments and key assumptions about the future. These criteria then determine transfer prices over the period covered. This period may not exceed four financial years. For the duration of the agreement, the agreed pricing method cannot be called into question by the administration during a tax audit. The guarantee covers the method, and not necessarily the level of margin.

This protection is not unconditional, however. The agreement becomes void, and the method can be challenged, in two cases. One is misrepresentation of facts, concealed information, or errors or omissions attributable to the company. Another is failure to apply the agreed method and the obligations of the agreement, or the use of fraudulent schemes. These grounds for nullity can only be invoked within the adjustment procedures provided for in Articles 220 or 221 of the Tax Code.

For an IAZ subsidiary with a stable model, such as a contract manufacturer or a service centre, the APA often offers the best security-to-cost ratio. Indeed, it locks in the method for four years and removes the main source of uncertainty.

Country-by-country reporting: the MAD 8.1 billion threshold

Do not confuse it with transfer pricing documentation. Country-by-country reporting (CbCR) was introduced in 2020 in Article 154 ter of the Tax Code. It meets the minimum standard of BEPS Action 13.

For each jurisdiction where the group operates, it provides a breakdown of revenue, profits, taxes and other indicators of economic activity. It only concerns multinational enterprise groups whose consolidated annual revenue reaches MAD 8,122,500,000 or more in the previous financial year. Most free zone subsidiaries are therefore not filers in Morocco. Their group, however, often files elsewhere. The information is then subject to automatic exchange with countries that have signed an agreement to that effect with Morocco, subject to reciprocity.

In practice, the DGI can compare the group’s foreign filings on profit allocation with the Moroccan local file. Any inconsistency between the two is an audit trigger.

Deadlines, penalties and presumption of dependency

The documentation must be provided to the administration electronically, on the date the on-site audit begins (Article 210, 5th paragraph, of the Tax Code). It is therefore not a document prepared once the inspector has arrived: it must be ready beforehand.

If documentation is missing, the administration asks the company to produce it, as set out in Article 219 of the Tax Code. The company then has thirty days from receipt of the request. After that deadline, two consequences add up.

Applicable penalties

Failure	Consequence	Legal basis
Failure to produce the missing documents within 30 days	Fine of 0.5% of the amount of the transactions covered by the documents not produced, with a minimum of MAD 200,000 per financial year concerned, issued by tax roll	Article 185-IV of the Tax Code
Failure to produce the missing documents within 30 days	The dependency link is presumed to be established by the administration	Article 214-III-C of the Tax Code
Failure to respond to the right of communication (30 days)	The dependency link is presumed to be established	Article 214-III-B of the Tax Code
Adjustment of taxable income	Indirectly transferred profits are added back to declared taxable income and turnover	Article 213-II of the Tax Code

The minimum of MAD 200,000 per financial year deserves attention. For an audit covering four financial years, the floor of the fine reaches MAD 800,000 before any discussion on the merits. For a group with large intra-group flows, the 0.5% calculation quickly exceeds this floor.

The second consequence is more insidious than the first. When the dependency link is presumed established, the company loses most of its room for discussion. It then falls to the company to prove the arm’s length nature of each transaction, without the supporting documentation it failed to produce.

Five frequent mistakes in free zone subsidiaries

• Believing that the corporate tax exemption removes the need to document. It removes nothing, and it attracts attention rather than deflecting it.
• Reusing the group master file without a local file. Both are required. A European master file, however complete, does not describe the Moroccan entity’s transactions.
• Applying a “historical” cost plus mark-up without an updated comparability study. A rate set eight years ago and never reviewed is the first point to be challenged.
• Describing limited functions that reality contradicts. The inspector visits the premises and interviews the teams, so any gap between the documented organisation chart and the real organisation is immediately visible.
• Treating documentation as an isolated annual exercise rather than as an extension of cost accounting and group reporting. If the two do not reconcile, the documentation works against the company: it commits it.

This last point is central. The documents produced commit the company and can be used against it. Approximate documentation is more dangerous than no documentation at all.

How Cabinet Dami & Associés supports you

Mastering transfer pricing follows a sequence. First comes the functional analysis (functions, assets, risks). Then come the choice of method and the comparability study. Finally, the master file and the local file are drafted. It requires coordination between accounting, the group’s finance department and the Moroccan tax framework.

Since 1991, Cabinet Dami & Associés has supported subsidiaries and groups based in free zones with their tax compliance, as part of its tax and social advisory. We prepare the documentation and review it before an audit. We also assist you during an audit and prepare advance pricing agreement applications. It is part of a broader approach to optimising free zone taxation in strict compliance with the legal framework.

To secure your file, contact our experts.

FAQ — Transfer pricing in Morocco’s free zones

Which companies must prepare transfer pricing documentation?
Companies with dependency links with companies located outside Morocco whose turnover excluding VAT or gross balance-sheet assets reach MAD 50 million (Article 214-III-A of the Tax Code). The two thresholds are alternative.

Is a free zone company exempt from documentation?
No. No provision exempts companies in industrial acceleration zones. The IAZ regime covers corporate income tax, VAT and customs duties, not transfer pricing.

Which documents must be prepared?
First, a master file describing the group (organisation chart, activities, intangible assets, intra-group financing, consolidated tax position). Second, a local file describing the Moroccan entity and its controlled transactions, in accordance with Decree No. 2.22.1020.

What is the penalty for failing to produce them?
A fine of 0.5% of the amount of the transactions covered by the documents not produced, with a minimum of MAD 200,000 per financial year concerned, issued by tax roll (Article 185-IV of the Tax Code). In addition, the dependency link is presumed under Article 214-III-C.

How long does a company have to produce missing documents?
Thirty days from receipt of the administration’s request, in the manner set out in Article 219 of the Tax Code. This deadline may be extended until the end of the audit period.

Can the method be secured in advance?
Yes, by concluding an advance pricing agreement with the administration (Articles 234 bis and 234 ter of the Tax Code, Decree No. 2-16-571). Its term may not exceed four financial years. During that period, the administration cannot challenge the agreed method, unless the agreement is void.

Conclusion

For a free zone company belonging to an international group, compliance with transfer pricing rules is no longer optional above MAD 50 million in turnover or gross assets. Decree No. 2.22.1020 has set the expected content, the penalty is quantified, and the floor of MAD 200,000 per financial year makes non-compliance costly. The real issue, however, is not the fine: it is the consistency between what the subsidiary actually does in Tangier and what its documentation states.

To prepare or review your documentation, talk to the experts at Cabinet Dami & Associés.

Official source: General Tax Directorate — Transfer Pricing Audit Guide and General Tax Code (Arts. 213-II, 214-III, 185-IV, 234 bis, 154 ter).

Further reading

• groups based in Tanger Free Zone
• setting up in Tanger Free Zone
• tax and social benefits of Morocco’s free zones

Information current as of 2026 and subject to change under the applicable regulations. For an analysis tailored to your situation, contact Cabinet Dami & Associés.