Morocco: The new VAT withholding tax is coming, what will change for businesses

This system now requires service recipients to directly withhold the VAT due when paying the claims of service providers to remit it to the Treasury. This measure replaces the spontaneous declaration of service providers and primarily concerns banking institutions, insurance companies, as well as companies with an annual turnover equal to or greater than 200 million dirhams.

The application of this system will follow a staggered schedule according to the Directorate General of Taxes. Companies with a turnover exceeding 500 million dirhams will be the first concerned as of July 1, 2026. The obligation will then extend, on January 1, 2027, to entities with a turnover between 350 and 500 million dirhams, to result in a complete generalization on January 1, 2028 for all entities reaching the threshold of 200 million dirhams.

The withholding rate is conditional on the tax compliance of the service provider. A 75% withholding of the VAT amount will be applied if the service provider provides a tax compliance certificate. In the absence of this document, the client will have to withhold 100% of the tax amount. This mechanism is designed to encourage economic operators to keep their tax situation up to date with the administration.

The main objective of this reform is to limit tax evasion and optimize recovery in the service sector, where transaction monitoring is often complex. By making large clients responsible in the collection process, the tax administration intends to ensure better traceability of payments and stabilize the Treasury’s resources.