Dahir n° 1-12-10 of May 16, 2012 issued the Finance Act n° 22-12 for the budgetary year 2012 (Kingdom of Morocco’s Official Gazette n° 6048) and the Circular Note n°720 published on June, 13, 2012 related to the Finance Act for 2012.
The Finance Act for the budgetary year 2012 has been adopted in respect of the proceedings provided by article 50 of the Moroccan Constitution that came into force July 29th, 2011 (Dahir n° 1-11-91 promulgated the new Constitution).
Provisions of Finance Act for 2012 are applicable from the publication on the Official Gazette and cancel and replace provisions of Decree n° 2-11-746 of December 31, 2011 related to the collection of some tax revenue for the 2012 budgetary year (article 4 Decree n°2-11-746).
The MTA published a Circular Note on June 13, 2012. Forward this e-mail Share on Twitter Follow us on LinkedIn New Publications Supporting your business in Morocco CMS Annual Review 2011-2012 CMS European M&A Study 2012 The following presentation will cover the major measures implemented by the Finance Act for the budgetary year 2012.
1. Creation of a contribution to support the social cohesion
Article 9 of the 2012 Finance Act created a new taxation named as “Contribution to support the social cohesion”. This contribution will be supported by companies as provided in paragraph III article 2 of the Moroccan GTC (General Tax Code).
Therefore, companies liable to this taxation are “Companies, public establishments, associations and other assimilated bodies, funds liable to CIT, coordination centers and all other entities liable to CIT…”.
Taxation rates are fixed in consideration of the amount of net profit realized by companies.
Amount of net profit (in MAD)
From 50 million to 100 million
Beyond 100 million 2,5%
The taxpayers liable to this new contribution should spontaneously pay the tax due to the Receiver of Moroccan Tax Administration where their head office is located before:
- August 1, 2012 for companies submitting the tax return between January 1, 2012 and June 30, 2012;
- January 1, 2013 for companies submitting the tax return between July 1, 2012 and December 31, 2012.
The payment of this new contribution must be done with the tax return mentioning the net profit declared and the amount of the contribution in a form made available on the MTA’s website http://portail.tax.gov.ma/jctportal/wps/portal.
In case of delay or failure of tax return, the 2012 Finance Act refers to general provisions applicable for CIT. Indeed, article 184 of the GTC provides an increase of 15 % of the due tax amount contribution in such situation.
In case of failure of spontaneous payment of the contribution or in case of incomplete payment of the contribution, the contribution is recovered by a budget revenue from the Ministry of Finance or a delegated person that will recover the penalties provided by article184 in case of lack of payment of the contribution and the late penalties provided by article 208 of the GTC (a single penalty rates of 10% increased by 5% for the first month delay and a 0,5% per additional delayed month is applicable).
The contribution amount is not deductible from the tax result liable to Corporate Income Tax. The Finance act for 2012 provides that this Contribution is applicable only for the tax year 2012.
2. Corporate Income Tax
2.1 Extension of tax advantages to inter companies operations (In Free Trade Zone)
Companies performing their activities in FTZ benefit from a total exemption during the first 5 consecutive financial years following the date of the beginning of their activity. Then, they are applied a reduced rate of 8.75% during the following 20 consecutive financial years. The 2012 Finance Act provides that tax advantages allocated to companies performing their activity in the FTZ are extended to operations realized between companies located in the same or other FTZ.
However, in order to benefit from this regime, the following conditions must be met:
- The final product must be dedicated to exportation;
- The transfer of goods between companies located in different free trade zones of exportation must be performed in accordance with Custom regulation in force.
2.2 Temporary taxation of sports companies with the reduce rate of 17,5%
Sports companies regularly constituted in accordance with Law 30-09 relating to sports and physical education benefit from a reduced rate taxation of 17,5% during the first 5 consecutive years following the date of the beginning of the activity.
3. Personal income tax (PIT)
3.1. Extension of tax benefits for companies located in FTZ inter-company transactions
Companies subject to the Personal Income Tax regime and conducting their activity in the FTZ benefit from a total exemption during the first 5 fiscal years and from a tax reduction of 80% for the following 20 consecutive years.
The Finance Act 2012 extends the tax benefits to the operations performed between companies located in the same or in different FTZ.
Therefore, tax benefits shall be granted according the following conditions:
- The final product shall be dedicated to exportation;
- The transfer of goods between companies located in different free trade zones of exportation shall be performed in accordance with Custom regulation in force.
3.2. Application of a 40% deduction rate to professional sportsmen income
The professional sportsmen which are defined by the Finance Act as any sportsmen practicing a sport as an exclusive or a principal activity in order to attend competitions or sporting events in return for remuneration benefit from a favorable tax regime.
Providing the 2012 Finance Act and in order to determine the net income, a 40% deduction rate is applicable on the taxable gross amount.
This favorable regime cannot be combined with other deductions.
3.3. An increase of the exemption limit related to the taxation of the real estate profits for the PIT (Personal Income Tax)
The exemption limit for the PIT related to the sale of property increases from MAD 60.000 to MAD 140.000 for the taxpayers who performed those operations during the civil year. It is the total amount value of the sale of property that is considered to determine the exemption limit.
3.4. Softening of the sanctions in case of arbitrary taxation by the MTA
In case of arbitrary taxation by the MTA, the 2012 Finance Act provides that:
- Taxable amount of sale of property is equal to the selling price minus 20% instead of 10% before;
- Regarding with movable capitals gains, taxable amount is equal to 15% of the selling price instead of 20% before.
These provisions are applicable to the sales performed from the date of publication of the Finance Act in the Official Gazette.
3.5 Exemption of tax return relating to income liable to the Personal Income Tax discharging rate
Providing article 86 of the GTC, the global revenue tax return is not required (unless the taxpayers consider being overtaxed or unless the taxpayers claim entitlement to reductions provided in articles 28 and 74 of the GTC) for taxpayers that:
- Provide only agricultural income from a sole working farm, when they are under the global payment system;
- Provide only salaries revenue from a sole employer or a payer of a life annuity having elected or living in Morocco who must proceed to withhold according to article 156-I of the GTC (withholding on the salaries and life annuities by the employers and the payers of a life annuity).
The 2012 Finance Act adds at the same article, the taxpayers having their revenue only from revenue and profits liable to exemption rates of PIT shall be exempted from the tax return.
4. Value Added Tax (“VAT”)
4.1. VAT on domestic transactions
4.1.1. Exclusion from the scope of application for the operations performed inside and between the FTZ
According article 92 (I-36) of the GTC, Products or services delivered from a territory subject to VAT and provided to the companies located in FTZ are exempted from VAT with a right to deduct.
The 2012 Finance Act provides that operations performed inside and within ZFE are excluded of the application scope of VAT with a right to deduct.
4.1.2. VAT exemptions
Exemptions with a right to deduct:
- Goods, equipment acquired by the Mohammed VI Foundation for the promotion of the social works of religious officials (article 92 (I-44°) of the GTC;
- Anticancer and anti-viral (hepatitis B and C) drugs, drugs for diabetes, asthma, heart disease, and AIDS (article 92(I-19°) of the GTC.
Removal of the VAT exemption without the right to deduct applicable to the film industry. This measure concerns cinematographic films, the distribution of cinematographic films, and the gross revenue coming from the film industry.
Only documentary and educational films still benefit from the VAT exemption without the right to deduct.
Extension of the exemption without the right to deduct to microcredit operations (this extension is applicable from January 1, 2012 to December 31, 2012).
4.1.3. Deductibility of VAT applicable to diesel and kerosene
The Finance act for 2012 provides that the VAT charged on diesel and kerosene used for air transportation is deductible.
4.2. VAT on imports
- Extension of the application of the 10% reduced tax rate to the fattening veal sectors;
- Removal of the exemption granted to the cinematographic films excepting the education and documentary films;
- Exemption of the VAT charged on operations performed by the Mohammed VI Foundation for the promotion of the social works of religious officials;
- Removal of the formalities condition to benefit of VAT exemption on the purchase of specialized equipment for disabled people;
- Exemption of VAT charged on equipment and goods totally dedicated to micro-credit associations (exemption applicable from January1, 2012 to January 31, 2012).
5. Registration duties
5.1. Removal of the sole condition to exempt the land acquisitions necessary to realize investments projects for companies located in the FTZ
According to Section 129 (IV°-5) of the GTC, “acquisitions that are necessary to realize investment projects by the companies located in FTZ Companies are exempted from registration taxes”.
This exemption was granted only to the companies located in FTZ that maintained the acquire lands as fixed assets for at least 10 years from the date of the delivery of the authorization providing article 11 of the law 19-94 related to the FTZ.
This condition has been removed by the Finance Act 2012.
5.2. An increase of the reduced rate for the taxation of specific operations
The 2012 Finance Act increases the reduced tax rate from 3% to 4% for specific operations:
- The acquisition of premises built by natural or legal persons other than credit institutions and similar establishments, Bank Al-Maghrib, the CDG, and the insurance and reinsurance companies. This reduced tax rate is applicable to residential, commercial, professional or administrative premises;
- The lands on which are built the above-listed premises to a maximum limit of five times the covered area;
- The acquisition for a consideration of vacant lands or lands containing constructions that are intended to be demolished and that are reserved to the realization of subdivision or construction operations of residential, commercial, professional or administrative premises.
It is important to note that some operations are still subject to the reduced tax rate of 3% and more specifically, the first sale of social housing and low property value housing according article 92 (I-28°) and 247 (XII-A) of the GTC.
The rate of 4% is applicable to the deeds and agreements concluded from the date of the publication of the Finance Act in the Official Gazette.
6. Common provisions
6.1. Prorogation of some provisions
- Prorogation of the deletion date of the exemption of Corporate Income Tax (CIT) or Income Tax provided for companies located in the FTZ harbor of Tangier: applicable from January 1, 2012 to December 31, 2013.
- Prorogation of the tax benefits related to the incorporation of the activity performed by an individual to a company until December, 31 2012 (article 247-XVII of the GTC).
6.2. Creation of a new obligation in case of losses or absence of taxable income
Articles 20 and 82 (IV) of the 2012 Finance Act introduce a new obligation to declare. Taxpayers (individuals or companies) which taxable income is zero or negative are now obliged to attach to their tax return form, an “explanatory state” of the origin of the declared losses or zero income that has to be signed by the taxpayer.
Regarding the lack of production of this explanatory state, the Moroccan Tax Administration will invite the taxpayer to deposit the explanatory state in a delay of 15 days (i.e. a penalty of 2,000 MAD issued by assessment).
The 2012 Finance Act provides that the declaration form will be established by the MTA. This provision is applicable to the tax return filed from January 1st, 2013.
6.3. Modification of the definition of low property value housing and modification of the conditions to benefit from tax advantages
According to article 247 (XII-A) of the GTC “ real estate developers, individuals or legal entities under net income regime are exempted for their deeds, activities, and revenues related to low property housing from CIT, PIT, VAT and other registration fees.”
The 2012 Finance Act defines the low property housing as “all housing unit with a covered area from 50 to 60 m2 and a price of the first sale that does not exceed 140,000.00 MAD”. There are some conditions to fulfill in order to benefit from tax advantages:
- The real estate developers shall sign an agreement with the State that bind them to build 200 urban housings (instead of 500) and to build 50 rural housings (instead of 100).
- These housing programs must be dedicated to citizen whose income per month does not exceed twice the SMIG (instead of 1.5 before the 2012 Finance Act).
- The housings must conform to urbanism legislation and regulation.
Moreover, the 2012 Finance Act suppressed the condition of limitation to the first floor and three levels for housing programs.
6.4. Increase of the reduced rate of taxation for the CIT (2,5%) and PIT (2%) for companies located in the FTZ of Tangier and areas providing the Decree N 2-08-132
Regarding the provisions introduced by the 2012 Finance Act, the 2008 reduced rate of 17,5% for CIT and 20% for the Personal Income Tax that are applicable to companies located in Tangier or performing their activity in one of the province or prefectures provided by Decree n° 2-08-132 of May 28, 2009, will be increased each year of respectively 2.5 and 2 points.
In this respect, taxation rates for companies are now 22.5% for the CIT and 24% for companies liable to the PIT.
7. Tax Procedure Rules
The Finance Act for the budgetary year 2012 now provides the Moroccan Tax Administration the power to contest before the Court the definitive decisions of the Local Taxation Commission.
8. Stamp duties
Motor vehicles are liable to a specific tax for motorized vehicles at their first registration in Morocco.
The 2012 Finance Act provides the payment of these duties as the following:
Lower than 8 H.P.
From 8 to 10 H.P.
From 8 to 10 H.P.
Stronger or equal to 15 H.P.
Amount in DH
9. Specific tax on cement
The 2012 Finance Act provides the increase of the taxation on cement: the taxation on cement is now 0.15 DH/KG (before it was 0.10 DH/KG).