After lengthy discussions and a lot of arm wrestling, especially with the pharmacists and the legal professions, the Finance Act 2023 has finally been published, and we’re going to look at what interests you most: your taxes.
The road to simplification has begun
The government is moving forward with its plan to simplify / harmonise tax rates (particularly the corporation tax), which is due to be completed in 2026 and which will put an end to tax niches. Unfortunately, this also affects the export turnover allowance.
Take the money where it belongs: from those who fill their tax forms
A French humorist recommended taking money from where it is, from the poor, but this does not apply in Morocco where most of the poor are in the informal sector.
We will therefore fall back on those who declare, and more particularly companies, whether the tax is finally paid by the companies or by the final consumer, with new indirect taxes on sales. Part of the tax collection is transferred to the companies that pay the charges. If they do not pay, the cost becomes non-deductible.
Professionals, individuals and autoentrepreneurs taxpayers: these three types of taxpayers are likely to suffer from the new finance law. The biggest changes concern companies and professionals, so they are the subject of a separate article.
Is it still worth being an autoentrepreneur?
”Autoentrepreneur for self-employed entrepreneurs where the amount of the turnover is limited (200.000 dirhams/year for services) in exchange of extreme administrative simplification and a very low tax-rate.This is a real question, with the limitation of services that can be invoiced to a single customer.
The answer is “yes, if you are really an autoentrepreneur, no if this status allows the company that should be employing you to bypass social laws“.
Uberisation through self-employment is widespread in countries where this type of status exists, allowing large companies to have suppliers instead of employees: no permanent contract, no redundancy, no social protection, no work accidents at the company’s expense, etc.
After lengthy legal proceedings, several courts in Europe have recognised the reality of an employment contract disguised as a service provision. The same criteria exist in Morocco (no autonomy, application of directives, single principal), but the labour inspectorates remain cautious and their first response is “you have a service contract”.
This contract can be requalified as an employment contract by the courts… after a few years.
Exclusion from the autoentrepreneur regime of turnover exceeding 80,000 dirhams made with a single customer
From 1 January 2023, the surplus of the annual turnover exceeding 80,000 dirhams (initially 50,000), when it concerns services with the same customer, is excluded from the autoentrepreneur regime, which means :
In other words, 30% of the amount of your invoice will have to be paid to the state by the customer.
I’m sure that some people will try to deduct this 30% from the invoice, and only pay 70% to the self-employed person.
While this suggests conflicts for current contracts, it is clear that for future contracts, the self-employed will ensure that they receive the desired fee and leave the 30% to be paid by their customer.
With an employer’s social security contribution rate of 21% (27% if social security contributions are included) without IR, the 30% rate is still lower than the overall payroll deductions once the amount of tax-free salary is exceeded. Except for new recruits (see details in the post on measures affecting companies).
Companies will therefore not be really dissuaded from using self-employment, but the state will get its money back, by taking the money from where it is: from those who declare.
Some advantages for individuals and income tax
It cannot be said that income tax will be reduced.
However, unlike the measures affecting companies, there are some advantages for individuals.
Increase in the business expense allowance
The first step to go from your gross salary/income to your net taxable income is to deducean allowance for “professional expenses” (the petrol to go to work, the dry cleaning for your nice suits instead of the comfy jogging suit you hang out in at home…)
Until now, this deduction was 20%. Now it is:
- 35% for gross annual income of up to 78,000 dirhams (6,500 dirhams, i.e. 500 dirhams more than the capped CNSS salary)
- 25% for the others, with a ceiling raised from 30,000 to 35,000 dirhams (2,917 dirhams/month, which corresponds to the allowance on a gross salary of 11,670 dirhams/month).
It is therefore the middle class that is targeted.
For employees who already have a contract, this means a higher net amount to pay, and it is especially interesting for the managers of SARLs of AU who pay themselves a small salary and pocket dividends at the end of the year.
Deduction on pensions and life annuities
These incomes benefit from a flat-rate deduction, different from the one for professional expenses.
This deduction is, until now, of :
- 60% on the bracket of this income below 168,000 dirhams/year, after a first revaluation in 2019, where the allowance was 50%
- 40% on the higher bracket
The allowance on income of less than 168,000 dirhams increases to 70%, while the allowance for the higher bracket remains at 40%.
Capital gains on the resale of the main residence
The period necessary to benefit from the exemption from the tax on real estate profits is reduced to 5 years instead of 6.
Various withholding taxes
These apply to non-salaried income, and are intended to ensure the declaration of income and, in a way, to protect employment (same mechanism as for auto-entrepreneurs). They concern :
- the income of self-employed teacher-vacationers: 30%, in full discharge of the I.R. ;
- the redemption of contributions and premiums of individual or collective pension insurance contracts: withholding tax of 15% instead of the current progressive scale, reaching 38% above 180,000 dirhams;
- 5% withholding tax on the invoices of services issued by natural persons (this is the most contested measure of this finance law, which provoked, among others, the lawyers’ strike)