As Morocco moves towards modernizing its tax system, it is imperative to accelerate the implementation of the remaining measures. This will not only ensure effective reform but also solidify the basis of the Moroccan economy in a context of growing challenges. The success of this reform will depend on the ability of the authorities to skillfully navigate between innovation and responsibility, thus laying the foundations of a prosperous and inclusive economy, underlined the Court of Auditors in its annual report for 2023-2024 published this Friday December 13, 2024.
According to the Court of Auditors, the continued implementation of the provisions of framework law No. 69.19 of July 26, 2021 marks a decisive turning point in the transformation of the tax landscape in Morocco. This fundamental text defined clear guidelines, ambitious objectives and a progressive approach to apply the priority measures of the tax reform, setting a deadline of five years from August 2021. The main objective of this reform being to establish an efficient, fair and balanced tax system, making it possible to mobilize the full tax potential to finance public policies.
In this context, the finance laws (LF) of 2023 and 2024 introduced significant measures, mainly focused on corporate tax (IS) and value added tax (VAT). Concerning the IS, one of the flagship measures consisted of the revision of the rates, aiming to gradually reach target rates of 20% for companies whose net profit is less than 100 MDH, 35% for those whose net profit is higher than this threshold, and 40% for credit institutions and insurance companies. In addition, the minimum contribution has been reduced from 0.5% to 0.25% of turnover.
Regarding VAT, the 2024 FL made notable changes by reducing the number of rates to just two (10% and 20%) by 2026, while generalizing the VAT exemption on essential products such as medicines, school supplies, materials used in their manufacture, and water intended for domestic use as well as sanitation services.
In addition, the VAT reverse charge regime and a new withholding tax system for this tax have been introduced. The reforms proposed in the 2025 Finance Bill (PLF) mainly focus on income tax (IR). From January 1, 2025, the progressive IR scale will undergo a significant rearrangement, with an increase in the first tranche of exempt net income, which will increase from 30,000 DH to 40,000 DH. At the same time, the other brackets will be widened and the marginal rate will be reduced from 38% to 37%.
This bill also provides for an increase in the annual amount of the income tax reduction for family expenses, from 360 DH to 500 DH per dependent, with an increase in the ceiling of this reduction from 2,160 DH to 3 000 DH. In addition, the threshold for applying withholding tax on property income will be raised from 30,000 DH to 40,000 DH. It will also be possible to opt for taxation of gross property income of individuals, reaching or exceeding 120,000 DH, at a final rate of 20%, with an exemption from annual declaration of overall income for these amounts.
As part of the fight against tax evasion, the PLF proposes that all other income and gains, not included in the five categories provided for by article 22 of the general tax code, be subject to income tax. . To improve the readability of tax texts and guarantee tax fairness, the 2025 PLF also aims to clarify the principle of taxation of land profits resulting from de facto expropriations or from any transfer of property by a final judicial decision.
In addition, it is suggested to impose an obligation on notaries to transmit to the tax administration, electronically, documents bearing a digital signature. Sanctions will be applied to professionals responsible for registration formalities in the event of non-compliance with information obligations, incorrect transmission or failure to send recorded documents in electronic format.
However, despite this appreciable progress, certain priority measures remain to be implemented to guarantee the full effectiveness of the reform. In particular, the revision of the bases relating to territorial taxation is expected, following the amendments made by Law No. 07.20 modifying and supplementing Law 47.06 on local authority taxation. In addition, although certain parafiscal taxes have been integrated into the general tax code, as proposed by the 2025 PLF for the special tax on cement, other measures to rationalize and simplify the parafiscal rules remain to be enacted.
Thus, the Court of Auditors, while noting the continued implementation of the framework law, reiterates its recommendations from the 2022-2023 annual report, which call for the activation of the implementation of the tax reform of local authorities and parafiscality in accordance with the objectives set by the framework law, and on the regular evaluation of the socio-economic impact of the tax advantages granted in order to guide decisions as to their maintenance, their revision or their deletion as appropriate. The Court also emphasizes the importance of a regular assessment of the socio-economic impact of tax advantages, carried out by the Ministry of Economy and Finance, in order to guide decisions concerning their maintenance, revision or elimination. .
