Turnover: Tax regulations in Morocco

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The turnover, as defined in article 9 of the General Tax Code, corresponds to the revenues and receivables that the company has definitively obtained as a result of:

  • Firstly, delivery of goods
  • Secondly, provision of services
  • Finally, the execution of real estate works.

This amount is a taxable income subject  to Corporate Income Tax.


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Recognizing turnover in accounting

The General Tax Code defines turnover as:

“the amounts receivable for sales of goods and services to third parties in the ordinary course of business. A company must record these sales net of:

  • Trade discounts
  • Recoverable taxes (VAT for instance)

In addition, note that accrual accounting is the accounting method adopted in Morocco. Thus, revenues from receivables are recognized and recorded when they are earned, regardless of their payment.

These sales are posted to the credit of “class 7” accounts of the income statement. In fact, they contribute to the gross income of the fiscal year which is the tax base.

The different types of sales : turnover recognition

Outright Sale

A sale that a company makes can be either:

  • Firstly, a cash sale. In this case, the exchange of consent and the payment are simultaneous;
  • Secondly, a credit sale. In this case, the parties agree that the payment will occur at a later date;
  • Thirdly, a forward sale. In this last case, the parties agree on a commitment but delay the execution of the sale.

Forward sale – Legal implications

In the case of a forward sale, the parties agree :

  • First, on the date of execution of the sale
  • And on the sale price

However, they agree that the conclusion of the transaction (its completion) will take place at a later date. In tax matters, if this sale does not include any suspensive conditions, the operative event is the date of the contract.

Conditional sales

The Moroccan law provides for two types of conditional sales. They are :

  • On the one hand, sales under a suspensive condition
  • On the other hand, sales under a resolutory condition

Sales under a suspensive condition

The Dahir of Obligations and Contracts (Dahir des obligations et des contrats) governs the conditions of these sales.

Indeed, this code states that a suspensive condition postpones the final conclusion of the sale. Thus, this sale is definitive only when the condition is actually fulfilled.

The sale becomes final on the date of the condition’s fulfillment.

Sale under a resolutory condition

The sale under a resolutory condition is governed by the provisions of article 121 of the DOC.

Indeed, this code specifies that the resolutory condition does not suspend the fulfilment of the obligation. Thus, it only obliges the buyer to return what he has received if the resolutory condition is fulfilled

The company must, therefore, record the sales related to such a transaction upon goods delivery. However, if the condition is fulfilled, the seller must adjust its accounts.

Specific cases of Turnover recognition

Circular 717 has provided for the treatment of the following particular cases:

Sales with right of redemption

A sale with right of redemption is an agreement whereby the seller can redeem ownership of the sold goods. In such a case, the seller must repay the purchase price (and possibly the acquisition costs).

From an accounting and tax point of view, the company must record the turnover. In the event of a redemption, it is treated as a purchase to be expensed.

Sale before completion

Sales before completion applies mostly to buildings. It is an agreement whereby the seller undertakes to:

  • First, to construct a building within a set time limit
  • Second, to transfer ownership of the property upon completion

The buyer commits to paying the price as the work progresses.

The seller retains his rights and duties as owner until the completion of the building.

In this case, the seller can only recognize the turnover when the ownership of property is transferred by a final contract.

Sale with retention of title clause

In this case, the seller retains the ownership of the goods until the full payment of the purchase price. The sale is only final when transfer of ownership happens.

The seller must therefore recognize sales only when the reservations are lifted.

Lease option

A lease option is a contract consisting in a lease and a probable future sale.

The seller recognizes only rental revenue during the term of the contract. When the option is exercised, the sales’ revenue is recognized.


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