If one were to summarise income tax in Morocco, it would be “simple”, “high” and “limited”.
Simple because, unlike many countries, there are few tax niches, few deductions, etc.
High because… the rates are high (or the brackets are low).
Restricted because a lot of income is exempted or simply taxed at source.
The basic principles of income tax
No common tax household
The notion of a tax household does not exist in Morocco as we know it. Indeed, legally, the assets and income of the two spouses remain strictly separate, they are not merged to calculate a global tax. This is advantageous for couples where both parents work and who will have, as it were, two tax homes at the same address for the same family.
Minimal allowance for dependants
On the other hand, the notion of dependents exists and allows a minimal deduction from taxable income of 60 dirhams per person per month. It includes children, the non-employed spouse or any other dependent adults (for example in the case of a kafala for an adult).
When both parents work, the children are traditionally attached to the father, although this is not a legal obligation. However, given the small amount of the deduction, it is not worth trying to change this for tax reasons alone.
Income tax is not progressive!
In other words, and this is undoubtedly the biggest difference with foreign systems, the tax rate determined by the “income bracket” is applied to the entire taxable income, starting from the first dirham.
This means, in practice, that a small increase in salary, if it results in a higher bracket, may generate in a diminution of the net income.
Income tax deducted at source, to be adjusted annually
In the case of employees, each company draws up its pay slips on the basis of the wages it pays, and only on that basis.
If the employee has other sources of taxable income or works for several companies, it is up to him or her to make an annual adjustment to the Tax Administration, which may lead to an additional tax or a refund.
However, if at the end of the year the company finds that the annual base is higher than the one applied in certain months, it must make an adjustment. This can happen for employees who earn large salaries from time to time, such as salespeople paid on commission.
Conversely, if the annual salary is finally in a lower bracket (employees who arrive during the year, long-term sick leave, unpaid leave, etc.), it is up to the employee to ask the Directorate General of Taxes directly for the adjustment of the overpayment.
The “CNSS” base is the same as the tax base
This is a real blessing, compared to countries with complex tax systems, incentives, etc., that we can experience in various European countries (I remember the headaches of French or Belgian pay slips and German tax returns…)
Everything that is exempt from Income Tax is exempt from CNSS contributions and vice versa.
(Except for the very special case of CFC employees, who are taxed at a rate of 20% regardless of their income, in return for which they are not entitled to any tax deduction, although the corresponding amounts remain exempt from CNSS).
Limited exemptions
Some salary items are exempt from income tax:
- representation expenses for management staff
- a transport allowance
- (partial) coverage of telephone subscriptions
- some bonuses, such as the “sheep bonus” (premium given at the occasion of Eid El Kebir) or bonuses related to working conditions
All these elements, like the deduction for professional expenses, are limited in amount.
However, there are revenues that are not subject to tax
- Income that is compensation in the broad sense is exempt from income tax. This includes:
- all family allowances, CNSS/AMO allowances and those paid by complementary mutual insurance companies, as well as disability pensions;
- redundancy payments (up to a maximum of one million dirhams from 2023 on);
- alimony payments;
- scholarships and internship allowances paid to students (within the limit of 6,000 dirhams gross/month) are also tax exempt;
- authors’ rights (without limitation of amount) and literary and artistic prizes, up to a limit of MAD 100,000/year;
- certain benefits paid under life insurance contracts and capitalisation contracts;
- Inheritances;
Income subject to a withholding tax
This income will be taxed, generally by a withholding tax, at a fixed rate, generally rather low, or benefit from a very high allowance (which amounts to the same thing in practice). They are therefore not included in the taxable base which will determine the tax bracket.
These are in particular dividends (with a withholding tax of 13.75% in 2023).
A universal tax for residents in Morocco
Morocco requires its residents, nationals or foreigners, to declare all income in Morocco, regardless of the country in which it is earned. (Unlike the US, this applies only to residents. Non-resident Moroccans have to declare revenues made in Morocco only, like rents…)
Where a tax treaty has been signed (which is the case with the US, Canada, United Kingdom and Ireland, among others), mechanisms are put in place to avoid double taxation.
These mechanisms depend on the country, the nature of the income and the method of payment (withholding tax or payment on the roll) and allow, depending on the case, to have the tax paid in the country of origin refunded, to deduct it from the tax due in Morocco or even to exclude the income from the tax base in Morocco.
High tax rates
It is both simple and painful!
Income tax rate schedule in 2023
| Montly (indicatif) | Yearly | Frais professionnels | IT rate |
Income tax due |
|||
| From | To | From | To | Rate | From | To | |
| – | 2 500 | – | 30 000 | 35% | 0% | – | – |
| 2 501 | 4 166 | 30 001 | 50 000 | 35% | 10% | 1 951 | 3 250 |
| 4 167 | 5 000 | 50 001 | 60 000 | 35% | 20% | 6 501 | 7 800 |
| 5 001 | 6 500 | 60 001 | 78 000 | 35% | 30% | 11 701 | 15 210 |
| 6 501 | 6 666 | 78 001 | 80 000 | 25% | 30% | 17 551 | 18 000 |
| 6 667 | 15 000 | 80 001 | 180 000 | 25% | 34% | 20 401 | 49 300 |
| 15 001 | 180 000 | 25% | 38% | 55 100 | – | ||
The 2023 finance law introduced a threshold of 78,000 dirhams for the allowance for professional expenses, which is within the 30% bracket (from 60,000 to 80,000 dirhams), which is why we have split the line in two.
The I.R. amounts are indicative, they have been calculated in the absence of any other reduction, exemption or allowance, which is not the case in real life.
Indicative comparison of tax brackets and rates with France
In 2017 we made this comparative table, which remains true even if the conversion rates should be updated. Amounts, of course, differ from one country to another, nevertheless, it shows the differences in brackets and taxation rates.
| Morocco | France | ||||
| Annual net income |
Rate | In euros | In dirhams | Rate | |
| Non-taxable | 0 – 30.000 | 0 | 0 – 9.807 | 0 – 109.270 | 0 |
| Bracket 1 | 30.000 – 50.000 | 10% | 9.807 – 27.086 | 109.270 – 301.792 | 14% |
| Bracket 2 | 50.000 – 60.000 | 20% | 27.086 – 72.617 | 301.792 – 809.100 | 30% |
| Bracket 3 | 60.000 – 80.000 | 30% | 72.617 – 153.783 | 809.100 – 1.716.450 | 41% |
| Bracket 4 | 80.000 – 180.000 | 34% | > 153.783 | > 1.716.450 | 45% |
| Bracket 5 | > 180.000 | 38% | NA | ||
We can see :
- that you have to earn a lot more money to reach the same brackets
- and even more to pay so much tax, since income tax in France is progressive
Example of income tax calculation
Let’s take the case of an executive earning 20,000 dirhams gross/month, with a bonus of 15,000 dirhams and a sheep bonus of 2,400 dirhams.
This 20,000 dirhams includes :
- a representation bonus of 10% of his salary
- a contribution to transport costs of 500 dirhams
- half of his telephone costs (150 dirhams out of 350 in total)
He has a working wife and two children, so two dependants.
| Gross annual income | A | 257.400 |
| Non-taxable items | B = C+D+E+F | |
| – Representation expenses | C | 25.500 |
| – Transport costs | D | 6.000 |
| – Telephone | E | 1.800 |
| – “Sheep premium” for Eid El Kebir | F | 2.400 |
| Gross taxable income | G = A-B | 221.700 |
| Allowance for professional expenses (capped) | H = G*25% | 35.000 |
| CNSS AMO paid by employee | I | 8.236 |
| Taxable income | J = G – H – I | 178.464 |
| Income tax rate | K | 34% |
| Income tax |
L = J*K | 60.678 |
| Deduction for dependants | M | 720 |
| Tax payable | N = L – M | 59.958 |
| Net disposable income | O = A – I – M | 189.206 |
| per month | 15.767 |
With a monthly salary of 25,000 dirhams (25% more), the annual net income rises to 220,791 dirhams, i.e. an increase of only 16.7% (and an increase in employer’s charges of 24.5%)
The special case of pensions
Pensions pay income tax according to the general scale, but benefit from a much higher allowance than the allowance for professional expenses:
- 70% on the bracket of this income below 168,000 dirhams/year
- 40% on the higher bracket
Therefore, a person who receives an annual pension of 200,000 dirhams will have a taxable income of only 69,600 dirhams, which places him in the 30% bracket instead of the 38% bracket, i.e. a total tax saving of 55,000 dirhams.
Is it possible to optimise your income tax?
Yes, it is possible.
Identify the subsidised investments
There are far fewer of these than many countries, but the purchase of a main residence, investments in mutual funds or savings plans can give rise to tax deductions.
However, this remains limited, without the wide variety of subsidised investments we usually know.
Organising your income
Given the relative absence of “tax niches” in Morocco, optimising one’s income tax consists above all in optimising the structure of one’s income: salaried employees, self-employed persons, dividends, etc., both at the individual and family level.
This work must be done taking into account the totality of income, in Morocco and abroad, the functioning of tax treaties, etc.