The Moroccan General Directorate of Taxation (DGI) has issued an overview of the main tax measures of the Finance Law for 2023. The main measures are summarized as follows.

New Simplified Corporate Income Tax Rate System

One of the main measures of the Finance Law for 2023 is for the introduction of a new simplified corporate income tax rate system that includes:

• a standard corporate income tax rate of 20%;
• a higher corporate income tax rate of 35% for companies with annual net profits of MAD 100 million or more; and
• a higher corporate income tax rate of 40% for financial (credit) institutions and similar bodies and insurance and reinsurance undertakings.

The overview also provides that the higher corporate income tax rate of 35% does not apply to:

• Service companies benefiting from the Casablanca Finance City tax regime;
• Companies operating in Industrial Acceleration Zones; and
• Companies established on or after 1 January 2023 that undertake under an agreement with the government (state) to invest at least MAD 1.5 billion over five years from the date the agreement is signed, subject to certain conditions including that the investment is made in tangible fixed assets that are kept for at least 10 years.

These companies will be subject to the 20% rate from 1 January 2023. However, the overview also notes that the Finance Law for 2023 includes measures for a transition to the simplified corporate income tax rate system over a period of four years, with the rates of 10%, 15%, 20%, 26%, 31%, and 37% increased, reduced, or maintained as the case may be, during the period 2023 to 2026

The transition measures provide the following:

• The 10% rate for companies with net profits of MAD 300,000 or less is increased to:
  • 12.5% from 1 January 2023
  • 15.0% from 1 January 2024
  • 17.5% from 1 January 2025
  • 20.0% from 1 January 2026
• The 15% rate for companies established in Industrial Acceleration Zones and those with Casablanca Finance City status is increased as follows:
  • for companies with net profits below MAD 100 million, the rate is:
    • 16.25% from 1 January 2023
    • 17.50% from 1 January 2024
    • 18.75% from 1 January 2025
    • 20.00% from 1 January 2026
  • for companies with net profits of MAD 100 million or more, the rate is:
    • 20% from 1 January 2023
    • 25% from 1 January 2024
    • 30% from 1 January 2025
    • 35% from 1 January 2026
• The 20% tax rate on net profits exceeding MAD 1 million for qualifying companies in certain sectors is increased as follows if profit is MAD 100 million or more:
  • 23.75% from 1 January 2023
  • 27.50% from 1 January 2024
  • 31.25% from 1 January 2025
  • 35.00% from 1 January 2026
• The 20% tax rate is maintained for:
  • qualifying companies in certain sectors with net profits greater than MAD 1 million and less than MAD 100
  • companies in general with net profits of between MAD 300,001 and MAD 1 million
• The 26% tax rate for qualifying companies engaged in industrial activity is reduced as follows if profit is less than MAD 100 million:
  • 24.5% from 1 January 2023
  • 23.0% from 1 January 2024
  • 21.5% from 1 January 2025
  • 20.0% from 1 January 2026
• The 31% top tax rate is reduced or increased as follows:
  • for companies with net profits greater than MAD 1 million and less than MAD 100 million:
    • 28.25% from 1 January 2023
    • 25.50% from 1 January 2024
    • 22.75% from 1 January 2025
    • 20.00% from 1 January 2026
  • for companies with net profits greater than MAD 100 million:
    • 32% from 1 January 2023
    • 33% from 1 January 2024
    • 34% from 1 January 2025
    • 35% from '1 January 2026
• The 37% tax rate for financial (credit) institutions and similar bodies and insurance and reinsurance undertakings is increased as follows:
  • 37.75% from 1 January 2023
  • 38.50% from 1 January 2024
  • 39.25% from 1 January 2025
  • 40.00% from 1 January 2026

Reduced Tax Rate on Income from Shares and Profit Distributions

The Finance Law for 2023 also provides for a reduction in the 15% tax rate on income from shares and profit distributions as follows:

• 13.75% in respect of the financial years beginning from 1 January 2023;
• 12.50% for the financial years beginning from 1 January 2024;
• 11.25% in respect of the financial years beginning from 1 January 2025; and
• 10.00% in respect of the financial years beginning from 1 January 2026.

Income from shares and distributions out of profits realized in financial years beginning before 1 January 2023 remain subject to the 15% rate.

Changes for Service Companies with Casablanca Finance City (CFC) Status

Before the Finance Law for 2023, all service companies with CFC status could benefit from total exemption from corporate tax for five years from the date of obtaining CFC status, even if they had previously enjoyed a similar benefit. In order to rationalize tax incentives and direct the five-year exemption towards newly created target companies, a limit is introduced to provide that the total exemption may apply for the first 60 months following the date of their incorporation.

Further, considering the increase in the tax rate from 15% to 20% for service companies with CFC status, said service companies are allowed to constitute provisions for deductible investments, within the limit of 25% of taxable profit after loss carryforward and before tax. The investment must be made in equity securities that must be kept for at least four years. The rate allowed for the constitution of provisions for investments is increased from 7.7% to 25.0% over the period 2023 to 2026 to maintain an effective tax rate of 15%, considering the gradual increase in the applicable corporate tax rate.

Rationalization of Tax Advantages of Industrial Acceleration Zones Granted to Financial Companies

Financial companies are excluded from benefiting from the tax advantages of Industrial Acceleration Zones, including credit institutions and insurance and reinsurance companies. This is in line with the exclusion of such financial companies from CFC regimes benefits in the Finance Law for 2021.

Extension of 70% Exemption on Net Gains

The 70% exemption (reduction) on net gains from the sale of fixed assets that are reinvested as provided in the Finance Law for 2022, with the exception of gains from the sale of land and buildings, is extended to fiscal years beginning in 2023, 2024, and 2025.

Minimum Contribution Reduction

The normal rate of the minimum contribution is reduced to 0.25% for all companies, and the minimum contribution rate is reduced to 0.15% for operations carried out by commercial enterprises in respect of sales relating to certain basic products. Further, the minimum contribution rate for liberal professions is reduced from 6% to 4%.

Withholding Tax Exemptions for Dividends

The withholding tax exemptions provided for dividends and similar distributions by companies with CFC status, except financial companies, and by companies established in Industrial Acceleration Zones are rationalized. This includes that the exemptions are limited to dividends and other income from foreign equity investments distributed to non-residents.

Social Solidarity Contribution Extension

The social solidarity contribution on profits and income in 2022 is extended so that it also applies in 2023, 2024, and 2025. As first provided by the Finance Law for 2022, progressive contributions rates of 1.5% to 5.0% apply on net profits of MAD 1 million or more.

Other Measures

The Finance law for 2023 also contains various measures regarding personal income tax, VAT, and others.