2020: The year of the last resort in Morocco
With the passing of the 2020 Finance Law, the Moroccan Government has given a helping hand to economic operators by offering five major measures to restore confidence.
With Morocco having signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS) in June 2019 and having adhered to the exchange of information on request for tax purposes, the country's Government gives the opportunity to individuals and companies to start a new chapter where transparency, confidence and mutual rights and duties are the only rules. Ouassim Akil of Moroccan accounting firm AKONSEIL, provides an overview of this latest development.
1. Discharge contribution on cash and undeclared assets in Morocco
This measure applies to natural persons whose tax residence is in Morocco and whose realized profits or income from professional and/or agricultural business are not declared to the Tax Administration before January 1, 2020.
Natural persons with undeclared cash (whether in cash or deposited in the bank), securities or real estate assets acquired with this cash, or loans granted to third parties, need to deposit the cash in a bank account or declare the assets other than cash to the Tax Administration and pay a discharge contribution equal to 5% of the value of those assets.
The enrollment within this contribution needs to be done between January 1 and June 30, 2020. This period can be extended by the Government for a period of 2 months, is renewable once, i.e. at the latest by the end of October 2020.
Once the discharge contribution is paid, all personal expenses incurred by the beneficiary natural person from these assets cannot be taken into consideration in the examination of the taxpayer's overall tax situation in case of a tax audit in 2020 or in subsequent years.
2. Amnesty for informal operators who identify for the first time with the Tax Administration
This measure consists of taxing taxpayers who identify themselves for the first time to the tax authorities from January 1, 2020, based on the acquired income and transactions realized starting from this date. Tax identification procedures need to be realized no later than December 31, 2020.
3. Corrective tax returns
This transitional measure is applicable until September 30, 2020 and covers Corporate Income Tax, Income Tax on Salaries and Value Added Tax for the fiscal years 2016, 2017 and 2018.
Taxpayers who voluntarily subscribe to corrective tax returns and spontaneously pay the excess tax will benefit from:
- The cancellation of related surcharges, fines and penalties
- Exemption from a Tax Audit for the years covered by the corrective tax returns.
In order to benefit from this measure, the taxpayer needs to ask the Tax Administration to share the potential adjustment they might have identified as per their internal cross checking and verifications and should be assisted by an agreed accountant or Chartered Accountant who can provide an explanatory note that describes the amendments made in the corrective tax return.
Taxpayers who are under an ongoing tax audit procedure are not entitled to this measure.
4. Foreign exchange amnesty
This measure applies to Moroccan residents owning assets outside of Morocco in violation of foreign exchange regulations.
In this regard, assets and cash held abroad, constituted before September 30, 2019 and declared to the foreign exchange office between January 1 and October 31, 2020, will have a contribution applied at the following rates:
- 10% of the acquisition value of real estate and/or financial assets (securities, shares, etc.) held outside Morocco
- 5% of the amount of foreign currency liquid assets repatriated to Morocco and deposited in a bank account in foreign currency or in convertible Moroccan dirhams
- 2% of foreign currency cash repatriated to Morocco and converted in the domestic foreign exchange market to Moroccan dirhams.
The payment of the contribution frees those who were not compliant with the foreign exchange regulation from penalties relating to the foreign exchange regulations, income tax or corporate income tax and related fines and surcharges. In addition, they will not be subject to any administrative or judicial proceedings.
5. Property income Tax amnesty
Property income beneficiaries who have not filed their annual income return for years that are subject to a tax audit (i.e. the last 10 years) can benefit from the exemption from the payment of income tax and the cancellation of fines and penalties related to their undeclared property income.
For that purpose, they need to file a return before July 1, 2020 and spontaneously pay a contribution amounting to 10% of the property income gross amount for year 2018.