Corporate Income Tax : This article provides a brief summary of the provisions of the General Tax Code (C.G.I.) concerning Corporate Income Tax. This summary is not a substitute for a tax consultation or a detailed reading of the provisions of the C.G.I. and the circulars in effect.
Corporate Income Tax – What it is all about ?
Corporate Income Tax (C.I.T.) in Morocco is a tax on the profits made by companies (except for partnerships which have the right to opt for the Income Tax). It applies in particular to the profits of LLCs (Limited Liability Companies) and PLCs (Public Limited Companies).
This tax is subject to a yearly return. This means that each company must file a tax return each year and pay Corporate Income Tax spontaneously
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What is the scope of application of CIT (Corporate Income Tax) in Morocco ?
The scope is defined by two key factors :
- Firstly, territoriality (area in which the tax applies)
- Then, the attributes of the persons (or entities) to which it applies
First of all, as far as territories are concerned, this tax is applicable for companies whose head office is in Morocco. In addition, it may apply to companies that do not have their headquarters in Morocco in the following cases:
- If a company does not have its registered office in Morocco but has a permanent establishment there (e.g., if it operates a business as a branch) ;
- If the taxation of a profit-making business in Morocco, is granted to Morocco under the provisions a double taxation treaty.
According to the provisions of Circular 717 (which explains the provisions of the General Tax Code), the following are considered as permanent establishments:
- Firstly, executive or operational headquarters ;
- Secondly, branches, agencies, retail stores ;
- Also, construction or assembly sites ;
- And finally, offices or purchasing desks operated in Morocco by a non-resident company and used for the purchase and resale of goods.
The General Tax Code states that C.I.T. is applicable to income, profits and revenue of :
- Companies regardless of their form or purpose; ;
- Public institutions and other legal persons carrying out profit-making operations
- associations and organizations legally assimilated for their profit-making activities ;
- Trusts established by law or by treaty ;
- Establishments of non-resident companies or groups of such companies ;
In some forms of partnerships (e.g., general partnerships, …), Corporate Income Tax may be payable following an irrevocable option.
What is the taxable base for Corporate Income Tax (C.I.T.) ?
The Corporate Income Tax is based on the company’s taxable income which must be determined according to the accounting rules in effect in Morocco.
Under the provisions of the Article 8-I of the General Tax Code, the taxable income of a fiscal year is the excess of revenues over expenses of said period.
To be deductible, an expense must be incurred for the needs of the taxable activity. (Read Deductible expenses – C.I.T. in Morocco for a more in-depth analysis)
In practice, the transition table from the accounting income to the taxable income neutralizes, in particular, non-deductible expenses, such as:
- Non-operating expenses
- Fines, penalties and surcharges
- Expenses no supported by a regular document (physical backup, documentary evidence, journal vouchers…)
- Some expenses are deductible up to a certain limit:
- Allowances for depreciation for passenger vehicles are deductible up to a total amount of 300.000 MAD per vehicle over a five-year period ;
- The deductible amount is limited to 50% for certain expenses when paid in cash ;
When a fiscal year show a net loss, the tax losses are carried forward over 4 financial years, with the exception of depreciation related losses which can be carried forward indefinitely.
What are the C.I.T rates (Corporate Income Tax) in effect in Morocco ?
Up to date with the provisions of the 2020 Finance Law.
C.I.T has a progressive tax rate in Morocco:
|Net Income (In MAD)||Rate|
|Common Law||Industrial Companies (*)|
|Less than or equal to 300 000||10 %||10%|
|From 300 001 to 1 000 000||20 %||20%|
|Over 1 000 000||31%||28%|
(*) An industrial activity refers to any activity which consists of the direct manufacture or processing of tangible movable goods, through the use of technical installations, equipment and tools whose role is predominant.
Note that some specific rates are provided for in certain cases:
The C.I.T. rate for the ‘over 1000 000 MAD’ net income segment is capped at 20% for some businesses, namely:
- exports of goods and services
- Hotels and tourist facilities
- Handicraft businesses
- Private education and vocational training
- Agricultural businesses
Moreover, the General Tax Code (G.T.C.) provides for some particular tax regimes for the following:
- Companies based in Casablanca Finance City : such companies benefit from a five-year tax exemption, and from a reduced C.I.T. rate of 15% afterwards.
- Outsourcing companies : these companies benefit from a five-year tax exemption, and from a C.I.T. rate of 20% afterwards.
Finally, in accordance with the dispositions of the Article 6-II-B-4 of the General Tax Code, some industrial activities benefit from a complete C.I.T exemption for the first five consecutive financial years of activity.
The tax due cannot be less than 0.50% of the annual turnover excluding tax (C.I.T minimum contribution), nor less than 3000 MAD.
As such, even in the event of a loss, the minimum contribution is due. However, in case of profit, the minimum contribution is deducted from the C.I.T.. However, the minimum contribution proportion that exceeds the Corporate Income Tax can be deducted for the following three years.
In general, companies are exempt of the minimum contribution during the three financial years following their creation. However, this exemption is not applicable when the entity provides public services (Article 144 C 1° of G.T.C.)
What is the C.I.T. payment schedule ?
The Corporation Income Tax is paid spontaneously through 4 quarterly pre-payment. In practice, these down-payments are estimated on the basis of the previous year’s tax due.
In addition, when the Corporate Income Tax due for a year is higher than the advance payments made, companies must spontaneously pay the difference to be tax compliant.
On the other hand, when the pre-paid amount exceeds the final C.I.T., the surplus is automatically deducted from the following years’ down-payments.
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