A significant innovation in our VAT system: the introduction of new withholding mechanisms. These changes, introduced by the 2024 Finance Law, are designed to improve tax compliance and simplify VAT collection. Here are the details of this new regime:

Firstly, a 100% VAT withholding on transactions with suppliers of equipment goods and construction works. This mechanism targets operations carried out by suppliers of equipment goods and construction who are subject to VAT.

In fact, customers who are also subject to VAT will be responsible for withholding 100% of the VAT due on taxable transactions with their suppliers. This withholding applies only if the suppliers do not provide a certificate proving their recent tax compliance, issued within the last six months. In other words, companies subject to VAT must request a tax compliance certificate from all their suppliers every six months. This regime aims to secure tax revenues and ensure that all economic actors contribute fairly to the financing of public services.

It also helps to prevent tax evasion and encourages companies to maintain their tax compliance. This reform represents a step forward towards a more efficient and transparent tax system, aligned with international standards and adapted to Morocco's economic realities.

We continue our exploration of the new VAT withholding regime with a focus on the second mechanism introduced by the 2024 Finance Law. This mechanism specifically concerns service operations listed in Article 89-I of the General Tax Code (CGI), involving adjusted withholding rates based on the tax situation of the service provider. Here are the details of this measure:

This withholding applies to specified service operations, carried out for the benefit of the state, local authorities, public companies, and certain private legal entities as well as individuals under specific regimes. Sales of electricity and water destined for public distribution networks are excluded from the withholding, reflecting the importance of these essential services.

1. For the state, local authorities, and public companies: These entities apply a 75% withholding when paying for specified services.
2. For private legal entities and individuals under RNR or RNS regimes: These entities also apply a 75% withholding.

However, if the service provider (an individual) does not present a tax compliance certificate issued within the last six months, the withholding is increased to 100%.

These changes are intended to strengthen tax control and ensure the effective collection of VAT, ensuring that all actors, particularly in the service sector, contribute fairly to the funding of infrastructure and public services. This withholding regime helps maintain balance in our tax system and prevent tax evasion practices.

It is also important to highlight the operations excluded from this measure, as well as the provisions related to the refund of VAT credits.

Here are the details:

Sales of electricity and water destined for public distribution networks are excluded from the withholding, reflecting the importance of these essential services.

Sanitation services and meter rentals:

These services are also excluded to simplify the tax management of these essential operations.

Sales and services provided by telecommunications operators are excluded, recognizing their central role in connectivity and communication.

Services rendered by insurance agents or brokers:

These specific services are excluded due to their nature and distinct regulatory framework.

Finally, transactions with a value of less than or equal to 5,000 dirhams, within the limit of 50,000 dirhams per month and per supplier, are also excluded, helping to reduce the administrative burden for small transactions.

It should be noted that if a taxpayer ends up with a VAT credit due to these withholding rules, they have the right to request the refund of this credit, which is an important measure to ensure fairness and financial fluidity for the affected businesses.

These provisions will apply to all transactions carried out from July 1, 2024.