Morocco Raises Taxes on Luxury Vehicles, Prices Expected to Surge

In response to Ferrari Morocco’s concern about legal insecurity and tax inequality, the Directorate General of Taxes (DGI) provided clarifications on the calculation methods of the applicable VAT on high-end vehicles. "Following a tax audit, the auditor ordered Ferrari Morocco to calculate the VAT on the price excluding taxes plus the 20% luxury tax. But other importers were not doing so, creating an inequality of treatment," complained Adil Douiri, representative of the Italian manufacturer.

In its correspondence no. D635/24/DGI, the DGI specified that "the proportional stamp duty on vehicles upon their first registration in Morocco must be included in the taxable base of the VAT", recalling that Article 96 of the General Tax Code stipulates that "the taxable turnover includes the price of goods [...] as well as the related fees, duties and taxes, with the exception of VAT".

As a result, the selling price of luxury vehicles should increase, due to the 20% VAT and the 20% luxury tax calculated on the price excluding taxes. Thus, a high-end vehicle costing 1 million dirhams excluding taxes should be sold at 1.44 million dirhams including all taxes (1 million x 1.2 x 1.2), instead of 1.4 million currently, according to Challenge.

"The luxury tax, as its name suggests, aims to apprehend the real contributory capacity of the customer taking into account the value of the purchased asset. It would be paradoxical and contrary to the spirit of this tax to exclude it from the calculation of VAT," explains an analyst, stressing that "these particularly heavy taxes on high-value goods allow substantial revenues to be generated for the State, while limiting ostentatious consumption in a developing country like ours." It remains to be seen whether the measure will have direct repercussions on the Moroccan luxury automobile market.