92 PERSPECTIVES ON BUSINESS AND ECONOMICS | VOL 42 | 2024 country like Morocco is stagnation in developing infrastructure (roads, transportation, and electricity) that funnels into the demand and ability to market commercial real estate for these OPCIs. According to recent commentary by the World Bank (2023), the country is in fact facing some issues in terms of general market conditions. As of May 2023, GDP growth from 2021 to 2022 fell from 7.9% to around 1.2%. A subsequent fear is the impact on pricing commercial properties and difficulties tenants face to cover their rents. According to a Bank Al-Maghrib report on real estate (2023), the transaction volume for commercial properties had dipped heavily. From Q2 to Q3 of 2023, transaction volumes in business premises and offices had dipped 9.2% and 15.9%, respectively. Compared to Q3 of 2022, the transaction volumes of business premises showed a decline of 16.5%, whereas offices actually had an increase of 4%. As discussed previously, falling transaction volumes could indicate that real estate markets in Morocco are suffering, hinting at potential slowdowns and market impediments as risks inherent in forming and investing in OPCIs. More positively, Bank AlMaghrib’s real estate price index showed that since Q3 of 2022, the pricing of professional properties in general (both business premises and offices) had increased by around 1.7%. This growth is a hopeful sign for OPCIs, which may benefit from not only the tenant cash flows but also the appreciation of the underlying properties. The complex array of governmental agencies involved in forming and overseeing OPCIs (shown in Figure 1) and the range of asset categories (outlined in Table 1) offer their own challenges. Shifting tax incentives and strict requirements in the creation of an OPCI pose potential challenges for the continued adoption of such an instrument. Law 70.14, enacted in 2017, outlined various stipulations surrounding the OPCI structure. The initial framework outlined a 50% tax reduction on gains from property contributions to the structure which, if it had not been amended, would have ended in 2022. Also, an initial policy was in place that would reduce the amount of reportable income to corporations receiving OPCI distributions by 60% (Moroccan Capital Market Authority, 2022). In 2023, Morocco’s new Finance Law changed the leniency on OPCI taxation. The 50% reduction for contributions was cancelled and replaced with a deferral of tax payment until assets were sold. Furthermore, the 60% deduction was reduced to 40%, assuming the OPCI allows at least 40% of its existing shares are sold to the public. Dwindling tax benefits of the structure may, in turn, be perceived negatively by those contemplating adoption and, from an investor perspective, the lower reduction to reportable income may also discourage investment. Finally, the framework for OPCIs stipulates how corporate tax exemptions would only be granted if the requirements listed in Table 2 are met. Specifically, the extensive asset holding period and high distribution requirements are of note for OPCI managers. By mandating a 10-year asset holding period before realizing tax benefits, OPCI managers may feel limited in their ability to sell old properties and acquire new ones. Furthermore, a high distribution of earnings may limit the ability of an OPCI structure to reinvest retained earnings back into new property acquisitions and land developments. Regulators must weigh such Table 2 Conditions to benefit from total corporate tax exemption Table 2 Conditions to benefit from total corporate tax exemption Condition Description 1 Evaluation of assets by a governmental contribution commissioner 2 Must hold and conserve the assets contributed to the OPCI structure for a period of at least 10 years from the date of contribution 3 Distribution of a minimum of 85% of the earnings from the financial year pertaining to rental of buildings constructed for professional and residential use 4 Distribution of 100% of dividends and shares received 5 Distribution of 100% of fixed income investment products received 6 Distribution of a minimum of 60% of the capital gain realized on the transfer of securities Source: Moroccan Capital Market Authority, 2022. Condition Description 1 E valuation of assets by a governmental contribution commissioner 2 Must hold and conserve the assets contributed to the OPCI structure for a period of at least 10 years from the date of contribution 3 D istribution of a minimum of 85% of the earnings from the financial year pertaining to rental of buildings constructed for professional and residential use 4 D istribution of 100% of dividends and shares received 5 D istribution of 100% of fixed income investment products received 6 Distribution of a minimum of 60% of the capital gain realized on the transfer of securities
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