17 May 2022
Having been recently adopted by the Council of Ministers headed by His Majesty the King of Morocco, the draft framework law on tax reform is ready to begin its legislative path toward becoming law. The tax reform will be implemented over a period of five years and consists of ten flagship and priority themes. Within the framework of this tax reform, we will discuss the priorities to be considered, the methods used to achieve the objectives, and the date of the framework law’s implementation.
PRIORITIES
Morocco has set the following priorities to update its tax policy:
- To encourage productive investment that adds value and creates quality jobs, and makes Morocco a real investment hub, while ensuring the employability of its active and well-trained population;
- To promote the establishment of advanced regionalization as to the best political choice through territorial development and consolidation of spatial justice;
- Bringing down geographical and social inequalities;
- Acceptance of international best practices as a standard with different developed countries to attain the said flagship orientation;
- Consolidating use confidence and improving the efficiency and effectiveness of the tax administration.
FUNDAMENTAL OBJECTIVES
On the premise of key priorities mentioned above, this reform aims to achieve the fundamental objectives such as:
- Reinforcement of the contribution of the state and local authorities to the financing of economic and social development policies;
- Reducing the tax burden on taxpayers as the assessments base expands;
- The focus of the tax neutrality on VAT matters by including activities considered hitherto outside the scope of VAT, such as agriculture;
- The concentration of preferential regimes along with the international norms and standards, and the best tax practices such as OECD standards and European Union best practices;
- Application of tax provisions with the general and accounting rules of the law in force;
- Motivating businesses to integrate their national and international competitiveness;
- Savings mobilization and production sector targeting;
- Gradual implementation of the principle of global income tax for natural persons;
- Streamline tax incentives in response to socio-economic impacts and relation to the priorities set out in the Framework Act;
- Local government tax simplification and rationalization. Indeed, the new tax reform aims to decrease the local taxes such as hunting license tax, and housing tax, and to make local taxes more rational and uniform;
- Simplification and adaption of the tax system for moderately earned local activities;
- Strengthen mechanisms to combat tax fraud and tax evasion;
- The convergence of local government tax law and harmonization with the state government tax law and grouping of taxes on economic activities and taxes on real estate;
- Incorporation of the informal sector into a structured economy through the formation of a simplified and reachable tax system, and also by developing and implementing awareness and supporting programs.
IMPLEMENTATION
The objectives and the priority measures implementation will be established through the following methods:
- Adhering to the principles of tax neutrality, in particular, concerning VAT, exemptions are maintained for basic products, including, in our opinion, those covered by the General Tax Code of Morocco as essential products such as flour, sugar, butter.
- Step by step convergence towards a unified corporate tax rate, especially for industrial activities.
- Gradually reduce the minimum contribution rate by continuously reducing the rate to eventually eliminate the minimum contribution.
- Establish incentives to promote the growth of potential companies, especially start-ups and support structures (incubators and accelerators) and accumulators of auto-entrepreneurs.
- Recognize the progressive income tax scale for individuals and broaden its base. In this way, some tax justice is sought through the relief of the middle class, who often have salaries as their primary income and can be taxed up to 38 percent.
- Adapt and improve the single professional contribution system to accelerate the integration of the informal sector,
- Acquiescence with the rules of good governance in the field of international taxation under common agreements,
- Convergence of tax rates under the preferential regime applied to service and industrial zones, towards a unified tariff,
- Improve the contribution, in terms of CIT, of public establishment and enterprises, and companies carrying out regulated activities or in a monopolistic or oligopolistic situation for which the state intends to increase the annual tax rate,
- Ensuring the rights of taxpayers and regulators, especially in the context of tax disputes,
- Institutionalizing an appropriate tax regime that facilitates the restructuring of a group of companies to improve their competitiveness and governance,
- Introduce appropriate tax measures to develop the cultural sector, promote the socioeconomic and protect the environment, especially by implementing a carbon tax.
DATE OF EFFECT
The State of Morocco undertakes to:
- Adopt the necessary documents for the implementation of the proposed measures within five years from the date of entry into force of the framework law
- Adopt, from the said date, the documents necessary to implement other gradual measures provided by the framework law number 69-19.
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