The 2019 Finance Law was published in the Official Bulletin No. 6736 bis on December 21, 2018, and promulgated by Dahir (royal decree) No. 1-18-104 of December 20, 2018. The law introduces a number of tax developments, including changes to income tax for corporations and self-employed individuals, real estate investment and tax incentives for offshore companies.

Corporate Income Tax

The 2019 Finance Law revises the progressive scale for corporate income tax that was established in 2018. This has resulted in a reduction of the tax rate for those earning between Dh300,000 (€27,000) and Dh1m (€90,000), from 20% to 17.5%.

Additionally, the 2019 Finance Law provides for the progressive taxation of companies that benefit from the application of reduced rates, such as export companies, hotels, and private education or vocational training institutions. These companies had previously been subject to a proportional rate – generally 17.5% – which can place them in a less favourable position than common law companies subject to the progressive scale.

It should be noted that the law does not provide for any specific provision other than its entry into force on January 1, 2019. In this context, reference should be made to Article 163-II of the General Tax Code, which states that “levies, duties and taxes are calculated at the rates in force at the expiry date of the reporting periods provided for in Articles 20, 82, The 2019 Finance Law revises the progressive scale for corporate income tax that was established in 2018. This has resulted in a reduction of the tax rate for those earning between €27,000 and €90,000, from 20% to 17.5% 83, 84, 85, 110, 111, 128, 150 and 155 of this Code”. As a result, this measure is applicable to tax return and revenue statements filed as of January 1, 2019, and therefore for the year ending on December 31, 2018, for which declarations must be filed no later than March 31, 2019.

Social Solidarity Contribution

The Finance Law outlines the establishment of a social solidarity contribution for the years 2019 and 2020. This contribution, outlined in Article 267 of the General Tax Code, is undertaken by companies subject to corporate income tax, while excluding:

• Companies that are permanently exempt from corporate income tax as referred to in Article 6-I-A of the General Tax Code, such as non-profit organisations and associations, and real estate investment trusts;

• Companies operating in duty-free zones; and

• Service companies holding Casablanca Finance City status. The aforementioned contribution is calculated based on the amount of net profit applied to corporate income tax, equal or greater than Dh40m (€3.6m) at the rate of 2.5%, according to Articles 268 and 269 of the General Tax Code.

Reporting & Remitting

Affected companies must file a return electronically within three months of the closing date of each fiscal year. The social solidarity contribution must be paid at the same time as making the declaration. It should be noted that, according to a notice by the Institute of Chartered Accountants, this contribution should be a charge for FY 2019 and 2020. In the same way as for the evolution of the progressive scale of corporate income tax, this contribution should also apply to the year ending December 31, 2018.

As the Finance Law applies to the contributions for 2019 and 2020, the question arose as to whether the amount paid in 2019 should be accounted for in 2018 – in the same way as corporate income tax – or as an expense for FY 2019.

The Institute of Chartered Accountants issued a statement on this subject following the meeting of its National Council of January 14, 2019. This stated that “the social contribution of solidarity, even if it is based on the fiscal profit for the year ending before January 1, 2019 and 2020, is a contribution made by the targeted taxpayers for the years 2019 and 2020. It must therefore be attached to the said years. The fiscal result for the 2018 or 2019 financial years solely serves as a basis for the calculation of the said contribution”. Therefore, in principle, the contribution paid in 2019 should be recognised as an expense for FY 2019.

Minimum Contribution

The minimum contribution rate applied until 2018 is 0.5% of the amount of taxable income outlined in Article 144 of the General Tax Code, namely turnover, other operating income, financial income, subsidies and donations received from the state. The Finance Law plans for the rate to increase to 0.75%. The minimum contribution applied to business operations for medication and prescription drug sales was also reduced to 0.25%.

The date of entry into force of this new minimum assessment has given rise to much debate. Indeed, if the Finance Law has not, in the same way as for the changes to corporate income tax rates, made any precision as to the first year concerned by this provision, this point cannot be resolved by the application of Article 163-II of the General Tax Code concerning the entry into force of the new progressive scale of corporate income tax. This provision includes a list of the articles of the General Tax Code that it covers, which does not include Article 144 of the General Tax Code relating to the minimum contribution.

In order to remove any ambiguity, Circular Note No. 729 issued by the General Tax Administration states that “the new rates of the minimum contribution governed by the specific provisions of article 144-ID of the General Tax Code, are applicable to fiscal years beginning on or after January 1, 2019.”

Real Estate

Since the 2017 Finance Law, the successive finance laws have put in place a derogation regime relating to real estate investment trusts (REITs). One of the main objectives of these provisions was to set up a tax transparency regime for these instruments, which would not be taxed at their level but at the level of their stakeholders.

As such, the 2018 Finance Law expressly rejected the application of the 100% tax deduction to the proceeds of the stocks, member shares and similar assimilated income from the profits distributed by REITs.

However, this exclusion has raised questions about the Moroccan real estate market, which no longer sees any particular fiscal interest in the establishment of such instruments, whose creation remains legally complicated. In this context, the Finance Law outlines the introduction of a 60% abatement on profits distributed by these vehicles in order to encourage their development. This measure is applicable to fiscal years beginning on or after January 1, 2019.

Transfer Pricing Documentation

Prior to the 2019 Finance Law, Article 214-III of the General Tax Code provided for the possibility of the tax administration to ask companies with direct or indirect links to businesses located outside Morocco for transfer pricing documentation related to:

• The nature of the relationship between taxable enterprise within and outside Morocco;

• The nature of the services rendered or products marketed;

• The method of determining the prices of the transactions carried out between the said enterprises and the elements justifying it; and

• The tax system and rates for companies located outside Morocco. The 2019 Finance Law strengthened the transfer pricing documentation obligations of Moroccan companies by not only providing a simple possibility for the administration to request this documentation, but also an obligation for the companies concerned to transmit it to the administration via electronic means.

The details of this transmission, and in particular the possibility of periodic transmission, will be specified via regulatory channels.

The 2019 Finance Law modified the information that should be included in the transfer pricing documentation so that it now includes:

• Information related to all company activities, the overall transfer pricing policy in use and the distribution of profits and activities worldwide; and

• Transaction-specific information that the audited firm conducts with pre-determined links. In addition to outlining a requirement for electronic transmissions, the Finance Law outlines a new framework for transfer pricing documentation.

The scope of the information provided in the documentation has yet to be specified. In particular, disclosure of the distribution of profits and activities of all globally related companies appears at first glance to be far beyond international trends in terms of transfer pricing documentation. These measures are applicable to accounting audit procedures commencing on or after January 1, 2020.

Offshore Holding Companies & Banks

The Finance Law outlines the removal of tax incentives for offshore holding companies and offshore banks. This mainly concerns temporary (10%) or flat-rate (€21,000) tax relief for offshore banks and the flatrate tax deduction of $500 for offshore holding companies in the first 15 years, as outlined in Articles 6 and 19 of the General Tax Code.

As a transitional measure, the tax advantages granted to existing offshore holding companies before the application of the Finance Law on January 1, 2019 will remain applicable until the expiry of their issuance periods.

Double Taxation

The Finance Law outlines the recognition in domestic law of the principle of offsetting foreign tax credits, through the introduction of a new Article 19 bis of the General Tax Code. The Finance Law also outlines that if the products, profits and income concerned benefit from an exemption in the source country, the company under Moroccan law may benefit under certain conditions from a tax credit for the tax that would have been due in the absence of exemption, if the double taxation agreement between Morocco and the source country calls for this option. This is known as notional tax credit.

It should be noted that the tax credit is chargeable within the limit of the Moroccan tax fraction corresponding to foreign income, profit and revenue. Circular Note No. 729 also provided additional details concerning the method of assigning these tax credits.

In particular, the General Tax Administration has indicated that this provision is applicable only in the case of the existence of a double taxation agreement between Morocco and the country of source of income.

In addition, it is necessary to produce a certificate from the tax authority of the country of source of income, providing information on the legal references of the exemption, the methods for calculating the foreign tax and the revenue, profits and income that would have been retained as the tax base in the absence of exemption.

The circular note also outlined the order of allocation of these credits in relation to the other benefits adjusting the amount of corporate income tax. This order is as follows:

• Corporate income tax reduction following an initial public offering;

• Foreign tax credit;

• Withholding tax on fixed-income investment income;

• Tax reduction for companies that participate in the capital of new innovative companies;

• Instalments; and

• Application of the rules of common law for the determination of the taxable base applied to corporate income tax for the coordination centres. Article 8 of the General Tax Code states that the imposition rate applied to the corporate income tax on coordination centres should be on a basis equal to 10% of their total operating expenses, in addition to the result of non-current operations, depending on the case.

This new provision should lead to the re-adaptation of the operating mode of these coordination centres, which for the most part did not issue invoices in exchange for their services since their tax base was directly determined by law. The centres will therefore have to determine a billing model that complies with common law principles, particularly regarding transfer pricing and value-added tax (VAT).

The Finance Law outlines the repeal of this provision, thus resulting in the application of the rules of common law to companies engaged in this type of activity for financial years beginning on or after January 1, 2019.

Non-Deductible Payments

Article 11 of the General Tax Code outlined the non-deductibility of unjustified payments by non-endorsable crossed cheques, bills of exchange, magnetic means of payment, bank transfers or electronic processes which are between Dh10,000 (€900) per supplier per day, and Dh100,000 (€9000) per supplier per month. These regulations are also excluded from the right to deduct VAT provided for in Article 106.

In order to reinforce the traceability of transactions between companies and reduce the use of cash among professionals, the 2019 Finance Law outlines the reduction of the ceiling to between Dh5000 (€450) per day and per supplier, and Dh50,000 (€4500) per month and per supplier. This new measure is applicable to expenses and transactions relating to fiscal years beginning on or after January 1, 2019.


Prior to 2019 donations granted to associations were only deductible from the taxable income if they were associations recognised as being of public utility or listed directly in Article 10 of the General Tax Code. The Finance Law now allows companies to deduct from the tax result, up to a limit of 0.2% of the total revenue, the amount of cash or in-kind donations granted to associations whose list will be fixed by regulation and having concluded with the state a partnership agreement for the realisation of projects of public interest. This measure applies to companies subject to both corporate and personal income tax, determined under the system of actual net income or simplified net income.

VAT Deduction

Prior to the 2019 Finance Law, in cases of concentration, merger, division or changes to the legal form of an institution, Article 105 of the General Tax Code outlines that the VAT included in the accounts of the company absorbed and settled under operating values be transferred to the new reporting institution or acquiring company, provided that the values are entered in the deed of assignment for their initial amounts.

The word “settled” used in Article 105 of the General Tax Code could be confusing to the extent that the VAT included in the accounts of the absorbed company to be transferred to the absorbing company was not necessarily settled. In this respect, the Finance Law clarifies this article by stating that the VAT entered in the balance sheet of the absorbed company is transferred to the balance sheet of the absorbing company, provided that the amount of the said tax is identical to the amount appearing in the deed of merger. This rule also applies in the case of division or transformation of the legal form of an establishment.


The Finance Law outlines the introduction of a new Article 126 bis of the General Tax Code entitled “Territoriality”, which clarifies certain aspects of the territorial scope of this right. Thus, under this new provision, the following are subject to the formality of registration:

• Acts and conventions established in Morocco;

• Acts and agreements made abroad relating to property, rights or operations whose base is located in Morocco; and

• All other acts and agreements made abroad and having legal effect in Morocco. Additionally, the following are considered to have a base in Morocco:

• Property and rights that are located or operated in Morocco;

• Debts whose creditor is located in Morocco;

• Securities and other equity or debt securities with a registered office of the issuing institution located in Morocco;

• The acts of companies or groups whose head office is in Morocco; and

• Extension of the list of required documents subject to formality and registration fees.


The Finance Law mandatorily subjects the following deeds to the registration formality (these acts were subject to the formality of registration only on option or when they were notarised):

• Waivers of the right to withdrawal in case of sale;

• Withdrawals from repurchase;

• Release of opposition in real estate matters;

• Bonds, receivables and assignments of receivables;

• Proxies, whatever the nature of the mandate; and

• Receipts for purchase of buildings.

Stamp Duty

Prior to 2019 all cash receipts were subject to stamp duty of 0.25%. The Finance Law outlines the exemption of this stamp duty with regard to receipts relating to the sales of:

• Medicines by pharmacies; and

• Petroleum products by retail fuel stations. Lastly, the Finance Law states that cash receipts are to be considered record of payment in cash.

In addition, the following are excluded from the scope of application of this right:

• Taxpayers who are not traders; and

• Professionals not subject to the actual net income plan (résultat net réel, RNR).

Insurance Contracts Tax

The insurance contracts tax (taxe sur les contrats d’assurances, TCA) is a special tax, which applies to contracts entered into by insurance companies as well as all acts with the sole purpose of creation, amendment or amicable termination of such contracts.

Prior to the Finance Law, the texts governing this tax were not written into in the General Tax Code. The 2019 Finance Law codified the provisions governing this levy in the General Tax Code and introduced the following amendments:

• Taxation of life insurance operations underwritten for the benefit of the lending institutions at a rate of 10% (these transactions were exempt from the TCA);

• The obligation to declare and pay the TCA by electronic means;

• Main measures relating to natural persons; and

• Elimination of the 40% abatement on land revenue and the introduction of a free-at-source withholding tax. The General Tax Code outlined the taxation of property income according to the progressive scale of personal income tax, after application of a 40% reduction on the amount of gross land income.

Taxation by Withholding at Source

Property income paid by legal entities under public or private law, as well as by individuals whose professional income is determined according to either RNR or simplified net income (résultat net simplifié, RNS), the tax will be in the form of withholding tax.

This withholding tax must be paid to the authorities before the end of the month following the month in which the withholding tax was made. Natural and legal persons operating the withholding tax must submit electronically, before March 1 of each year, a declaration with respect to gross annual rents paid.

Exemption from Withholding Tax

The owners (or usufructuaries) of rented real estate can opt for an exemption from withholding tax. This implies the spontaneous payment of the tax on land revenue through the annual declaration, which must filled out and paid electronically for the previous year before March 1 of the current year. For 2019 rentals, owners must make the above-mentioned option clear before the end of March 2019.

Construction Costs

The Finance Law establishes an obligation to annually declare the costs of construction within the framework of the social solidarity contribution on the deliveries to oneself regarding construction of personal home. This contribution is due on the basis of a tariff per sq metre – on a proportional scale – between Dh60 (€5.40) and Dh150 (€13.50), with an exemption for construction with a surface area equal to or less than 300 sq metres.

Prior to the 2019 Finance Law, it was the subject of a single declaration within 90 days of issuance of the residence permit. The payment was made at the same time as the declaration. The Finance Law sets up a new annual reporting obligation, notably on the cost of construction and the identification of different suppliers. The declaration will be filed before the end of February each year, from the date of commencement of the work until the date of issue of the residence permit. This provision is applicable to building permits issued starting on January 1, 2019.

Minimum Contribution

Prior to the Finance Law, Section 63-II-B of the General Tax Code outlined a tax exemption of property revenue on buildings used as a primary dwelling for at least six years on the day of cession.

The new Finance Law outlines a minimum contribution of 3% on the sale of all, or parts of properties, if the sale price exceeds Dh4m (€360,000). This measure is applicable to transfers of buildings or parts of buildings occupied as a main dwelling, carried out on or after January 1, 2019.

Expenditure Indicators

Article 216 of the General Tax Code allows the tax administration, as part of the tax audit of natural persons, to assess the taxpayer’s annual total income when this income is not consistent with their expenses.

In order to supervise the application of this measure, Article 26 of the General Tax Code lists the said expenses that may be taken into consideration by the administration.

Prior to 2019 this list included the following personal expenses, the amount of which exceeds Dh120,000 (€10,800) per year:

• The annual amount of repayments of principal and interest on the loans contracted by the taxpayer for non-professional needs;

• The amount of the sums paid by the taxpayer for the acquisition of vehicles or immovable property not intended for professional use, including the costs of delivery of the same immovable property;

• Acquisitions of securities and equity interests, and other equity and debt securities; and

• Advances in current accounts of partners and in the account of the operator, and loans granted to third parties. The Finance Law extends this list to all personal expenses, other than those referred to above, borne by the taxpayer on their own behalf or that of their dependants. This provision applies to ongoing audit proceedings commencing on or after January 1, 2019.


Prior to the 2019 Finance Law, natural persons with self-employment status were subject to income tax at the following rates:

• 1% of revenue received not exceeding Dh500,000 (€44,500) for commercial, industrial and craft activities; and

• 2% of revenue received not exceeding Dh200,000 (€18,000) for service providers.