Indirect tax - Morocco

Value Added Tax (VAT) is the main type of indirect taxation in Morocco. VAT is levied on transactions carried out in Morocco by persons who, either habitually or occasionally, purchase goods for resale or engage in an activity of an industrial, commercial, artisan or professional nature, as well as in importation transactions.

VAT is a non-cumulative tax levied at each stage of the production and distribution cycle. Thus, suppliers of goods and services must add VAT to their net prices. Where the purchaser is also liable for VAT, input VAT may be offset against output VAT. Although VAT is ultimately borne by the consumer by being included in the price paid, the responsibility for charging, collecting and paying it to the tax authority at each stage of the process rests with the business making the supply.

As part of the 2024 Finance Law, Morocco has initiated a gradual reform of its Value Added Tax (VAT) system, aiming to simplify the current structure by converging toward two main rates: 10% and 20%. This reform is to be implemented over a three-year period.

There is no registration limit for the tax. The following bodies are subject to VAT:

• the legal entities who habitually or occasionally, whether as part of their main business or as an ancillary activity, manufacture, extract or process goods or change their form or handle them (packaging, putting into containers, shipment, storage or display), irrespective of whether these operations involve the use of other materials or the goods are sold under the producer’s name or trademark
• the persons who take part in any stage of the above- mentioned activities, either by providing a manufacturer with all or part of the materials or raw materials necessary for the production of goods or with patents, designs, plans, processes, formulas or trademarks to which they have the rights.

Individuals and legal entities with no permanent establishment in Morocco, but which engage in taxable transactions there, are subject to VAT in the same manner as residents. VAT rules require the submission of monthly declarations of turnover.

There is no specific legislation to tax non-resident supplies of electronically supplied/digital services.

According to the principle of territoriality, the private consumers resident in Morocco should be liable to VAT.

All non-residents must register, with the Minister of Finance, an accredited representative domiciled in Morocco who will be responsible for the taxpayer’s compliance with the VAT regulations. In the event of non-payment, VAT and penalties will become due by the Moroccan representative of the non- resident taxpayer.

Finance Law 2014 introduced an optional reverse charge mechanism. Under this regime, in case no accredited VAT representative was appointed, the Moroccan resident client becomes the legal taxpayer.

The filing of VAT returns may be on a monthly or quarterly cycle based on certain criteria.

Businesses with an annual turnover above MAD 1 million are required to submit VAT returns on a monthly basis.

Otherwise, the returns can be submitted covering three months accounting periods.

All taxpayers must file VAT returns and make VAT payments within one month after the end of the relevant month or quarter by internet system.

As of 1 January 2017, internet filing and payment system is mandatory for all taxpayers.

A default surcharge penalty may be imposed by the tax authority if VAT returns are not submitted on time, or the related tax is not paid by the due date.

Besides the VAT return, taxpayers must file to the tax administration a detailed statement of deductions with the reference of bills, the exact description of the goods, services or works, their value, the amount of tax on the invoice or memory and the mode of payment and references.

Furthermore, taxpayers performing taxable transactions and transactions outside the scope of the VAT or exempt transaction without right of deduction are required to deposit in local tax which they depend a statement of prorate.

Yes. A range of penalties can be imposed where businesses do not comply with the VAT rules.

Civil penalties and interest can be applied for errors and omissions made on tax returns, or where the tax is paid late. Penalties can also be applied where the business has failed to maintain adequate records or provide information (including additional declarations). Criminal proceedings may be brought in the case of more serious matters.

VAT only applies to transactions which are deemed to have been carried on in Morocco where:

• in the case of a sale of goods, delivery is accomplished in Morocco
• in the case of all other activities, the services provided, the item leased or the rights transferred are used in Morocco.

A VAT invoice must show for example:

• an invoice date and number which is unique and sequential
• the seller's name, address and VAT registration number and his ICE (Identifiant Commun de l'Entreprise or common identifier of the company)
• the customer's name and address and his ICE
• the quantity of goods or the extent of the services
• the total amount of VAT charged and the references and mode of payment relating to the invoice.

Where a VAT invoice includes zero-rated or exempt goods or services, it must show clearly that there is no VAT payable on those goods or services.

In Morocco taxpayers must only file, at the same time as the VAT return, a detailed statement of deductions with the reference of bills, the exact description of the goods, services or works, their value, the amount of tax on the invoice or memory and the mode of payment and references.