Withholding tax, reverse charge system... From July 1 onwards, new provisions of the Finance Act 2024 relating to VAT will come into force. In the meantime, revenues from this tax, the reform of which began this year, are continuing their upward trend: 37.51 billion Dirhams (USD 3.75 billion) at the end of May, up 27.1% from the previous year. VAT is still the main source of revenue for the general budget.
On the domestic front, it is growing at an attractive rate: 35.7% versus 7.2% for imports. Rising domestic consumption, greater capacity to capture this tax, successful anti-fraud strategies, digitization... Several factors could explain this good performance in VAT revenues, which could grow further in the second half of 2024. From July 1 onwards, the optional VAT reverse charge system will be introduced.
The VAT withholding tax, designed to improve tax collection by the tax authorities, will also apply from July 1 onwards. The withholding tax amounts to 100% of the VAT due on taxable transactions carried out by suppliers of capital goods and works who do not present a Certificate of Good Standing less than 6 months old. The central Government, local authorities, state-owned enterprises, and other legal entities governed by public law and subject to the provisions of the decree on public procurement are excluded from this provision.
The withholding tax will also apply to transactions carried out by service providers subject to VAT. This tax amounts to 75% of the VAT charged on services covered by article 89-I (5th , 10th , and 12th section). The levy must be paid by the central Government, local authorities, State-owned enterprises and public agencies, and any other public body paying remuneration to taxable persons. The withholding tax must also be paid by private legal entities and individuals whose income is determined according to the real net income (RNR) or simplified net income (RNS) system who pay remuneration for these services to individuals who have presented a tax clearance with regard to their obligations to declare and pay taxes, duties, and fees. In the absence of a tax certificate, the withholding tax is 100% of the amount of the tax. Excluded are sales of electrical energy, water supplied to public distribution networks, sanitation services supplied to subscribers by the organizations concerned, and the rental of meters. Also excluded are sales and services provided by telecom carriers, insurance canvassers, or insurance brokers. No withholding tax is levied on service transactions of up to MAD 5,000 incl. tax (USD500 incl. tax), up to a maximum of MAD 50,000 incl. tax (USD 5,000 inc. tax.) per month and per service provider.
Khadija MASMOUDI
