The Finance Law of 2015 has put measures in place to reform the Moroccan tax system. These measures are aligned with the government’s General Tax Direction for the period 2012-17. Here, we present the key measures included in the Finance Law of 2015.
1. CORPORATE INCOME TAX (CIT)
A. Extension of Casablanca Finance City (CFC) status to representative offices of non-resident companies: After the institution of a specific tax regime for service companies and regional and international headquarters operating under CFC status, under article 10 of Law No. 44-10, as amended and supplemented by Law No. 68-12, the new provisions of the Finance Law of 2015 have completed articles 8 and 19 of the Moroccan Tax Code and extended the benefit of tax incentives granted under CFC status to representative offices of nonresident companies. In accordance with article 19-IIB of the Moroccan Tax Code, representative offices of non-resident companies with CFC status benefit from a reduced corporate tax of 10%, starting from the first year of the status issuance. As provided to companies with CFC status, the taxable basis of representative offices is calculated as follows:
- In case of a profit: the higher of either the tax result or 5% of the operating expenses of representative offices; and
- In case of a deficit: 5% of the operating expenses of representative offices. B. Changes to the treatment of tax surpluses: Before 2015 the corporate tax surplus paid by a company had been charged in provisional instalments, with the remaining amount at the end of the financial year being automatically refunded to the company by the minister of finance in a period of one month from the due date of the last provisional instalment.
To avoid any delays in procedures for obtaining refunds, the provisions of the Finance Law of 2015 allow companies to charge a tax surplus in provisional instalments without a time limitation and possibly on the due tax. This applies to the tax surplus paid from January 1, 2015. As a result, any excess tax paid before January 1, 2015 continues to be governed by article IV-170 of the Moroccan Tax Code.
In order to facilitate stock exchange listings for predominantly real estate companies, and given the specific characteristics of their listed shares both in terms of transfer mode as well as the frequent changes of their owners’ identities, the Finance Law of 2015 removed the obligation to join the nominative list of shareholders’ names to the annual tax return.
2. PERSONAL INCOME TAXES
A. Limiting and increasing deduction rates for incentives and contributions related to pension insurance contracts: Before January 1, 2015, taxpayers liable for personal income tax could deduct from their earned income, without any limitation, pension insurance contributions for insurance contracts that have been taken out, either individually or collectively, for a period of at least eight years from an insurance company established in Morocco and with an intended beneficiary over the age of 50, according to article 28-III of the Moroccan Tax Code. The following modifications are related to this point:
- When a taxpayer only has wage income, he can deduct, up to a limit of 50% of his taxable net salary received during his activity, the contributions to his pension insurance contracts;
- When the taxpayer has wage income and income from other categories, he has the possibility to deduct those contributions, either up to the limit of 50% of the taxable net salary received regularly during his activity, or up to the limit of 10% of his taxable total income; and
- When the taxpayer has other sources of income, he has the possibility to deduct those contributions up to the limit of 10% of his total taxable income. These measures are applicable to pension contracts concluded from January 1, 2015. Consequently, contracts concluded before this date continue to benefit from the tax regime applicable before January 1, 2015. B. Taxation of advances granted to taxpayers as a part of their pension insurance contracts: An advance is defined in Moroccan law as a loan given by the insurer to the subscriber. These advances can be given as a part of pension insurance contracts up to the limit of the contract’s repurchase value.
Starting from January 1, 2015, advances that are granted by the insurer to the subscriber before the term of the contract and/or before the age of 50 will be considered as taxable repurchases. The received amount will be subject to a withholding tax, imposed by the payer of the allowance, at the rate of the current scale applied at the time when the transaction is realised. The withholding will be applied without any tax allowance or prejudice to the application of the penalties planned in article 208 of the Moroccan Tax Code.
The advance must be distributed equally over four years or over the effective period of subscription, if the duration of this period is less than four years. This enables taxpayers to determine the annual tax amount. The appropriate treatment is then to multiply the annual tax by four, or by the number of effective years of contributions, if this number is less than four years. C. Statutory exclusion of certain professions, activities and services from the auto-entrepreneur ( self-employed) regime: Article 4 of the Finance Law of 2014 had excluded taxpayers practising liberal professions from the auto-entrepreneur regime.
However, some of the occupations appearing in the above decree can be practised by auto-entrepreneurs, as entrepreneurs of diverse or computing works. The measures of the Finance Law of 2015 modified article 42-III of the General Tax Code to statutorily exclude some professions, activities and services from the above-mentioned system. D. Institution of an online declaration and payment option for auto–entrepreneurs: The measures included in the Finance Law of 2015 raise the possibility of online declaration and payment for auto-entrepreneurs through the institution of a platform dedicated especially to taxpayers. Online declaration and payment has the same legal effect as that laid out in the General Tax Code. E. Limitation of the exemption period for the internship allowance of Dh6000 (€534): The Finance Law of 2015 provides for a limitation to the exemption period for the internship allowance. This period will last for 24 months instead of 36 months. This exemption is granted under the following conditions:
- The trainees must be registered for at least six months with the National Agency for the Promotion of Employment and Skills;
- The same trainees cannot benefit twice from this exemption;
- The employer has to make a commitment to proceed with the recruitment of at least 60% of the trainees. F. Exemption of gross monthly salaries with an upper limit of Dh10,000 (€890): To promote the integration of the informal sector, a suggestion has been made to exempt, for a period of 24 months, gross monthly salaries with an upper limit of Dh10,000 (€890) paid by a company created between January 1, 2015 and December 31, 2019. This exemption can be granted up to a limit of five employees.
The employee must be recruited within the framework of a permanent employment contract. The recruitment must be made in the first two years from the date of the creation of the company.
In addition, the employer has to produce before March 1st of every year a declaration with a list of the employees benefitting from this exemption. G. Progressive tax allowance rates applicable to gross pension amounts: Before January 1, 2015, the taxable net income related to pensions and life annuities was determined after the application to the total amount of the following proportional tax annual rates:
- 55% when the gross amount does not exceed Dh168,000 (€14,952) annually; and
- 40% when the gross amount exceeds Dh168,000 (€14,952) annually. As of January 1, 2015, these tax allowance rates are applied in a progressive way as follows:
- 55% on the annual lower gross amount or equal to Dh168,000 (€14,952); and
- 40% for the surplus. These rates are applied to pensions and annuities acquired after the date of January 1, 2015. H. Taxation of the sales profits, for consideration, of shares or partnership shares of listed companies mainly active in real estate: Before January 1, 2015, sales profits, for consideration, of shares or partnership shares of listed companies mainly active in real estate were subject to personal income tax on real estate profits. To encourage companies mainly active in real estate to list on the stock exchange, the Finance Law of 2015 modified articles 61-II and 66-II, respectively, of the Moroccan Tax Code.
For this purpose, companies will submit the gains resulting from the transfer of shares of companies mainly active in real estate that are not quoted on the stock exchange to the personal income tax in the category of real estate profits.
Gains resulting from the transfer of shares of companies mainly active in real estate that are quoted on the stock exchange will be subject to personal income tax as movable capital asset profits. I. Granting the choice of tax treatment for wages and gross salaries paid to the employees of companies with CFC status: Starting from January 1, 2015, employees of companies with CFC status can opt with their employers for either the taxation of their treatments, emoluments and salaries at a fixed rate of 20%, or for taxation on a progressive scale as laid out in article 58 of the Moroccan Tax Code. J. Determination of the taxable net profit related to bonds and other debt securities: In accordance with article 70 of the Moroccan Tax Code, the sales net profit is calculated by setting the difference between the sale price, as reduced by trading and commission fees, and the purchasing price, as raised by acquisition fees. Starting from January 1, 2015, sale prices are defined by the security capital, including accrued interest. K. Changing the declaration obligations for movable capital assets, income and profits: For income and profits of movable assets from foreign sources generated by securities not registered in an account with authorised financial intermediaries, the tax due for these securities has to be versed spontaneously, according to article 173-I of the Moroccan Tax Code, before April 1st of the year following the year in which the incomes and profits were realised, given or registered in an account of the beneficiary.
For those declared with banks, the tax is paid according to article 174-II of the Moroccan Tax Code. With regards to the declarative obligations:
• For the movable capital assets profits, the financial intermediaries have to recalculate for every securities holder the sales made every year for movable assets from foreign sources;
• For shares income, the intermediaries must send a declaration to the tax inspector of the place where their head office is located before April 1st of every year; and
- For fixed income, this declaration must be made in the same way as for shares income. L. Repeal of the record-keeping obligation for taxpayers whose earned income is determined by the fixed profit regime: Following taxpayer complaints and government commitments, paragraph III of article 6 in the Finance Law of 2015 repealed the following articles:
- 145 on the holding requirement of the register;
- 212 on the control of the register; and
- 229 on taxation after register inspection. Following the repeal of these articles, the taxpayer practising his professional activity under the auto-entrepreneur regime is also exempted from holding such a registry in accordance with article 42-II-b-C of the Moroccan Tax Code. M. Institution of an obligation to present purchase vouchers for taxpayers whose professional income is determined by the fixed profit regime and the amount of dues exceeds Dh5000 (€445): According to article 40 of the Moroccan Tax Code, every purchase of goods and services made by a taxpayer with a supplier submitted to professional tax has to be justified by an invoice or a receipt.
In the event that the supplier is not submitted to professional tax and was unable to deliver an invoice, the taxpayer has to establish an expense order that includes:
- The name and address of the provider; and
- The modalities of purchasing and supplying. Starting January 1, 2015, the tax administration will be able to ask every taxpayer with a professional income determined by the fixed profit regime to present the purchase invoices or any other voucher for any amount that exceeds Dh5000 (€445). N. Extension of the advantage related to contributions of business assets from individuals to companies liable for corporate tax: The Finance Law of 2015 has extended the tax measures related to the contribution of business assets to companies liable for corporate tax under two conditions:
- The assets transferred must be evaluated by an independent auditor; and
- This contribution has to be made between January 1, 2015 and December 31, 2016. The advantage is only provided if the recipient company presents a declaration of its contribution to the tax inspector of the place where its head office is located, with a deadline of 60 days following the date of the contribution. O. Extension of promotional measures for new taxpayers in the informal sector: In applying article 6 of the Finance Law of 2015, all taxpayers who belonged to the informal sector and identified themselves to the tax administration starting January 1, 2015 are liable for income tax only on the revenues realised since the date of their identification.
At the moment of disposal or withdrawal of the assets, stocks held by taxpayers with professional income, and identifying for the first time to the tax administration, are evaluated in order to provide a margin higher or equal to 20%. This is an incentive granted to people working in the informal sector, which allows the suspension of taxation of the capital gain on the contribution of stocks until cession.
3. VALUE-ADDED TAX (VAT)
The major tax measures provided by the Finance Law of 2015 are the application of rates of 10% and 20% to a limited selection of exempted goods and services, the extension of the official exemption period for investment goods and the reduction of the investment project threshold. A. The 10% rate will be applied to the following areas:
• The interest on credit operations related to social housing in terms of property construction loans. This rate will be applied to credit interests where the contract is concluded on or after January 1, 2015;
- Solar water heaters were subject to a 14% rate, but according to the government support plan this rate was reduced to 10% for 2015;
- Artworks were subject to a 20% rate, in order to bring the tax rate into line with international practices related to the art field. The Finance Law of 2015 has fixed a rate of 10% for all works of art.
- The 10% rate is applicable to nets, materials and products used to attract and capture fish. B. The 20% rate will be applied to some exempt goods and services:
- Flour, rice and starches, except for milled rice, which is subject to a 10% rate;
- Tea is subject to a 14% rate, but according to the Finance Law of 2015, this has increased to 20%;
- The highway toll is applied at a rate of 20%. C. Extension of the exemption period for investment goods: The VAT-exempt period for investment goods was limited to 24 months in accordance with the Moroccan Tax Code. Responding to the demand of various economic actors, the Finance Law of 2015 has introduced a new measure to extend the exemption period for investment goods from 24 to 36 months from the start date of the activity.
This measure is applicable for all new companies created from January 1, 2015. It also concerns the companies that have not exceeded the deadline of 24 months starting December 31, 2014. D. Reduction of investment project threshold: Under the Moroccan Tax Code all equipment, goods, materials and tools necessary for the realisation of investment projects valued at a minimum of Dh200m (€17.8m) are exempted from import VAT for a period of 36 months starting the date of the activity in accordance with the agreement concluded with the government .
To extend the benefits of this regime to more potential investors, the Finance Law of 2015 has reduced the threshold for investment projects eligible for the conventional regime from Dh200m (€17.8m) to Dh100m (€8.9m). This new investment threshold is applicable to agreements signed with the government starting from January 1, 2015. E. Rules for the transition following the change in the VAT rate: Taxpayers affected by the application of the reduced tax rate of 10% or the standard tax rate of 20% according to article 125 of the Moroccan Tax Code should be aware that amounts received from January 1, 2015 on for taxable transactions made before that date are subject to the tax regime applicable at the date of the invoice. As a result, before March 1, 2015 taxpayers must submit a list of debtors clients’ names from December 31, 2014, indicating for each of them the amount due in respect of taxable transactions subject to the rate at December 31, 2014.
4. REGISTRATION FEES & STAMP DUTIES
Registration of the sale of shares of listed companies mainly active in real estate is not obligatory if a private agreement was reached. The sale of shares of an unlisted company mainly active in real estate needs to be submitted for registrations fees, however, in application of the new disposal of article 127. For this purpose, a rate of 4% will be applied to the sales of shares starting on January 1, 2015.
5. MEASURES FOR STAMP DUTIES
According to the Finance Law of 2015, stamp duty is payable for companies that have a turnover that is equal to or exceeds Dh2m (€178,000). Where turnover is less than Dh2m (€178,000), the company is exempted from stamp duty for a period of three years. According to the Finance Law of 2015, all gifts granted to an association to promote art are deductible. 6. MEASURES FOR CORPORATE & INCOME VAT To enhance tax management, the provisions of articles 155 and 169 were completed by new measures benefitting small and medium-sized enterprises (SMEs). The SMEs can proceed to the online declaration and payment of their taxes. Starting on January 1, 2016, this move will affect SMEs with a turnover of at least Dh10m (€890,000), and from January 1, 2017, SMEs with a turnover of at least Dh3m (€267,000). 7. COMMON MEASURES FOR ALL TAXES & LAWS Before the Finance Law of 2015, the purchase of lower-cost or social housing was an exclusive right reserved for Moroccan citizens. This right has been extended to foreigners living regularly in Morocco, who can henceforth buy lower-cost houses.
In order to promote investment in social and lowercost housing in 2015, the rental royalty will be increasing from Dh700 (€62) to Dh1000 (€89) for lower-cost housing and from Dh1200 (€107) to Dh2000 (€178) for social housing. The exempt rental period will be reduced from 20 years to eight years.
To ensure a stable tax environment for multinational companies, articles 234b and 234c in chapter 5 of the Finance Law of 2015 state that the period of an advanced transfer pricing agreement cannot exceed four years.
The modalities of the agreement have been secured by a legal text, which includes:
- The deposit, form and content of the demand;
- The exam of the demand;
- The period of the agreement; and
- The framework to monitor the agreement.