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Bahrain; Morocco

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Treaty between Bahrain and Morocco – details

Details of the Bahrain - Morocco Income Tax Treaty (2000), signed on 7 April 2000, have become available. The treaty was concluded in the Arabic language. The treaty generally follows the OECD Model.

The maximum rates of withholding tax are:

-   10% generally on dividends, but 5% if the receiving company owns at least 10% of the capital of the company paying the dividends (Art. 10(2) (a) and (b));
-   10% on interest (Art. 11(2)). An exemption applies to interest paid to the other contracting state, one of its political subdivisions or local authorities or the central bank of the other contracting state (Art. 11(5)); and
-   10% on royalties (Art. 12(3)).

Capital gains derived from sale of a real property are taxable only in the State of location of the property, whereas capital gains from sale of shares are taxable in the State of residence of the transferor (Art. 13(5)).

Deviations from the OECD Model include that:

-   the definition of a permanent establishment (PE) includes (i) a retail point (Art. 5(2) (c)); and (ii) a farm or plantation (Art. 5(2)(h));
-   10% on interest (Art. 11(2)). An exemption applies to interest paid to the other contracting state, one of its political subdivisions or local authorities or the central bank of the other contracting state (Art. 11(5)); and
-   the rendering of services, including consultancy services, by an enterprise through employees or other personnel engaged by the enterprise for such purposes constitutes a PE, but only if such services continue in the territory of the contracting state for a period or periods aggregating more than 6 months (Art. 5(3)(b));
-   the definition of royalties includes films for television or public broadcasting, the use of, or the right to use, industrial, commercial, agricultural or scientific equipment, (Art. 12(3));
-   a provision on independent services is in line with the UN Model (2001) (Art. 14));
-   a provision on teachers or researchers provides that the remuneration of teachers and researchers is taxable only in the state of residence provided that their visit to the source state for the purpose of teaching or research at the invitation of an approved educational institution does not exceed 3 years and provided that such payments arise from sources outside that State (Art. 20));
-   items of income not covered by another treaty article may also be taxed in the source state (Art. 22(2)).

The treaty generally provides for the credit method to avoid double taxation. In addition, both states grant a tax sparing credit with respect to tax reduced or exempted in accordance with domestic tax incentives legislation.

If the income derived by a resident of one state is, under the treaty, exempt from tax in that state, the state may nevertheless take into account the exempt income in calculating the amount of tax on the resident's other income (exemption with progression).

Neither treaty party can terminate this treaty during a period of 5 years starting from the date of its entry into force (Art. 29)).

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