Inactive sign in front of Moroccan Finance Ministry

Moroccan law allows a company with no turnover to declare itself inactive, without closing. The advantage of this status, known as “temporary cessation of activity“, which is limited in time (two financial years plus one), is that it has very few reporting obligations and is exempt from the minimum contribution.

However, it is necessary to declare and file its accounts and make an annual VAT return.

However, many companies do not do this, or even do not file a соmрtеѕ at all for years, on the basis of the “not seen not taken, if I do not declare anything, I do not pay anything”.

This is less and less true. The introduction of the ICE number, the obligation to indicate the ICE number of the invoicing company on the VAT return, the online verification of this ICE number (which prevents the return from being filed if the number is wrong), the declaration of fremuneration paid to third parties, all this gives the Moroccan administration all the information needed to track down companies, all the more easily as the computer systems are increasingly connected to each other.

And so, in very Moroccan fashion, the finance law blows the whistle on the future endgame, in two stages: regularisation then sanction.

The law: no declaration, automatic taxation

It is defined in chapter III of the tax code: in the absence of a tax return, the administration can assess the company’s profits on “the basis of the information available to it” (such as the invoices issued, but also the lifestyle…) and carry out an ex officio taxation, which will be quite difficult to contest, especially if the аЬѕеnсе of a tax return is the consequence of an absence of accounting.

Yet an inactive company must also fill tax returns, and pay a minimum contribution.

The regularisation procedure in 2023

Taxpayers who have not achieved any turnover or paid the minimum contribution for the last four financial years may benefit from the exemption from tax inspection as well as the automatic cancellation of increases, fines and penalties for failure to file declarations and pay taxes provided for by this code for the years not prescribed, under the following conditions:

  • the subscription of the declaration of total cessation of activity during the year 2023 ;
  • the spontaneous payment, within the same time limit of the declaration, of a lump sum of corporation tax or income tax, as the case may be, of 5,000 dirhams, for each fiscal year not prescribed;
  • unless a tax audit has already taken place.

This also applies to companies that have not even filled a tax return (and therefore have not paid the minimum assessment). The administration contact and invites them to file this cessation declaration, suspending the ex officio taxation procedure.

It is therefore not a simple reset procedure. To benefit from it, the company must be actually closed (and you might, possibly, create another one). But it is a very good way to clear a liability. There are thousands of dormant companies in Morocco, because there is always a fear of a tax audit if a company is closed.

The 2023 finance law therefore allows the situation to be cleared at a low cost: 25,000 dirhams (the rate initially planned was 20,000 dirhams per year)

Immediate sanction, via the customer of the inactive company

To further encourage the companies in question to regularise their situation, the Finance Law has put in place a system that is as perverse as it is effective: invoices issued by companies that have not fulfilled their reporting obligations for more than three years (“inactive”) are no longer expenses deductible from the profit.

This means that Moroccan companies are obliged, as in other countries, to check their suppliers:

  • ехіѕtеnсе and ICE number compliance
  • ехіѕtеnсе of tax returns

How do you go about checking your supplier information?

Two options, either you do it yourself, retrieving the balance sheets from (which is also used to check the ICE number), or you ask the supplier to provide its last balance sheet, specifying that you won’t pay him if he doesn’t meet this request.

Simple, isnt’it?

Nevertheless, the tax penalty will come late for the customer: at best when he files his annual accounts, at worst during a tax audit. There is therefore a good chance that this measure will be postponed or modified slightly.