Authors
Sources:
Site of the Ministry of Economic and Financial Affairs
This flash info aims at presenting the main tax measures provided by the Draft Budget Law n°110-13 for the fiscal year 2014, presented on October 23, 2013 by the Moroccan Minister of economy and finances (hereafter the "Draft").
The gradual implementation of the proposals from the assizes of taxation held on 29 and 30 April 2013, resulted in a series of measures contained in the Draft, main of which are listed below.
Summary :
1. Taxation of farm business
2. Obligations for taxpayers subject to the lump income regime
3. Reporting requirements for liberal professions
4. Removing the three-year exemption of the rental income coming from the renting of new buildings
5. Value Added Tax (“VAT”)
5.1. Change of rates
5.2. Removing the rule of the "one-month lag"
5.3. Introduction of the reverse charge mechanism
6. Removing of the special tax on the sale of sand
1. Taxation of farm business
One of the key measures of the Draft is the taxation of agricultural incomes, which are to date exempted from income tax.
As a reminder, Article 46 § 1 of the General Tax Code (the "GTC") defines agricultural income as profits from farming and other activities of an agricultural nature not subject to tax patent, named today as business tax.
According to Article 46 § 2 of the GTC, is considered as a farmer any person engaged in the cultivation of land for agricultural use as owner itself, usufructuary, lessee or occupant.
According to the Draft, incorporated farms making a turnover superior or equal to five (5) million dirhams for three (3) consecutive fiscal years would be subject to corporate income tax ("CIT") as from 1st January 2014.
On the other hand, farms with a turnover below such threshold would keep their current status, under which they are totally and permanently exempted from CIT (cf. article 6-I-A-29° of the GTC).
The taxation of incorporated farms would follow this timetable:
- From 1 January 2014 to 31 December 2015, the CIT would only apply to agricultural companies with a turnover superior or equal to 35 million dirhams;
- From 1 January 2016 to 31 December 2017, the CIT would apply to agricultural companies with a turnover superior or equal to 20 million dirhams;
- From 1 January 2018 to 31 December 2019, the CIT would apply to companies with a turnover superior or equal to 10 million dirhams.
The same tax principle and the same timetable are proposed by the government (cf. article 47 of the GTC) for farm business subject to Personal Income Tax ("PIT").
Thus, starting from 1st January 2020, all farms making a turnover superior or equal to five (5) million dirhams operated either through a corporation or not would be subject to CIT or PIT.
2. New Obligations for taxpayers subject to the lump income regime
Article 4 of the Draft provides an obligation to maintain a register established on or on the basis of a pattern printed issued by the tax administration for taxpayers with professional income determined by the lump income regime.
As a reminder, article 40 of the GTC provides that the lump income is determined by applying to the turnover of each calendar year a coefficient fixed for each profession addressed in the GTC.
Taxpayers subject to the lump income regime would have to record every day on this register (cash accounting system) all amounts paid for purchases, with supporting documents as well as those received for sales, works and services performed.
3. Reporting requirements for liberal professions
To reduce administrative costs and reduce the processing time, the Draft provides an on-line tax return obligation and electronic payment of PIT for taxpayers exercising a liberal profession (cf. article 155 of the GTC).
The list of liberal professions concerned by this measure would be set by regulation.
4. Removing the three-year exemption period of rental income from the renting of new buildings
The PIT exemption of rental income from the renting of new buildings, applicable during the three-year period following the completion of the constructions (cf. article 63 of the GTC) should be removed.
The taxation on such rental incomes should be effective as from the first year. On the other hand, please note that the 40% tax allowance on the property gross income would remain.
5. VAT
5.1. Change of rates
As from 1st January 2014, article 99 of the GTC dealing with VAT rates should be deeply amended.
Indeed, the rates of 10% and 20% would be extended to products and services which are exempted to date.
Raw sugar, the use of steam, the unmanufactured logs, some categories of farm equipment and catering services directly provided by the company to the staff would be subject to the rate of 10%.
The 20% rate would apply to equipment and fishing nets, dried raisins and dried figs, candles and paraffin.
Otherwise, the 10% rate would apply as from 1st January 2014 to certain products currently subject to the 7% rate. It is refined sugar, canned sardines and food for cattle feed.
Similarly, products subject to VAT at 10% would go to 20% as salt, milled rice and oils food fluids.
Finally, the 14 % rate applicable to products as butter, tea, commercial vehicles, alimentary fats and margarines, would increase to 20%.
5.2. Abolition of the "one-month lag" rule
To date, the right of deduction arises at the end of the month following the establishment of the customs receipts or full or partial payment of bills on behalf of the beneficiary, in accordance with article 101-3° of the GTC.
As from 1st January 2014, the right of deduction of VAT should begin at the end of the month of the establishment of customs receipts or full or partial payment of bills on behalf of the beneficiary.
As a result, the "one-month lag" rule should be abolished.
In order to mitigate the negative impact of a loss of 3 billion dirhams, corresponding to the amount of deductible taxes of December 2013 purportedly to be deducted in January 2014, transitional arrangements will be established. As a consequence, the amount of VAT which payment is made in December 2013 will be deductible over a period of five (5) years as from 1st January 2014.
5.3. Introduction of the reverse charge mechanism
Article 115 of the GTC would be amended and completed, without removing the requirement for non-resident taxpayers that perform taxable operations in Morocco, to appoint a tax representative undertaking to pay the due VAT on their behalf.
Indeed, according to the Draft, Article 115 of the GTC related to the obligations of non-resident taxpayers, would be completed to consider the Moroccan customer, subject to VAT, as the legal person liable to pay VAT, where it undertakes transactions with non-resident companies that have not appointed any tax representative.
In this case, the Moroccan customer should declare the amount (excluding VAT) of the transaction on its own VAT return, calculate the due VAT and proceed at the same time to the deduction of the amount of the due and declared VAT.
Meanwhile, articles 115 and 117 of the GTC would be completed to clarify that, when the client of a non-resident person carries out an activity outside the scope of VAT, the client is required to recover the VAT payable on behalf of the non-resident person by way of withholding. This VAT would then be paid by the client to the tax receiver, during the month following the month of payment.
This measure tends to simplify tax obligations of economic operators, namely those with no permanent establishment in Morocco and to clarify the obligations of the Moroccan clients.
6. Abolition of the special tax on the sale of sand
The special tax on sale of sand would be abolished as from 1st January 2014, a year after its complementation by Article 14 of the Finance Law No. 115-12 for the 2013 fiscal year.
This removal may be explained by the difficulty of implementing such tax, the amount of income collected being far below the expected projections.
