2021 Finance Act: what will change!

What are the main tax provisions of the 2021 Finance Act? That is the question answered by the speakers at the webinar organised by the Swiss Chamber of Commerce in Morocco, in partnership with the firm Ernst & Young, on 26 January. A constructive meeting with the participation of Kamal Himmich and Nassym Hajoui, respectively Partner and Senior Manager at EY.

Given an ongoing health situation, new challenges must be met to revive an economy still in the grip of Covid-19. “Major economic and social challenges that will need to be accompanied by appropriate tax measures”, said Kamal Himmich, Partner at EY, in his introduction to the event.

Introduction of a social contribution

One of the major tax measures contained in the 2021 Finance Act is the introduction of a social solidarity contribution on profits and income for the 2021 financial year. The aim: to continue efforts in favour of disadvantaged populations and to strengthen solidarity during this period of crisis. “This contribution will be paid by companies subject to corporate income tax (IS), excluding those permanently exempt from corporate income tax, companies operating in industrial acceleration zones and service companies benefiting from the Casablanca Finance City (CFC) tax regime”, Kamal Himmich explained.

It will also be paid by individuals subject to personal income tax (IR) on Moroccan-source professional, agricultural and property income, as well as on salaries and similar income. “The social solidarity contribution concerns individuals with a net income equal to or greater than 240,000 dirhams per year. They will pay a rate of 1.5% of their net income”, added Nassym Hajoui, Senior Manager at EY.

Reviving the job market

Another flagship measure concerns exemptions from personal income tax (IR). “The 2021 Finance Act provides relief for a category of the population looking for a first job or who lost their job because of the Covid-19 crisis”, Nassym Hajoui explained.

The transitional IR exemption thus applies to any new recruit under the age of 35 for a period of 3 years, on the basis of a permanent contract concluded between 1^st January 2021 and 31 December 2021.

In addition, employees who lost their jobs between 1^st March and 30 September 2020 for reasons directly linked to the Covid-19 crisis will be exempt from IR for a period of 12 months if they find a new job. This benefit is capped at a monthly salary of 10,000 dirhams and is subject to certain conditions.

Exemption from registration duties

With regard to registration duties, the 2021 Finance Act provides for a reduction in registration duties from 1% to 0.5% for deeds of incorporation or capital increases of companies. Along the same lines, the 2021 Finance Act introduced encouraging measures to facilitate access to housing for the various social groups on the one hand, and to boost the property market on the other. “The 2021 Finance Act extended the reduction in registration duties on property purchases: 100% for deeds relating to the first sale of social housing and low-value housing, and 50% for deeds relating to the acquisition of undeveloped land intended for the construction of housing or of built premises intended for residential use, provided that their value does not exceed 4 million dirhams. These reductions will be valid until 30 June 2021”, Kamal Himmich recalled.

Other measures…

In keeping with Morocco’s commitments on good governance for tax purposes, the 2021 Finance Act specified how the Casablanca Finance City (CFC) tax regime is to be brought into compliance, through two measures: clarification of the treatment of financial companies and limitation of the period of application of the former CFC regime to the end of 2022.

In line with the measures adopted, companies specialising in the business of fake invoices will be exposed. Indeed, when the administration finds that an invoice has been issued that does not meet the declaration and payment obligations laid down in the General Tax Code (CGI) and that there is no actual activity, the deduction corresponding to that invoice is not allowed (VAT and IS). The tax identification number of the companies concerned will also be published on the tax administration’s online portal and made accessible to users.

The 2021 Finance Act thus gives concrete form to the implementation of the recovery plan, whose objective is the return of economic growth and the mitigation of the economic and social consequences of the Covid-19 crisis.