In brief: VAT territoriality in Morocco is governed by Article 88 of the General Tax Code. For goods, the criterion is physical delivery in Morocco; for services, it is the place of use or exploitation. Since 2024, dematerialized digital services to Moroccan clients are also taxable. See our overview of VAT in Morocco.
What Are the Rules of VAT Territoriality?
VAT territoriality refers to the rules that apply to determine whether a transaction is subject to VAT based on the place where it is carried out. These rules form a fundamental pillar of the Moroccan tax system, as they define the territorial scope of value added tax and help prevent situations of double taxation or non-taxation.
The General Tax Code (2026 version) sets out the rules of VAT territoriality in its Article 88. Thus, Value Added Tax is applicable in Morocco when the transaction is carried out in Morocco. In other words, it is the place where the transaction occurs that serves as the determining criterion for the application of Moroccan VAT, regardless of the nationality or domicile of the parties involved.
Basic Principle of VAT Territoriality
A transaction is deemed to be carried out in Morocco, according to Article 88 of the General Tax Code:
First, if it involves a sale
When the sale takes place under conditions where the goods are delivered in Morocco. The criterion used is physical delivery, meaning the location where the goods are actually handed over to the buyer.
Second, for other transactions
When the service provided, the right assigned, or the object rented is used or exploited in Morocco. This criterion of use or exploitation is the cornerstone of VAT territoriality for all transactions other than the sale of goods.
VAT Territoriality - Sales in Morocco
According to the comments in Circular 717, Volume 2:
A sale in Morocco corresponds to a sale under conditions where the goods are delivered in Morocco. Thus, under the rules of VAT territoriality, this sale must be subject to tax in Morocco.
What Is a Delivery in Morocco Under Tax Law?
Delivery corresponds to the transfer of the item sold into the enjoyment and possession of the buyer. It therefore involves the physical handover of the goods to the buyer.
As a result, the conditions of chargeability have no bearing on the place of delivery.
According to the circular, the following should not be taken into account:
- Place of conclusion of the sale
- Place of payment for the transaction
- Location of the item at the time of sale, as long as it is intended for delivery in Morocco
- Currency of payment used in the transaction
- Nationality of the sellers and buyers
Ultimately, a sale in Morocco occurs as soon as the final receipt of goods takes place on Moroccan territory.
Legal and Tax Effects of This Definition Regarding VAT Territoriality
Under this rule, sales between two traders in Morocco must be subject to VAT.
Moreover, import purchases are subject to VAT insofar as the final delivery destination is in Morocco.
Conversely, since exports are delivered abroad, they are not subject to VAT.
Nevertheless, in some cases it may turn out that:
- First, a Moroccan customer takes possession of goods that they import abroad;
- Second, a seller who intends goods for export delivers them on Moroccan territory.
In both cases, the strict application of the rule could subject exports to VAT or exempt imports from it.
However, to determine whether a transaction must be subject to VAT, the territoriality rule must be combined with the provisions governing import and export operations.
Thus:
- On one hand, imports are subject to VAT, subject to certain special customs regimes;
- On the other hand, the law expressly provides (in Article 92) for the exemption of exported goods and services.
VAT Territoriality - Services and Place of Supply
Regarding services, the basic principle concerns the place of use and exploitation of the service. It is this criterion that connects a service to Moroccan territory, regardless of where the service provider is located.
Thus, the service provider’s place of residence, for example, does not determine VAT territoriality. The same applies to the place where the service provider renders the service (e.g., the seller’s registered office).
It is, however, up to the service provider to prove that the use or exploitation of the service takes place outside Moroccan territory.
Connection Criteria for Service Provisions
If a Moroccan company provides engineering services for a client located outside Morocco, the following questions arise:
- First, is the client located outside Moroccan territory?
- Second, have the parties to the contract denominated it in foreign currency?
- Finally, does the subject of the study correspond to use or exploitation outside Morocco?
If the answer to all three questions is positive: it is an export of services exempt from VAT. If, however, the service does not meet one of the conditions, VAT remains due.
Practical Examples of VAT Territoriality
- A Moroccan engineer provides a study for a foreign company for the construction of a building it plans to erect in Morocco: taxable, because the exploitation takes place on Moroccan territory.
- Services provided by a call center for a foreign client (calling foreign clients) are not taxable, because the use of the service occurs outside Morocco.
- A Moroccan consulting firm providing market research used exclusively in a foreign country: not taxable in Morocco, subject to supporting documentation.
- A Moroccan training company that trains staff for an industrial project located in Morocco, commissioned by a foreign company: taxable, because the use occurs in Morocco.
Digital Services and VAT Territoriality
The 2024 Finance Law introduced a major change to Article 88 of the General Tax Code by extending VAT territoriality to services provided remotely in a dematerialized manner.
Definition of Dematerialized Services
The General Tax Code defines a remotely provided dematerialized service as any service delivered through a remote communication tool, including intangible goods and other immaterial assets. This notably includes:
- Distance learning (e-learning);
- Software provision (SaaS, online licenses);
- Digital content provision (streaming, downloads);
- Online advertising services;
- Cloud computing services.
New Territorial Connection Criterion
Dematerialized services provided by a non-resident person without an establishment in Morocco are now deemed to be carried out in Morocco when the client has its headquarters, establishment, or tax domicile in Morocco. This rule applies even if, at the time the service is provided, the client is physically located abroad or if the service is consumed digitally by said client from outside Morocco.
International Transport and VAT Territoriality
The international transport of goods and passengers is subject to specific VAT territoriality rules. In principle, international transport is exempt from VAT under Article 92 of the General Tax Code, as an export of services. However, this exemption only covers the international leg of the journey. Domestic transport, even when it forms part of an international route, remains subject to Moroccan VAT insofar as it takes place within the national territory.
Withholding Tax on Foreign Suppliers
When a foreign service provider supplies a service that is used or exploited in Morocco, VAT is due in Morocco. Article 115 of the General Tax Code provides for a withholding tax mechanism to ensure the collection of this tax. In practice, this is closely tied to tax representation in Morocco.
Obligations of the Moroccan Company
The Moroccan client company must:
- Withhold VAT on the amount paid to the foreign supplier;
- Declare and remit this VAT to the tax authorities;
- Retain supporting documents for the service rendered and the payment made.
Since the 2024 Finance Law, the VAT withholding rate is 75% of the tax amount when the service provider presents a valid tax compliance certificate (ARF), and 100% in the absence of a valid ARF. This mechanism also applies to transactions carried out by non-resident suppliers providing dematerialized digital services to clients established in Morocco.
Free Zones and VAT Territoriality
Export free zones benefit from a special VAT regime. Transactions carried out within a free zone and intended for export are exempt from VAT. However, sales of goods or services from a free zone to Moroccan territory are treated as imports and are subject to VAT under standard conditions.
Key Points for Free Zones
- Purchases of goods and services made locally by companies established in a free zone for the needs of their export activities may benefit from VAT exemption;
- Transactions between companies located in the same free zone are generally exempt;
- The reintroduction of goods into the taxable territory (outside the free zone) triggers the application of import VAT.
Conclusion: Mastering VAT Territoriality
Mastering VAT territoriality rules is essential for any company operating in Morocco or with Moroccan partners. The distinction between sales of goods (delivery criterion) and services (use or exploitation criterion) forms the foundation of the analysis. Recent reforms, particularly the extension to dematerialized digital services and the strengthening of withholding tax mechanisms, reflect the adaptation of the Moroccan tax framework to new economic realities.
See also: Tax Administration Response
Frequently Asked Questions
How is VAT territoriality determined for goods in Morocco?
For sales of goods, VAT territoriality is determined by the place of delivery. A transaction is subject to Moroccan VAT if the goods are delivered in Morocco, regardless of where the contract was signed or where the seller is established.
How does VAT territoriality apply to services in Morocco?
For services, the criterion is the place of use or exploitation. A service is subject to Moroccan VAT if it is used or exploited within Moroccan territory. This applies even when the service provider is established abroad, triggering the reverse charge mechanism for the Moroccan client.
What VAT regime applies to digital services consumed in Morocco?
Since the 2024 Finance Law, dematerialized digital services provided by non-resident suppliers to clients in Morocco are subject to Moroccan VAT. The Moroccan client must withhold and remit the VAT to the tax authorities under the reverse charge mechanism.
Are exports subject to VAT in Morocco?
Exports of goods and services are generally exempt from VAT in Morocco, with the right to deduct input VAT (zero-rated regime), allowing exporting companies to recover VAT paid on their purchases. However, this exemption is subject to compliance with specific documentary and procedural requirements. Companies established in free zones also benefit from VAT exemption on locally sourced goods and services used for their export activities, though reintroduction of goods into the domestic taxable territory triggers import VAT.
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