Deductible operating allowances in Morocco (2024)

Definition of operating allowances

• 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.

Deductible operating allowances – Deductibility conditions

• 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.

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.