Moroccan Government Unveils 2009 Budget

by Ulrika Lomas, Tax-News.com, Brussels

28 October 2008

The Moroccan government has this week unveiled its 2009 budget, outlining key tax reforms designed to reduce the burden on taxpayers and simplify and harmonise the existing fiscal system.

The tax reforms outlined in this year’s budget by the Minister for Finance and the Economy, Salaheddine Mezouar, form part of an ongoing programme of modernisation and integration across the four key areas: VAT; income tax; corporate tax and registration and stamp duty. This process, aimed at enabling Morocco to compete at an international level, commenced in 1995.

According to the finance minister, the overhaul will produce a fully integrated system, achieve greater transparency for all and provide welcome tax relief for both businesses and individuals, thus strengthening purchasing power and in turn boosting the economy.

At the heart of the reforms are the following tax measures, due to enter into force as from January 1, 2009:

Families will be entitled to receive additional benefits as follows:

• The amount of deductions will be doubled from DH180 to DH360 per dependant, up to a limit of six dependants or an amount of deductions totalling DH2,160.
• A higher rate for business expenses, increased from 17% to 20% and capped at DH24,000.

Adjustments to income tax include:

• Raising the threshold for exemption from income tax from DH24,000 to DH27,000.
• Reducing the tax levied on income exceeding DH150,000 from 42% to 40%.

In addition to these initiatives, individuals will benefit from reductions in interest on loans taken out in order to build a residential house, from reductions in the amount of costs deducted for pensions and costs associated with life insurance or capitalisation.

Reform of the VAT system

Under the government’s proposals, the VAT system will also be reformed and simplified in a bid to unify thresholds for levying the tax and widen the base to which the tax applies.

From January 1, 2009, the threshold for imposing VAT on small manufacturers will rise from DH180,000 to DH500,000.

Reform of corporate taxation

This includes:

• Clarifying the conditions for granting tax benefits to offshore holding companies.
• Encouraging capitalisation of SMEs with profits of DH50mn or less, by enabling them to increase their social capital while reducing their corporate tax.
• Eliminating deductions made to capital gains on disposal of fixed assets.
• Extending the reduction of tax for property developers to 50% of corporate or income tax.

The government also announced that it intends to continue with the tax exemption on individual and corporate income for farmers until the end of 2013.

The 2009 budget bill was adopted during a council meeting of ministers on October 20, at the Royal Palace in Casablanca, with King Mohammed VI presiding.

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