Deductible operating allowances in Morocco (2024)



Operating allowances are deductible expenses in terms of corporate taxes for businesses in Morocco. Having a detailed understanding is a necessity for navigating Moroccan taxation.
Indeed, Moroccan taxation is complex and constantly evolving, encompasses various crucial aspects for companies operating in the kingdom, in particular the management of operating allowances. These allowances, essential in corporate taxation, represent a major challenge in terms of tax and accounting management.

In the Moroccan context, understanding and adequately managing operating allowances is fundamental to optimizing the tax burden and ensuring compliance with current regulations. This involves not only in-depth knowledge of current tax laws but also constant monitoring of legislative developments likely to affect the way in which these allowances are processed and declared.

In this overview, we will explore the key principles of operating endowment taxation in Morocco, with a focus on best practices for efficient and compliant tax management.

In this article, we will explain everything you need to know about deductible operating allowances in Morocco. The article uses information contained in Circular 717 .
This article is up-to-date with the provisions of the LDF 2024.

Definition of operating allowances

operating allocations
Operating allowances in Morocco mainly include two elements: depreciation allocations and provision allocations, as stipulated in article 10-IF of the Moroccan General Tax Code (CGI). In fact, operating allowances include
  • First, depreciation charges : These charges represent the accounting recognition of the loss in value of fixed assets depreciating with time and use.
  • Second, provisions are amounts set aside by a business to cover potential losses or expenses that could arise due to various risks or uncertainties.
Companies include operating expenses in the expense accounts for the accounting year.
They are tax deductible within the limits of the conditions for deductibility of operating expenses.

Deductible operating allowances – Deductibility conditions

The deductibility of these grants follows the general rules for deductibility of charges in the Moroccan tax system. These rules generally require that charges be incurred in the best interests of the operation and that they are appropriately justified and documented.
Indeed, to be tax deductible, operating grants must meet certain conditions:
Regarding depreciation:
  • First, the company must use the fixed asset within the framework of the professional activity of the company;
  • Secondly, the allocation must correspond to an effective loss of value of the fixed assets.
  • Third, the company must account for the allocation in accordance with current Moroccan accounting standards.

Circular 717 gives an indication of some depreciation rates to apply by type of property. These rates are considered as depreciation rates accepted in Morocco and are determined according to different criteria. These criteria include the use in each profession, the intensity of use of the equipment, and the nature of the goods. Here is an indicative summary of the depreciation rates provided for in Circular 717:

  1. Standard Rates for New Properties :
    • Commonly used rates: 50%, 33%, 20%, 25%​​​​.
  2. Rates for Fishing Boats and Mining Properties :
    • New boats: 20%
    • Used boats: 33%
    • Fishing nets: 20%.

The CGI 2024 provides specific conditions for the depreciation of passenger transport vehicles .


Regarding provisions:

The deductibility of provisions in the Moroccan tax context is governed by specific conditions, as indicated in the Circular Note relating to the General Tax Code. Here is a development on the conditions required for the deductibility of provisions:

  1. Correspondence to a Possible or Probable Risk :
    • The provision must be created to cover a specific event, such as depreciation, loss, or deductible expense. This means that the provision must be specifically allocated to cover costs or losses that have not yet been realized but are considered possible or probable.
  2. Probable Load or Loss and Approximate Assessment :
    • The provision must be linked to actual events that occurred during the fiscal year. These events must make the charge or loss not only probable, but also in an amount that can be roughly estimated. This implies that the provision must be based on a reasonable and justifiable assessment of potential losses or costs.
  3. Compliance with Moroccan Accounting Standards :
    • The provision must be recognized in accordance with Moroccan accounting standards in force. This involves compliance with accounting principles and methods recognized and accepted in Morocco, thereby ensuring that the provision is accurately and appropriately reflected in the company’s financial statements.

It is important to note that the deductibility of provisions is always conditional on the occurrence of real events during the tax year. These conditions ensure that provisions are established prudently and fairly reflect the company’s future obligations based on current information and circumstances.

To summarize, for an allowance to a provision to be deductible:

  • First, the provision must correspond to a possible or probable risk.
  • Second, the charge or loss must be probable and in an amount capable of approximate assessment.
  • Third, the company must recognize the provision in accordance with current Moroccan accounting standards.

Calculation of operating allowances

Regarding depreciation:

The calculation of operating expenses is based on the depreciation or amortization method chosen by the company.

There are several methods of depreciation and amortization:

  • First, the linear method,
  • Then, the decreasing method
  • or the unit of work method.

Regarding provisions, the company must make the best estimate of the risk or expense.

Circular 717 provides for the following method in terms of calculating provisions: “In general, the calculation of a provision is done in two stages:

1. Estimation of the probable amount of the charge or risk: this involves estimating the probable amount of the charge or risk for which the company constitutes the provision. This estimate must take into account prudence and objectivity, and consider all relevant elements.

2. Accounting for the provision: once the probable amount of the charge or risk is estimated, the corresponding provision should be recognized in the company’s accounts.

The provision must be clearly specified as to its nature and an approximate estimate as to its amount.

It is important to note that the provisions must be recognized in accordance with the Moroccan accounting standards in force and that they must meet the conditions of tax deductibility mentioned in circular 717, page 157.

It is important for businesses to choose the depreciation or amortization method that best fits their business and fixed assets.

Deductibility limits There are deductibility limits for operating grants in Morocco.

Indeed, grants cannot exceed certain limits set by the Moroccan tax administration. These limits are as follows:

  • Depreciation charges relating to acquisitions of fixed assets whose invoiced amount is equal to or greater than 10,000 dirhams excluding deductible VAT, and whose payment is not justified by the means of payment cited in circular 717, are not permitted in deduction only up to 50%.
  • Allocations to provisions are limited in certain cases (case of doubtful debts : obligation to pursue within 1 year).

Accounting obligations

Companies have accounting obligations regarding operating expenses.

They must in particular:

  • Keep regular and honest accounts .
  • Account for operating allowances in accordance with current Moroccan accounting standards.
  • Mention operating allowances on their balance sheet and income statement.

FAQ “Deductible operating grants in Morocco”

Operating allowances

Q1: What are operating grants in Morocco?

A1: Operating allowances in Morocco include depreciation allocations and provision allocations, according to article 10-IF of the Moroccan CGI. They represent the loss in value of fixed assets and the sums set aside to cover potential losses or charges.

Q2: What are the conditions for the deductibility of Operating allowances?

A2: Grants must be made in the interest of the operation, justified and documented. Depreciation requires the use of the asset in the professional activity, an effective loss of value, and accounting in accordance with Moroccan accounting standards. Provisions must correspond to a possible or probable risk, be linked to real events, and be recorded according to Moroccan accounting standards.

Q3: How are Operating allowances calculated?

A3: The calculation depends on the method of depreciation or amortization chosen, such as the linear, declining balance or units of work method for depreciation. For provisions, it is necessary to estimate the probable amount of the charge or risk, then record the provision in the company’s accounts.

Read original article in French : Dotations d’exploitation déductibles au Maroc