The Morocco–Spain tax treaty: an old text with three unusual features.
Updated
Signed in Madrid in 1978, in force since 1985, drafted in French and never modernised. It does something almost no current Spanish treaty does — it exempts business profits rather than crediting them — and it treats a shop, and a warehouse of someone else's stock, as a permanent establishment.
With progression, not credited. Unusual among Spain's treaties.
Dividends
10% / 15%
10% on a direct holding of 25% or more; 15% otherwise.
Royalties
5% / 10%
5% on copyright, 10% on patents, trademarks and technical studies.
The short answer
What does the Morocco–Spain treaty do?
It allocates taxing rights between the two countries and caps what the source state may withhold: 10% or 15% on dividends, 10% on interest, and 5% or 10% on royalties depending on what is licensed. Its most consequential feature is the method used to remove double taxation — for most income it is exemption with progression, not a tax credit.
The convention was signed in Madrid on 10 July 1978, ratified in December 1984 and entered into force on 16 May 1985. It runs to 29 articles, was drafted in French, and has never been renegotiated — the only subsequent instrument is an exchange of interpretative letters from 2015, published in 2016.
That age shows in ways that matter commercially. Some provisions are more generous than a modern treaty; others reach further. Reading it against the OECD model will mislead you in both directions.
Two ways to remove double taxation, and why this one is different
Why this matters. Under a credit treaty, operating through a lower-taxed country buys you a timing advantage at most. Under an exemption treaty the lower rate is the rate you keep. This single article changes the economics of a Moroccan permanent establishment for a Spanish group.
The rates.
Income
Cap
Condition
Dividends
10%
Recipient is a company, other than a partnership, directly holding at least 25% of the capital
Dividends
15%
All other cases
Interest
10%
Flat. No exemption category in the article itself
Royalties — copyright
5%
Literary, artistic and scientific works, excluding cinema and television films
Royalties — industrial property
10%
Patents, designs, models, plans, secret formulas and processes
Royalties — extended list
10%
Trademarks, film rental, industrial and scientific know-how, technical or economic studies, and hire of agricultural, industrial, port, commercial or scientific equipment
The line consultancies keep crossing
Technical and economic studies are royalties here.
Article 12(2)(c) sweeps remuneration for technical or economic studies into the royalty article at 10%. A Spanish engineering or advisory firm invoicing a Moroccan client for a feasibility study is not receiving a service fee outside the treaty's withholding articles — it is receiving a royalty, and the source state may withhold.
The 2015 exchange of letters narrowed this usefully: a "technical or economic study" is an analysis in which one party uses its own knowledge and experience to carry out the work itself, without transferring that knowledge to the other party. Where know-how genuinely passes, the analysis differs.
What creates a permanent establishment.
Article 5 is short. Two entries in it are not in the OECD model, and one of them is unusually wide.
Article 5, and where it exceeds the model
Read that last one twice. In most treaties, using a genuinely independent distributor is the safe structure. Here, if that distributor holds your stock on consignment and ships from it, the stock itself is said to establish a permanent establishment — independence notwithstanding.
Construction PE threshold, compared
Morocco–Spain 1978Over 12 months
OECD modelOver 12 months
India–Spain, for contrastOver 6 months, aggregated
On construction the Moroccan treaty is conventional — twelve months, no aggregation clause, no equipment-pricing rule. Where it reaches further is on premises and stock, not on projects.
What the treaty does not tax.
A 1978 text lacks provisions that became standard later, and the absences are worth as much as the rates.
Four gaps, all favourable to the taxpayer
Article 13(3)
No share-sale clauseGains on anything other than immovable property and PE assets are taxable only in the seller's state. No real-estate-rich company rule, no substantial-holding rule.
Article 18
Private pensionsTaxable only in the state of residence. No source-state carve-out.
Article 21
Other incomeResidence state only, unless effectively connected with a PE or fixed base.
Absent entirely
No anti-abuse machineryNo limitation-on-benefits article, no principal purpose test in the text, and no beneficial ownership condition in the dividend article.
Do not over-read the last one
An old treaty is not a licence.
The absence of anti-abuse language in a 1978 text does not mean arrangements are unchallengeable. Spanish domestic anti-avoidance rules apply independently of the treaty, EU law reaches structures involving member states, and both administrations can address artificial arrangements without a treaty clause. The gaps describe what the convention says, not what a tax authority will accept.
People, not just profits.
Situation
Article
Rule
Independent professional
14
Taxed at home unless there is a fixed base, or presence of 183 days or more in the fiscal year
Employee
15
Home state only if under 183 days, paid by a non-resident employer, and not borne by a PE — all three
Company director
16
The company's state may tax directors' fees
Private pension
18
Residence state only
Government service
19
Paying state, with the usual nationality exception
Student or trainee
20
Maintenance and training payments from abroad not taxed in the host state
Dual residence
4
Permanent home, centre of vital interests, habitual abode, nationality — in that order
Getting the rate.
What a Spanish payer needs before withholding at the treaty rate
Step 1
A residence certificate naming the conventionIssued by the Moroccan tax administration and stating residence for the purposes of the convention with Spain. Generic certificates are refused.
Step 2
Valid on the payment dateThese certificates have a limited life. Recurring payments need a renewal calendar, not a one-off document.
Step 3
Classify the payment correctlyCopyright at 5% and industrial property at 10% sit in the same article. Technical studies fall on the 10% side. The invoice description does not decide it.
Step 4
Give it to the payer before paymentRelief at source depends on the withholding agent holding the evidence when it withholds. Afterwards you are in refund territory.
One clarification from the 2015 letters is worth having in writing: payments made by a Spanish resident to a permanent establishment situated in Spain for services that establishment provides are not subject to withholding at source, where they are attributable to the PE under Article 7.
Where this becomes a decision
An old treaty rewards reading and punishes assumption.
The exemption method, the shop clause and the consignment-stock rule all cut against what a general adviser would expect. We read the position against the actual text before the structure is built, not after a withholding notice arrives.
The residence state does not tax the income but may take it into account when setting the rate on other income. Article 23(1).
Credit method
The residence state taxes the income and deducts the foreign tax. Used here only for dividends, interest and royalties.
Permanent establishment
A fixed place of business through which an enterprise carries on all or part of its activity. Article 5.
Technical or economic studies
Analysis where a party applies its own knowledge without transferring it. Taxed as a royalty at 10%.
Consignment stock
Goods held by an intermediary and owned by the supplier until sale. Article 5(5) treats such a stock as establishing a PE.
Residence certificate
Proof of residence issued by the other state, which must refer to this convention to support a treaty rate.
Tax sparing
Article 23(3) deemed Moroccan tax of 10% on interest from listed development bodies, for ten years from entry into force.
Mutual agreement procedure
Article 25. A claim may be taken to the other state's authority if unresolved after six months.
Frequently asked
Is there a tax treaty between Morocco and Spain?
Yes. The convention was signed in Madrid on 10 July 1978 and entered into force on 16 May 1985. It covers income and capital, runs to 29 articles with an attached protocol, and was drafted in French. It has never been renegotiated; the only later instrument is an exchange of interpretative letters agreed in 2015 and published in 2016.
What are the withholding rates?
Dividends are capped at 10% where the recipient is a company, other than a partnership, directly holding at least 25% of the capital, and 15% in all other cases. Interest is capped at 10%. Royalties are capped at 5% for copyright in literary, artistic and scientific works excluding films, and 10% for patents, designs, trademarks, know-how, film rental, equipment hire and technical or economic studies.
How is double taxation actually removed?
Mainly by exemption, which is unusual. Under Article 23(1) the residence state exempts income that the other state may tax, while retaining the right to take it into account in setting the rate on the taxpayer's remaining income. The credit method applies only to dividends, interest and royalties under Article 23(2). For business profits attributable to a permanent establishment, exemption is the rule.
Does a shop create a permanent establishment?
Under this treaty, yes. Article 5(2)(h) lists a shop among the examples of a permanent establishment, with no time or turnover threshold attached. That is not a provision of the OECD model, where a place used only for display or delivery would ordinarily be excluded as preparatory or auxiliary.
Can an independent distributor create a PE?
Yes, if it holds your stock. Article 5(5) preserves the usual exception for brokers, general commission agents and other intermediaries acting in the ordinary course of business — and then provides that where the intermediary holds a stock of goods on deposit or consignment from which sales and deliveries are made, that stock is taken to establish a permanent establishment. This is materially wider than the equivalent OECD provision.
How are technical service fees treated?
As royalties, at 10%. Article 12(2)(c) expressly includes remuneration for technical or economic studies. The 2015 exchange of letters defines these as analyses in which one party uses its own knowledge, skills and experience to carry out the work itself without transferring that knowledge — which narrows the category but does not remove it. Spanish advisory and engineering firms invoicing Moroccan clients should price for the withholding.
Does the treaty tax gains on shares?
Generally no. Article 13(3) gives exclusive taxing rights to the seller's state of residence for gains on any property other than immovable property and assets of a permanent establishment or fixed base. There is no real-estate-rich company clause and no substantial-holding clause, both of which appear in most treaties concluded since. Domestic anti-avoidance rules still apply.
Has the treaty been modified by the MLI?
The convention remains a 1978 text with a 1985 entry into force, and the position should be verified against the current instruments before relying on it for a specific transaction. What is clear from the text itself is that it contains no limitation-on-benefits article and no principal purpose test, and no beneficial ownership requirement in the dividend article — features standard in modern treaties.
What proof does a Spanish payer need?
A residence certificate issued by the Moroccan tax administration stating residence for the purposes of this convention, valid on the payment date, provided to the payer before payment. Generic tax certificates without that wording are commonly rejected. If the evidence arrives after the payment, the route is a refund claim rather than relief at source, which is slower and depends on the payer's cooperation.
Based on the Convention between the Government of the Kingdom of Spain and the Government of the Kingdom of Morocco of 10 July 1978, ratified 4 December 1984, in force 16 May 1985, published in the BOE of 22 May 1985, together with its protocol and the interpretative exchange of letters of 2015 published in 2016. Article references are to that convention. Treaty application depends on facts and on both states' domestic law; positions should be verified before relying on them. General information as at September 2026, not tax advice.
Founder, Voixa Consultors · International corporate structuring since 2008
Seventeen years designing and delivering cross-border corporate structures — incorporation, tax, holding, banking and market entry — for founders and companies expanding into Spain and the EU. Author of professional books on entering the Spanish market.