The "Mother-Daughter" Structure: Should You Keep Your Moroccan HQ or "Flip" to a French Holding?

For high-growth startups originating in the MENA region, there comes a pivotal moment—usually around the €500k ARR mark or just before a fundraising round—where the initial corporate structure becomes a liability.

You likely started with a single entity: a SARL in Casablanca, Tunis, or Algiers. As you expand into Europe, the natural instinct is to open a "branch" or a simple subsidiary to handle local invoicing.

However, if your goal is to raise venture capital, exit via acquisition, or optimize the flow of revenue between continents, a simple subsidiary is often insufficient. You are faced with a structural choice:

1. The "Classic" Model: Your Moroccan company remains the HQ; the French entity is just a local satellite.
2. The "Flip" (Holding Model): You create a French Holding company (SAS) that acquires 100% of your Moroccan company, effectively turning your original HQ into a technical subsidiary.

This is not just a legal formality. It is a decision that fundamentally alters your tax exposure, your investability, and your operational control. This guide breaks down the mathematics and strategy behind the "Mother-Daughter" (Mère-Fille) structure for cross-border founders.

Part 1: The "Classic" Route (Moroccan Parent -> French Subsidiary)

In this scenario, your Moroccan company (let’s call it "Atlas Tech SARL") owns 100% of the shares of your new French company ("Atlas France SAS").

The Logic: This is the path of least resistance. You are already generating revenue in Morocco. You simply need a French SIRET number to invoice European clients who refuse to wire funds to a non-SEPA bank account.

The Advantages

• Simplicity: You retain your center of gravity in Morocco, where operational costs are lower.
• Moroccan Sovereignty: You avoid the complex "Share Swap" (Apport de Titres) process required for a flip.
• Lower Corporate Tax (Initially): Morocco’s progressive IS (Corporate Tax) rates for 2025 start at 17.5% for profits under 300,000 MAD. France’s standard rate is 25% (though small businesses pay 15% on the first €42,500). If your profits are moderate, keeping them in Morocco can be tax-efficient.

The Strategic Dead End

The problem arises when you try to scale.

• The "VC" Block: European Venture Capital funds are bound by strict mandates. 99% of them cannot (or will not) invest in a Moroccan SARL due to legal due diligence costs and perceived jurisdictional risk. If your HQ is in Casablanca, you are invisible to Paris/London VC money.
  
  
• The "Dividend Trap" (Upward Flow): If your French subsidiary becomes highly profitable, repatriating that cash to the Moroccan parent is inefficient. While tax treaties exist, the flow of capital from North to South is often scrutinized heavily by French tax authorities who may view transfer pricing arrangements with suspicion.

Part 2: The "Flip" (French Holding -> Moroccan Subsidiary)

In this scenario, you incorporate a French SAS (the "Holding"). You then contribute your shares of the Moroccan company to this French SAS.

• Result: You (the founder) now own shares in the French SAS. The French SAS owns the Moroccan SARL.

The Logic: You are effectively moving your commercial headquarters to Europe while keeping your production/engineering team in North Africa.

Why Investors Demand This

1. IP Protection: Investors want the Intellectual Property (IP) held in a jurisdiction with robust legal enforcement (France/EU).
2. Liquidity: In an exit scenario (acquisition), it is infinitely easier for a buyer to acquire French shares than Moroccan shares, specifically regarding the repatriation of the sale proceeds.
3. Valuation: A SaaS company headquartered in Paris often commands a higher revenue multiple (4x-8x) than the exact same company headquartered in North Africa (2x-4x), simply due to market comparables.

Part 3: The Tax Mechanics: "Régime Mère-Fille"

If you choose the Holding model (The Flip), your biggest concern is double taxation.

• If the Moroccan subsidiary makes €100k profit, pays tax in Morocco, and sends the rest to France, is it taxed again?

The answer lies in the French "Régime Mère-Fille" (Parent-Subsidiary Regime).

How it Works (2025 Rules)

France encourages holding companies. If a French company owns at least 5% of the capital of a subsidiary (French or foreign) for at least 2 years, it can opt for this regime.

The Calculation:

1. Moroccan Profit: €100,000
2. Moroccan Tax (IS): Let’s assume ~20% (approx €20,000).
3. Dividend Distributed: €80,000 sent to France.
4. Withholding Tax (Retenue à la Source): Morocco applies a withholding tax on dividends leaving the country. Under the France-Morocco Tax Treaty, this is typically 15%.
   • Cost: €80,000 * 15% = €12,000 left in Morocco.
   • Net received in France: €68,000.
5. French Taxation (The Exemption):
   • Under Régime Mère-Fille, the €68,000 is 95% tax-exempt.
   • You are only taxed on a "Quote-part de frais et charges" of 5%.
   • Taxable Base: €68,000 * 5% = €3,400.
   • French Corporate Tax (25%): €3,400 * 25% = €850.

The Total Tax Leakage: To move that profit from Morocco to the French Holding, you paid:

• €12,000 (Moroccan WHT)
• €850 (French IS)
• Total Friction: ~18.8% of the dividend amount.

Is this perfect? No. Losing 15% to Moroccan Withholding Tax is painful. Is it viable? Yes. It allows you to consolidate cash in France to reinvest in growth, hire sales teams, or acquire competitors.

Part 4: The "Transfer Pricing" Danger Zone

Whether you choose Model A or Model B, the flow of money between your two entities will be watched by two tax administrations: the Direction Générale des Impôts (Morocco) and the DGFIP (France).

They both look for the same thing: Disguised Profit Shifting.

The "Cost Plus" Model

The most common way to structure the relationship is to treat the Moroccan entity as a "Service Provider" to the French entity.

• The French entity sells the product to the final client (e.g., €100/month subscription).
• The Moroccan entity does the R&D and support.
• The French entity pays the Moroccan entity its costs (Salaries + Rent + Overhead) plus a margin (markup).

The Golden Rule: The markup must be "Arm's Length" (Pleine Concurrence).

• If you pay your Moroccan subsidiary only cost + 0%, the Moroccan tax authority will argue you are under-reporting profit in Morocco to avoid tax.
• If you pay cost + 50%, the French tax authority will argue you are inflating costs to reduce French tax.
• Standard Safe Harbor: A markup of 5% to 10% on costs is generally accepted for routine software development services, though a Transfer Pricing study is recommended for revenues exceeding €1M.

Part 5: The "Branch" (Succursale) – The False Friend

Some founders ask: "Why create a company at all? Why not just open a Branch (Succursale)?"

A branch is not a separate legal entity; it is just an office of the foreign company.

• Pros: No need for minimum capital; losses in the branch can sometimes be deducted from the head office profits.
• Cons:
  1. Unlimited Liability: If the French branch gets sued, your Moroccan HQ is fully liable.
  2. Banking Nightmare: Opening a bank account for a foreign branch is even harder than for a subsidiary (see our previous article on the Banking Crisis).
  3. Tax Complexity: Determining which profit belongs to the branch vs. the HQ is messy and often leads to double taxation disputes.

Verdict: For 95% of tech companies, the Branch structure is a mistake. Stick to the Subsidiary (SAS/SARL).

Summary: The Decision Matrix

Which structure is right for you in 2025?

The Nounda Recommendation

If you are bootstrapping a lifestyle business and plan to live in Morocco long-term: Keep the Moroccan HQ. Open a simple French subsidiary only if you need a local RIB for clients. It saves you complexity and keeps your wealth in a lower-cost jurisdiction.

If you are building a startup with the intent to raise funds, issue stock options (BSPCE) to employees, or sell the company within 5-7 years: Execute the Flip. The cost of the setup (approx. €2k–€4k for legal fees + auditor) is an investment in your company's valuation.

The "Mother-Daughter" regime allows you to move cash efficiently enough to make this work, but the real value isn't the tax rate—it's the credibility of having an "SAS" on your letterhead rather than an "SARL."

(Note: Nounda assists with the coordination of the 'Commissaire aux Apports' required for the share swap process in France. Contact our advisory team for a simulation of the costs.)