In brief: In Morocco, a provision for retirement or for end-of-career indemnities (IFC) is not deductible for corporate tax (IS): Article 10-I-F-2° of the CGI 2026 requires events in progress, whereas the right to retirement arises later. Accrued paid leave remains deductible as an accrued expense.
No article of the CGI names the retirement provision, the IFC or paid leave. Their treatment follows solely from the general test for provisions, presented in our guide to deductible provisions for corporate tax. The tax authority’s doctrine, set in 2011 in circular note no. 717, has not been changed by circular notes 729 to 737. Three DGI replies (no. 78 and no. 453 of 2003, no. 130 of 2015) settle the concrete cases.
Two rules point in opposite directions: the retirement or IFC provision is added back, while accrued leave calculated employee by employee is deducted. The transfer of an internal pension fund to the RCAR follows its own regime (reply no. 78).
What the CGI 2026 says
The law provides, in Article 10-I-D, that the following are deductible: “personnel and labour expenses and the related social charges, including housing assistance, representation allowances and other benefits in cash or in kind granted to the company’s employees”. No Finance Law note amends this paragraph: the text is stable.
Article 10-I-F-2° defines deductible provisions. They are set up to cover “either the impairment of asset items, or charges or losses not yet incurred which events in progress make probable”. These charges “must be clearly specified as to their nature and must allow an approximate assessment of their amount”.
The same article sets out what happens to misused provisions. A provision used in a way that does not match its purpose, or that has become unnecessary, is written back to the result of the financial year; failing that, the tax authority makes the adjustments. And, under its last paragraph, “any provision irregularly set up, recorded in the books of a financial year that is not time-barred must, whatever the date on which it was set up, be added back to the result of the financial year in which it was wrongly recorded in the accounts”.
Article 11, which lists non-deductible expenses, covers neither retirement provisions, nor IFC, nor paid leave. Their treatment is therefore governed solely by Article 10-I-F-2° and by doctrine.
| Article of the CGI 2026 | What it provides | Effect on personnel expenses |
|---|---|---|
| Art. 10-I-D | Personnel expenses and social charges deductible | Salaries, accrued leave and indemnities paid are deductible |
| Art. 10-I-F-2°, para. 1-2 | Provision = charge made probable by events in progress, clearly specified | A future event (age, length of service) is not enough |
| Art. 10-I-F-2°, para. 4 | Unnecessary or misused provision: written back to the result | Write-back compulsory, otherwise tax adjustment |
| Art. 10-I-F-2°, last para. | Irregular provision added back, whatever the date it was set up | An old provision still on the balance sheet remains exposed |
| Art. 57-27° (IR) | Basic pensions and CIMR group pensions exempt | Concerns the retiree, not the company |
On the income tax (IR) side, Article 57-27° exempts pensions from basic schemes (Article 59-II-A) and, since Finance Law 50-25 for 2026, CIMR group supplementary pensions (Article 28-III). This exemption concerns the retiree, not the employer’s deduction.
Key points:
- In Morocco, a provision is deductible only if events in progress at year-end make the charge probable (Art. 10-I-F-2° of the CGI 2026).
- No article of the CGI 2026 names the retirement provision, the IFC or paid leave; Art. 11 does not cover them.
- Any irregular provision appearing in a financial year that is not time-barred is added back, whatever the date it was set up (Art. 10-I-F-2°, last paragraph).
- The income tax (IR) exemption of pensions (Art. 57-27°, Finance Laws 2025 and 2026) concerns the retiree, not the employer’s deduction.
What the tax authority specifies
The tax authority sets out its doctrine in circular note no. 717 of April 2011 (volume 1, § 8-2 “Provisions”, p. 157-162). No Finance Law has since amended Articles 10-I-D and 10-I-F-2°, and the annual circular notes 729 to 737 deal neither with retirement provisions, nor IFC, nor paid leave. This doctrine therefore remains valid.
General principles (p. 157-158). A certain charge is an “accrued expense”, not a provision. A provision is not deductible if the expense it is meant to cover is not itself deductible. The probability of the charge is assessed at the closing date.
Provisions for personnel expenses (p. 161-162). Personnel expenses are “annual and normal charges”. They “cannot… give rise to deductible provisions. This applies to salaries, wages and paid leave remuneration.” An exception is provided for certain expenses which, although they are to be borne only in the following financial year, can be regarded, from year-end, as a certain charge that arose during the financial year by reason of formal commitments made by the company: “This is the case in particular of bonuses and profit-sharing paid to the company’s staff, provided that their payment results from formal commitments (collective agreement, staff regulations etc.)”. A provision for bonuses without a formal commitment is “irregular from the outset”.
Dismissal or voluntary departure indemnities (p. 162). The provision is allowed under three conditions: the indemnities are still owed at year-end; they relate to dismissals or departures decided during the financial year; the persons concerned were “expressly informed, during that financial year, of the end of their assignment or contract under the conditions laid down by the Labour Code”. A future retirement does not meet these conditions.
Accrued paid leave (p. 142). “Paid leave not yet taken but acquired by employees at the end of the financial year constitutes a certain salary expense deductible from the taxable result of that year, provided that its amount is calculated in detail and individually per employee.” The labour law rule on how leave days accrue is presented in our article on annual leave in Morocco.
Indemnities and contributions paid (p. 142-143). The total amount of indemnities paid to dismissed staff, calculated according to the legislation in force, is deductible. The deduction is also allowed where the amount to be paid is set by a court, whether it concerns damages, the dismissal indemnity proper or the voluntary departure indemnity, “even if the amounts of these indemnities exceed the limit set by the legislation in force”. Also deductible are the employer’s share “paid to build up a pension or retirement when this share is borne by the company” and old-age and life-retirement insurance premiums.
| Personnel expense | Deductible provision? | Doctrinal basis |
|---|---|---|
| Salaries and wages of the following year | No | NC 717 p. 161-162 |
| Paid leave | Not as a provision; yes as an individualised accrued expense | NC 717 p. 142 and p. 162 |
| Bonuses and profit-sharing | Yes, if formal commitment | NC 717 p. 162 |
| Dismissal or voluntary departure indemnities | Yes, if decided and notified during the year and owed at year-end | NC 717 p. 162 |
| Employer pension contribution paid | Deductible as an expense (no provision) | NC 717 p. 143 |
Key points:
- According to circular note no. 717 (2011, p. 161-162), salaries and paid leave cannot give rise to deductible provisions.
- NC 717 (p. 142) allows the deduction of leave accrued and not taken at year-end, if calculated in detail and individually per employee.
- The provision for dismissal or voluntary departure indemnities is allowed only for departures decided and notified during the financial year (NC 717 p. 162).
- Circular notes 729 to 737 (Finance Laws 2019 to 2026) have not changed this doctrine.
Cases settled by the DGI
Reply no. 453 of 7 November 2003: retirement provisions of an internal fund
Question. Are retirement provisions set up by a company for its members, through an internal fund, deductible?
Reply. In this reply of 7 November 2003 (2003 collection, p. 41-42), the DGI refused the deduction on two grounds. First, deductibility requires “real events that occurred during the financial year”. Yet entitlement to a pension depends on the age limit, disability and years of service, events that “can only occur later”. Second, the company’s fund “has no separate legal personality”. Only provisions “calculated in accordance with the legislative provisions in force and relating to pension funds external to the company” are deductible.
Scope. Published reply of principle, prior to the CGI (Law 24-86). Its reasoning can be transposed under Article 10-I-F-2° of the CGI 2026, which applies the same test of events in progress.
Transposition to IFC. Reply no. 453 concerns pensions, not a retirement indemnity paid as a lump sum. No published DGI reply deals with the IFC provision. The reasoning of reply no. 453 applies to it by analogy: the right arises on departure, subject to future conditions of age and length of service. NC 717 also refuses provisions for personnel expenses, except for certain expenses to be borne in the following financial year that can be regarded, from year-end, as a certain charge that arose during the financial year by reason of formal commitments (p. 161-162). The IFC provision is added back. The indemnity is deductible, as a personnel expense (Art. 10-I-D), for the financial year in which the employee leaves, as an accrued expense if it is still owed at year-end.
Reply no. 78 of 25 February 2003: transfer of an internal fund to the RCAR
Question. How should the cost of transferring an internal pension fund to the RCAR (collective retirement allowance scheme) be treated?
Reply. In this reply of 25 February 2003 (2003 collection, p. 39), the DGI accepted that this cost is an “exceptional expense of an unforeseeable nature”. It distinguishes two populations:
- for retirees, future rights are allocated “according to the residual life expectancy of this category of staff, duly justified and validated by the R.C.A.R.”, with no fixed period;
- for active staff (rights acquired for the past), the amount “may be spread over a period not exceeding 5 years”.
A State subsidy is allocated to the financial year in which it is received. The employee share borne by the employer is a cash benefit taxable in the employees’ hands.
Scope. Reply of principle, prior to the CGI. The case concerns a transfer to the RCAR; no written DGI position extends it to another external body.
Transposition to 2026. The subsidy falls under Article 9-II of the CGI 2026. The employee share borne by the employer falls under income tax (IR) on employment income (Articles 56 et seq.). This allocation over time is specific to the transfer of a pension scheme.
Reply no. 130 of 12 March 2015: paid leave accrued and not taken
Question. Is paid leave accrued at year-end and not yet taken deductible?
Reply. In this reply of 12 March 2015, the DGI restated that such leave is a certain expense, deductible in the financial year in which the right is acquired, provided it is calculated in detail and individually per employee (NC 717, p. 142). The triggering event is the acquisition of the right, with the expense recognised in the charges of the financial year in which that right arose. Paid leave remuneration may not give rise to a deductible provision (NC 717, p. 161-162); the provision for personnel expenses of the following year is allowed only for certain expenses, such as bonuses and profit-sharing whose payment results from formal commitments made by the company (NC 717, p. 162).
Scope. Reply issued after the CGI, reproduced in the DGI questions-and-answers collection 2006-2026 (Order of Chartered Accountants, Rabat-Salé-Kénitra regional council, p. 226). It confirms NC 717 (p. 142) and applies directly under Articles 10-I-D and 10-I-F-2° of the CGI 2026.
Key points:
- In its reply no. 453 of 7 November 2003, the DGI refused the deduction of retirement provisions of an internal fund with no separate legal personality.
- No published DGI reply deals with the IFC provision: it is added back by analogy with reply no. 453 and under NC 717 (p. 161-162); the indemnity is deductible for the financial year in which the employee leaves, as an accrued expense if it is still owed at year-end (Art. 10-I-D).
- According to reply no. 78 of 25 February 2003, the cost of transferring an internal fund to the RCAR for active staff may be spread over 5 years at most.
- According to reply no. 130 of 12 March 2015, leave accrued and not taken is a certain deductible expense if individualised per employee.
Application in 2026: worked example
Assumptions. A public limited company (SA), which is neither a credit institution or similar body nor an insurance and reinsurance company, closes on 31 December 2026 its financial year opened on 1 January 2026. Its net profit is below MAD 100,000,000, as it was for each of the financial years opened since 1 January 2023: the corporate tax (IS) rate is 20% (Art. 19-I-A and B and 247-XXXVII-A of the CGI 2026). The amounts are set for illustration.
- The company records an IFC provision of MAD 2,000,000 for the retirement indemnities of its current employees, whose rights have not yet vested.
- It records MAD 350,000 of paid leave accrued and not taken at 31 December 2026.
| Item | Amount | 2026 tax treatment | Effect on IS at 20% |
|---|---|---|---|
| IFC provision (rights not vested) | MAD 2,000,000 | Not deductible: no event in progress at year-end (Art. 10-I-F-2°, analogy with reply no. 453) | Off-book add-back; additional IS MAD 400,000 |
| Accrued leave, calculated employee by employee, booked as accrued expenses | MAD 350,000 | Deductible (NC 717 p. 142; reply no. 130) | IS saving MAD 70,000 |
| Same leave estimated globally or on a flat-rate basis | MAD 350,000 | Not deductible | Add-back; additional IS MAD 70,000 |
| Provision for 2027 paid leave (personnel expense of the following year) | MAD 350,000 | Not deductible (NC 717 p. 161-162; reply no. 130) | Add-back; additional IS MAD 70,000 |
Reading. The IFC provision costs 2,000,000 × 20% = MAD 400,000 of IS in 2026. The off-book add-back mechanism is presented in our article on moving from accounting profit to taxable income. If the provision has not been added back, the last paragraph of Article 10-I-F-2° requires, provided it is recorded in the books of a financial year that is not time-barred and “whatever the date on which it was set up”, that it be added back to the result of the financial year in which it was wrongly recorded in the accounts; if that financial year is time-barred, the adjustment is made in the first financial year of the period that is not time-barred (NC 717, p. 160).
For leave, the gap between the two methods is 350,000 × 20% = MAD 70,000 of IS.
Variant: transfer of an internal scheme to the RCAR. No source puts figures on the operation; the principle is written as a formula, following reply no. 78:
| Item | Treatment |
|---|---|
| Cost of past rights of active staff (C active) | Expense that may be spread over 5 years at most, for example C active / 5 per year if the company chooses 5 years; the reply sets a maximum period without requiring straight-line allocation |
| Cost of retirees’ rights (C retirees) | Allocated according to residual life expectancy justified and validated by the RCAR, with no fixed period |
| State subsidy (S) | Taxable income of the financial year in which it is received |
| Employee share borne by the employer | Cash benefit taxable to income tax (IR) in the employees’ hands |
Key points:
- At the 20% corporate tax (IS) rate (Art. 19-I-A of the CGI 2026), an added-back IFC provision of MAD 2,000,000 costs MAD 400,000 of IS.
- MAD 350,000 of accrued leave, calculated per employee and booked as accrued expenses, reduces 2026 IS by MAD 70,000.
- The same leave estimated globally, or provided for the following year, is added back (NC 717 p. 161-162).
Points to watch
- IFC and voluntary departure are two different regimes. NC 717 (p. 162) allows the provision for a dismissal or voluntary departure decided and notified during the financial year. It does not allow it for a future retirement.
- Write “accrued expense”, not “provision”, for paid leave. NC 717 (p. 162) refuses the provision for paid leave; only the individualised accrued expense is deductible (p. 142).
- Dismissal indemnities paid. NC 717 (p. 142) allows, for corporate tax (IS), the deduction of the total amount of indemnities calculated according to the legislation in force and, where the amount is set by a court, even above the legal limit. Their treatment for the employee is covered in our article on the taxation of severance pay.
- Old replies. Replies no. 453 and no. 78 (2003) predate the CGI: their reasoning can be transposed under Article 10-I-F-2° of the CGI 2026.
- Allocation over time limited to fund transfers. Only the transfer of an internal fund to the RCAR (reply no. 78) allows the expense to be allocated over several financial years. No such rule exists for a dismissal or departure indemnity.
- Points not settled by the texts. The treatment of the write-back of an IFC provision already added back, IFC contracts entrusted to an insurer and the extension of reply no. 78 to a body other than the RCAR are dealt with neither by the CGI 2026, nor by NC 717, nor by a published DGI reply.
Key points:
- The provision for voluntary departure or dismissal is allowed only if it is decided and notified during the financial year (NC 717 p. 162); it does not cover a future retirement.
- Paid leave is deducted as an accrued expense calculated per employee (NC 717 p. 142), never as a provision.
- Only the transfer of a pension fund to the RCAR allows allocation over 5 years at most (reply no. 78 of 25/02/2003).
READ ALSO:
- Deductible Provisions for Corporate Tax in Morocco: Conditions and Risks
- Corporate Tax in Morocco: From Accounting Profit to Taxable Income
- Taxation of Severance Pay in Morocco
Frequently asked questions
Is a provision for end-of-career indemnities deductible for corporate tax in Morocco?
No. Art. 10-I-F-2° requires a charge made probable by events in progress. The right to the indemnity arises from future conditions (age, length of service). No published DGI reply deals with the IFC provision: the reasoning of reply no. 453 of 2003 applies to it by analogy, and NC 717 (p. 161-162) refuses provisions for personnel expenses. The provision is added back; the indemnity is deductible for the financial year in which the employee leaves, as an accrued expense if it is still owed at year-end.
Is paid leave accrued and not taken at year-end deductible?
Yes, as an accrued expense of the financial year in which the right is acquired, if it is calculated in detail and individually per employee (NC 717 p. 142; reply no. 130 of 12/03/2015). A provision for paid leave constituting a personnel expense of the following year is not deductible (NC 717 p. 161-162; reply no. 130).
Is a retirement provision set up in an internal pension fund allowed?
No. The fund has no separate legal personality and the events giving entitlement to a pension lie in the future. Only provisions calculated in accordance with the law and relating to external pension funds are allowed (reply no. 453 of 7 November 2003).
How is the cost of transferring an internal pension fund to the RCAR deducted?
It is an exceptional expense. The share relating to active staff (past rights) may be spread over 5 years at most. The share relating to retirees is allocated according to their residual life expectancy validated by the RCAR. A State subsidy is taxable in the year it is received (reply no. 78 of 25/02/2003).
Which personnel provisions remain deductible?
Provisions for personnel expenses to be borne in the following financial year that can be regarded, from year-end, as a certain charge that arose during the financial year by reason of a formal commitment of the company (collective agreement, staff regulations), in particular bonuses and profit-sharing, as well as dismissal or voluntary departure indemnities decided and notified during the financial year and still owed at year-end (NC 717 p. 162).
