When a company generates profit, its shareholders may decide to distribute part of it in the form of dividends. However, the accounting profit generated by a company cannot automatically be paid out to shareholders.

The distribution must comply with several legal and tax rules and, in principle, triggers a withholding tax. In Morocco, dividend taxation has also undergone a significant change in recent years, with a progressive reduction of the applicable rate: 12.50% in 2025, 11.25% in 2026 and 10% in 2027. How does this taxation work, and what happens when the shareholder resides abroad?

What is a dividend?

A dividend is the portion of a company's profit that the company decides to distribute to its shareholders or partners. In order to distribute dividends, the company must, in particular, have distributable amounts available.

In practice, the decision is generally made after:

  • the financial statements for the financial year have been finalized;
  • the financial statements have been approved by the shareholders or partners;
  • the profit has been allocated;
  • distributable amounts have been established;
  • the distribution has been formally approved.

It is therefore important to distinguish between two stages:

  • The company makes a profit ➡️ This profit is subject to Corporate Income Tax (CIT) in accordance with the rules applicable to the company.
  • The profit is distributed to the shareholders or partners ➡️ The distribution may then be subject to withholding tax on dividends.

There is therefore taxation at the company level as well as taxation associated with the distribution of profits.

What is the dividend tax rate in Morocco?

The tax treatment applicable to income from shares, equity interests and similar income is being reduced progressively. The applicable schedule based on the date of distribution is now as follows:

  • Distribution in 2025 ➡️ 12.50%
  • Distribution in 2026 ➡️ 11.25%
  • Distribution from 2027 onwards ➡️ 10%

The reform therefore gradually reduces the withholding tax rate to 10% as of January 1, 2027. The 2025 Finance Law simplified the mechanism for the gradual reduction of withholding tax — the rate is now determined according to the date on which the amounts are distributed, which considerably simplifies the determination of the applicable rate.

How does withholding tax work?

Dividend taxation is based on a withholding-at-source mechanism. In practical terms, the company distributing the dividends does not necessarily pay the shareholder the full gross amount approved for distribution — it withholds the corresponding tax and pays the beneficiary the net amount.

Example in 2026 — a company decides to distribute DH 100,000 in dividends.

  • Withholding tax in 2026: DH 100,000 × 11.25% = DH 11,250
  • The shareholder therefore receives ➡️ DH 88,750 net

From 2027 onwards, for the same DH 100,000 distribution, the withholding tax will be DH 10,000, so the net amount paid will be DH 90,000. For the same gross distribution, the reduction from 11.25% to 10% therefore represents a saving of DH 1,250 for every DH 100,000 distributed.

As a general rule, the company distributing the dividends is responsible for applying the withholding tax. It must:

  • determine the gross amount being distributed;
  • calculate the applicable withholding tax;
  • pay the net amount to the beneficiary;
  • declare and remit the withholding tax to the tax authorities.

What if the shareholder is a non-resident?

This is a particularly important issue for Moroccans Residing Abroad (MREs) and foreign investors holding an interest in a Moroccan company. Being resident abroad does not automatically mean that dividends distributed by a Moroccan company are exempt from Moroccan tax — the General Tax Code provides that income from shares, equity interests and similar income is subject to withholding tax whether it is paid to beneficiaries who are domiciled or headquartered in Morocco or abroad.

When a shareholder is tax resident in another country, further analysis is required. Morocco has entered into tax treaties with numerous countries, notably to prevent double taxation. Depending on the beneficiary's country of residence, the applicable tax treaty, the status of the beneficiary, the beneficiary's percentage ownership, and the conditions provided for under the treaty, the tax treatment of dividends may be different.

📌 The domestic tax rate should therefore not be applied automatically to an international dividend distribution without first checking the applicable tax treaty.

Can dividends be transferred abroad?

When a shareholder or investor is a non-resident, another question arises: can the dividends received be transferred to the shareholder's country of residence? In principle, income generated by a foreign investment made in Morocco in compliance with foreign-exchange regulations may benefit from the convertibility regime.

Dividends are among the types of income that may be transferred under this regime, subject to compliance with the applicable conditions and formalities — this requires, in particular, that the initial investment has been properly structured and documented. Taxation and foreign-exchange regulations must therefore be considered together when a non-resident shareholder receives dividends from a Moroccan company.

Dividends or remuneration: which option should you choose?

For a shareholder who is also a company director or manager, dividend distributions are not necessarily the only way to receive income from the company. Depending on the circumstances, several options may be available:

  • director/manager remuneration;
  • dividends;
  • reimbursement of professional expenses;
  • repayment of a shareholder's current account.

However, these transactions do not have the same legal nature or tax treatment. Remuneration may, subject to certain conditions, constitute a deductible expense for the company, but it is subject to personal income tax (IR) and potentially social security contributions. Dividends, on the other hand, are distributed from profits after taking into account the tax borne by the company and are then subject to the tax applicable to the distribution. The analysis should therefore consider the overall cost for the company as well as the actual net amount received by the shareholder.

Mistakes to avoid

Dividend distributions should not be treated as a simple transfer from the company's bank account to the shareholder's personal account. Several points must be checked:

  • the existence of distributable amounts;
  • proper approval of the financial statements;
  • a valid decision to distribute the dividends;
  • calculation of the applicable withholding tax rate;
  • declaration and payment of the withholding tax;
  • the beneficiary's tax status;
  • the applicable tax treaty in the case of a non-resident shareholder;
  • foreign-exchange regulations when funds are transferred abroad.

A poorly prepared dividend distribution can have tax, legal and accounting consequences for both the company and its shareholders. Dividend distributions should therefore be planned in advance in order to properly secure the legal decision-making process, taxation, reporting obligations and, where applicable, the international transfer of funds.

Support from a chartered accountant or accounting professional can help determine the appropriate treatment for each situation and secure the entire process.