Nestlé Morocco Hit with $110 Million Tax Bill After Pricing Audit

This tax reassessment follows an audit conducted by the team of the national division of tax audits directly under the boss of the General Directorate of Taxes in Rabat, reports Financial Afrik. The rejection of the transfer pricing calculation method applied by Nestlé Morocco is at the origin of this reassessment. "The prices at which the purchases and sales of goods and services between the company and the other subsidiaries of the group, but also with its parent company, are invoiced," it is explained. According to the Moroccan tax authorities, the subsidiary of the Swiss food group has improperly organized a transfer of profits to its parent company by underestimating the taxable result in Morocco through the manipulation of transfer prices.

Nestlé Morocco intends to challenge this reassessment. In this sense, from Geneva, the group has sent tax lawyers on a mission who will work with the local consultants of the EY firm. A procedure has already been initiated before the National Tax Appeals Commission. In parallel, the company is attempting an amicable settlement with the tax administration. "The method used by Nestlé Morocco is a global scheme implemented in all the subsidiaries of the group," said Imane Zaoui, CEO of Nestlé Morocco. It remains to be seen whether the Swiss multinational will be able to convince the Moroccan tax authorities. According to a source, the discussions between the two parties would be closer to a breakdown than a transaction.

In a transaction between the tax authorities and a taxpayer, a discount on the amount of tax reassessments can only cover issues of interpretation and not of law, specifies Moroccan law. In other words, any reduction in the VAT bill not paid to the Treasury cannot be considered. The Moroccan tax administration can, however, grant a reduction on the amounts of late payment penalties or the level of royalties that a company has paid to its parent company for technical assistance.