The government has published the Finance Law 2024, introducing various changes summarized as follows:
Value Added Tax (VAT)
This measure extends VAT exemption to some basic products, including:
Progressive alignment over 3 years of the VAT rate applicable to electricity, increasing from 14% to 20%, and electricity meter rentals, increasing from 7% to 20%.
The applicable rates for electricity will be adjusted as follows:
The rates applicable to the rental of electricity meters will be adjusted as follows:
Gradual reduction over 2 years of the rate applied to electricity produced from renewable energies (wind, solar, hydraulic, etc.) sold by producers, decreasing from 14% to 10%, as follows:
Gradual increase over a period of 3 years in the VAT rate applicable to refined sugar, rising from 7% to 10%, as follows:
Increase in the VAT rate applied to economical cars from 7% to 10%.
Urban transport operations and interurban passenger and freight transport operations are now subject to a reduced VAT rate of 10% with the right to deduction. The progressive reduction of the VAT rate will be applied over a period of 3 years as follows:
Progressive reduction from 14% to 10%, without the right to deduction, over a two-year period, as follows:
Implementation of a new VAT reverse charge mechanism system allowing individuals engaged in VAT-liable activities to calculate the amount of VAT applied to their purchases from suppliers outside the scope of this tax or exempt from it without the right to deduction. This enables them to deduct this amount from the tax simultaneously, excluding land and agricultural product acquisitions.
VAT WHT on transactions conducted by suppliers of equipment and works subject to VAT:
Clients subject to VAT will perform this WHT on transactions subject to this tax carried out by suppliers of equipment and works who do not electronically provide clients with a certificate from the tax administration, issued within the last 6 months, confirming their tax compliance regarding the taxes listed in the Moroccan Tax Code. This measure will take effect from July 1, 2024.
VAT WHT for transactions conducted by VAT-registered service providers:
This WHT will be applied to service transactions outlined in Article 89-I (5°, 10°, and 12°) of the MTC, as regulated, at a rate of 75% of this tax by:
Are exempted from the withholding tax:
In the case of a tax credit resulting from the application of VAT withholding, refunds are processed according to regulatory procedures.
This measure will take effect from July 1, 2024
Reinstatement of the obligation to retain movable property that has benefited from VAT-exempt purchases or the right to deduction in an asset account for a period of 60 months.
In the absence of retaining these assets for the aforementioned period, the recipient of the deduction or VAT-exempt purchase must reimburse the Treasury an amount equal to the initially granted exemption or deduction, reduced by the amount corresponding to the months elapsed since the acquisition date of these assets.
Operations of transferring movable property by credit institutions and similar organizations in the context of lease-purchase or lease with an option to purchase are also excluded from the aforementioned regularization obligation.
To clarify the tax regime applicable to the leasing of non-equipped professional premises, the Finance Law 2024 specified that these operations are subject to VAT, provided that these premises are acquired or constructed with the benefit of the right to deduction or exemption from this tax. Thus, individuals who have benefited from the exemption or the right to deduction must necessarily invoice VAT to their clients for non-equipped premises leasing operations.
As part of the reform aimed at expanding the scope of VAT, it is proposed to establish a legal framework to address the online provision of dematerialized services by non-resident suppliers to end consumers.
The introduced measures are presented as follows:
- Revision of VAT territoriality rules to establish the principle of taxing digital service transactions based on the consumer's residence.
- Introduction of the obligation for non-resident providers of such digital services to identify themselves on an electronic platform and declare the turnover realized and pay the tax due in Morocco.
In case of fraud related to declaration or payment obligations or both, as provided by current regulations, any financial or administrative responsible of the company, or effective beneficiary of the amount of this tax, may be jointly liable for the tax due, as well as the related penalties and surcharges. In case of contestation of the unpaid amount, the application of this measure is suspended from the date of filing an appeal with the competent court until the date of the final judgment. Even after the final judgment, the company retains the possibility to regularize the unpaid amounts of VAT. Thus, the tax administration will not need to resort to solidarity in case of payment of the VAT due by the company.
Corporate Income Tax
• Introduction of a permanent exemption from corporate income tax for the Mohammed VI Foundation of Sciences and Health for all its activities or operations and for any related income.
• Deductibility of cash or in-kind donations granted to the Mohammed VI Foundation of Sciences and Health established by Law No. 23-23.
Restricting the application of the 35% corporate income tax rate to the sole fiscal year in which the threshold of MAD 100 million in taxable income is exceeded, when such threshold is reached due to non-current income from gains on the disposal or withdrawal of intangible, tangible, or financial assets.
Personal Income Tax
As part of supporting the national strategy for the widespread implementation of social coverage and to ensure tax fairness among all taxpayers, an expansion of the right to deduct social security contributions has been introduced for the compulsory health insurance (AMO) and retirement schemes for professionals, independent workers, and non-salaried individuals subject to income tax under the real or simplified net profit regime.
The gross amount of fees granted to artists, whether working individually or as part of a group, will now be subject to a 30% withholding tax, after applying a flat-rate deduction of 50%.
In the event of the sale of securities and other equity and debt instruments acquired by donation, the acquisition price to be considered is:
In the case of a tax assessment, the tax is calculated based on the information and data available to the administration, relying on the sale price in the absence of such information.
Currently, the registration fee rates applicable to acts of allocating housing to members of housing associations or cooperative members are not harmonized, and they do not ensure the principle of tax fairness.
Indeed, acts of allocating housing to cooperative members are subject to a fixed fee of MAD 200 under conditions specified by the general tax code or a proportional fee of 4% in case of non-compliance with these conditions.
On the other hand, acts of allocating housing to members of housing associations, commonly called "amicale," are subject to a rate of 1.5%.
Therefore, it is proposed to align the registration fee rates for all acts of allocating premises and land by cooperatives or associations by applying the current proportional rates of common law.
Exemption from registration fees for acts related to the activities and operations of the Mohammed VI Foundation of Sciences and Health created by Law No. 23-23.
Notaries, officials performing notarial functions, Adouls, Hebrew notaries, and anyone who has drafted or contributed to the drafting of an act subject to registration are now subject to two obligations:
Introduction of a new mechanism granting taxpayers the "right to error" to regularize their tax situation and spontaneously correct any irregularities identified in their tax returns. This mechanism allows the taxpayer to request the tax administration to provide a statement of the irregularities identified in their declarations, enabling them to submit a corrective return and spontaneously pay any additional taxes owed. The corrective return should be accompanied by an explanatory note, prepared by a statutory auditor, a certified public accountant, or an approved accountant, specifying the rectifications made following the irregularities communicated by the tax administration, as well as any identified by the aforementioned auditor or accountant.
The existing provisions provide for two levels of appeal regarding adjustments to taxable bases in cases where the administration alleges an abusive practice:
As part of the simplification of procedures aimed at combating abusive practices, it is proposed to eliminate the appeal to the Advisory Board for Abusive Practice Appeals, maintaining a single level of appeal before the CNRF. It is important to note that this measure safeguards the rights of taxpayers who have the option to request prior tax consultation from the administration on operations that may constitute an abusive practice. The administration can only invoke the concept of abusive practice within the framework of the contradictory procedure of tax control, which guarantees the right to defense and recourse before the CNRF and the courts.
In order to ensure the consistency of income tax retuns with indicators related to the expenses and assets of individuals, it has been agreed to improve and simplify this procedure. The modifications aim to establish a simplified adversarial procedure that guarantees all taxpayers' rights, allows continuous dialogue with the tax administration during different phases, and provides the right to appeal before the National Tax Appeals Commission and potentially before the relevant courts. It is worth noting that this measure is proposed in parallel with the one concerning the voluntary regularization of taxpayers' tax situations, allowing them to voluntarily regularize their tax situation. This examination cannot last more than six months from the date of notification of the aforementioned examination notice.
To avoid divergent interpretations regarding the application of the non-cumulation principle of tax benefits, the Finance Law 2024 repealed the provisions of Article 165 of the MTC, which provided for the non-cumulation of certain tax benefits with any other benefits provided by other legislative provisions.
Reinstatement on a derogatory basis, for the year 2024, of the measure regarding the voluntary regularization of taxpayers' tax situations, as provided for by Article 7 of the Finance Law for the year 2020. This regularization concerns individuals, for their profits and income taxable in Morocco, not declared before January 1, 2024, and constituting the source of assets and financing of the following expenses:
Introduction of the voluntary regularization contribution for assets and liquidity held abroad before January 1, 2023, by individuals and legal entities with residence, registered office, or fiscal domicile in Morocco. To benefit from this measure, the parties concerned are required to declare their assets and liquidity held abroad, repatriate the foreign currency liquidity, and pay a voluntary regularization contribution:
The voluntary contribution is set at 1.5% of the amount of the unpaid checks subject to unresolved payment incidents, issued before December 31, 2023, provided that said contribution is paid during the year 2024. The amount of the aforementioned contribution is fixed at 10,000 dirhams for individuals and 50,000 dirhams for legal entities, regardless of the number of unresolved payment incidents for checks issued before December 31, 2023. Payment of this contribution is made in a single installment and exempts the parties concerned from penalties related to unresolved payment incidents for checks issued before December 31, 2023.
NAZALI TAX & LEGAL