Morocco – Income Tax calculation – Progressive scale

 

How to calculate the corporate tax (Moroccan) when you have both an export turnover and a local turnover at the same time?

A question to which the new circular 729 (no official translation into English available) does not answer. At least not yet until the second part of this circular is published.

The fact is that the new scale introduces the progressivity rule for the part of the tax base corresponding to turnover benefiting from a capped rate.

This is our position at Upsilon Consulting:

Case N°1: Company benefiting from a turnover taxed only under the progressive capped scale (Service exporter, Hotels collecting only in foreign currencies…)

Assuming that the net result is MAD5,000,000. The calculated IS will be:

IS = 300,000*10%+4,700,000*17.5%= 852,500 dirhams.

CASE N°2: Company realizing only turnover taxed at the normal rate (Normal company, no export, no measures)

IS = 300,000*10%+(1,000,000,000-300,000)*17.5%+(5,000,000-1,000,000,000)*31%=1,392,500 dirhams

CASE N°3: Company whose turnover is partly taxed according to CASE N°1 and partly according to CASE N°2

This is where it gets a little complicated and we need clarification of the circular (however, in the meantime, some companies already have to file their returns).

Example: A hotel with both a turnover in foreign currency duly repatriated (and therefore benefiting from the ceiling) and a turnover in dirhams.

Let’s take the following case: 90% of the turnover in foreign currencies, and 10% in dirhams.

Let’s say that the total result is still MAD5,000,000.

We had a dispute of opinions between professionals as follows:

First opinion: As the share of the relative result of the turnover in dirhams is < 1 million (5,000,000 *10%), we must apply 17.5% on the whole result being above the scale.
The calculation would be:

IS = 300,000*10%+4,700,000*17.5%= 852,500 dirhams.

That is not the option we have chosen.

Second notice: Calculate tax on a pro rata basis
Calculated IS = 90%*(300,000*10%+4,700,000*17.5%)+10%*(300,000*10%+(1,000,000-300,000)*17.5%+(5,000,000,000-1,000,000)*31%) = 90%*852,500+10%*1,392,500 = 906,500 dirhams.

This calculation method seems to be the one favored by the automatic calculator integrated into SIMPL-IS.