Morocco

Morocco’s 2024 Finance Law: Navigating a Crucial Economic Juncture

As Morocco stands at a critical economic crossroads in 2024, its newly implemented Finance Law takes centre stage. This comprehensive legislation navigates global challenges with resilience, prioritizing robust growth, financial stability, and sector-specific advancements in energy, tourism, and technology. Here we look at the key highlights and delve into the potential future prospects this law presents for the country.

Background
The 2024 Finance Law (“the Law”) arrives at a crucial moment for Morocco’s economy. Having demonstrated remarkable resilience amidst global uncertainties, the country now seeks to solidify its financial stability and propel sustainable growth. Key considerations include maintaining robust economic expansion, ensuring long-term financial stability, and fostering innovation within crucial sectors like energy, tourism, and technology.

This comprehensive legislation navigates global challenges with resilience, prioritizing robust growth, financial stability, and sector-specific advancements in energy, tourism, and technology. The Law’s ambitious reforms and focus on rebuilding affected areas illustrate a strategic response to current uncertainties, paving the way for a brighter future for Morocco.

Key changes

Increased General State Budget: A 3% increase from 2023, with particular emphasis on personnel and material expenditures.
Expanded Health and Social Protection Budget: Approximately 30.7 billion Moroccan Dirhams for 2024, a 9.1% increase from 2023.
Tax Reform Focus: A central aspect of the Law, aligning with the 2021 fiscal reform law (Law No. 69-19).
Creation of Budgetary Positions: 30,034 budgetary positions, with 500 allocated for the Prime Minister’s distribution among ministries.
Social State Consolidation: Focus on generalizing Mandatory Health Insurance for disadvantaged populations and the gradual operationalization of direct social assistance programs.

Overarching aims

Development: Stimulating economic growth, creating a fairer society through equitable wealth distribution, and championing environmentally conscious development.
Budgetary innovation: Strategic allocation of resources to support key sectors and prioritize strategic development initiatives.
Strategic investment: Focused investments in earthquake-affected zone reconstruction, strengthening the social safety net, implementing structural reforms, and ensuring the sustainability of public finances.
Increased investment: Higher expenditures aim to improve critical infrastructure and enhance the quality of public services.
New revenue streams: The government seeks innovative funding solutions while minimizing the burden on citizens.

Significant changes to the tax landscape

Tax simplification: A welcome shift towards streamlining the tax system for greater clarity and ease of compliance.
Startup incentives: Dedicated incentives aim to nurture innovative young businesses and empower their entrepreneurial spirit.

The VAT developments in the Law include exemptions for basic consumer goods from VAT, alignment of VAT rates towards 10% and 20%, exoneration for specific services related to military equipment, and the extension of VAT scope to cover remote services provided by non-resident companies. Additionally, there are changes in the VAT treatment for various products and services, such as energy, transportation, insurance brokerage, and equipment for the fishing industry. The Law also introduces a new self-assessment VAT regime and measures related to penalty harmonization, VAT retention at source, and the obligation to retain movable assets acquired with VAT benefits.

In the realm of corporate taxes, there is an adjustment to the corporate income tax rate and the permanent exemption of the Mohammed VI Foundation for Science and Health from corporate income tax.

Regarding individual taxes, there are changes related to the deductibility of social security contributions for self-employed individuals and the adjustment of the withholding tax rate for artists' fees. In terms of the broader tax framework, the Law introduces a right to correct errors for taxpayers and simplifications in the procedure for detecting abusive tax practices. Additionally, it addresses the regularization of taxpayers’ fiscal situations, including a contribution for regularization of assets held abroad.

General remarks
Morocco’s 2024 Finance Law represents a bold step towards innovation, sustainable economic growth, and unwavering support for its citizens and businesses. The commitment to environmental sustainability and tackling global challenges highlights a comprehensive approach to navigating turbulent times. The Law’s ambitious reforms and focus on rebuilding affected areas illustrate a strategic response to current uncertainties, paving the way for a brighter future for Morocco.

Sector-driven investment

The Law channels special attention towards specific sectors and areas that drive the nation’s progress:

Education and Healthcare: Major investments are planned to bolster essential services and empower citizens.
Technology and Infrastructure: Modernization of technology and infrastructure receives considerable focus, acting as a catalyst for economic advancement.
Employment: Concerted efforts are underway to boost employment, especially amongst youth demographics.
Social measures: Improvements in citizens’ well-being, with a focus on enhancing healthcare access and educational opportunities. Renewable energy: Significant investments are allocated to develop and utilize renewable energy sources.
Environmental stewardship: Measures are implemented to safeguard the environment and promote practices that align with sustainable development goals.

Overhauling Business Practices: Unveiling the Impact of Law 69-21 on Payment Delays in Morocco

In a bid to foster more fluid commercial transactions and improve the business climate, Morocco has implemented Law 69-21. Beyond mere procedural changes, this new legal framework aims to bolster the financial health of small and medium-sized enterprises (SMEs) by combatting abusive payment delays inflicted by certain businesses at the expense of their suppliers. This article delves into the intricacies of Law 69-21, unravelling its progressive implementation, implications for businesses, and the transformative effect it promises for the Moroccan commercial landscape.

Progressive Rollout: Paving the Way for Smooth Adaptation
The introduction of Law 69-21 signals a positive shift and a strategic approach, particularly for SMEs. The law’s phased implementation, tailored according to the size of businesses, provides ample time for adaptation.

Law 69-21 adopts a gradual rollout in three phases, commencing with businesses boasting turnovers exceeding 50 million dirhams, ensuring that larger enterprises lead the way in compliance.

Law 69-21 emerges as a transformative force, steering Moroccan business practices toward fairness, transparency, and financial sustainability. While the transition may pose challenges, particularly for businesses accustomed to lax payment practices, the potential benefits—improved cash flows, reduced financial strain on SMEs, and a levelled playing field—far outweigh the temporary disruptions.

Effective from July 1, 2023, for the first phase, subsequent milestones include January 1, 2024, for businesses with turnovers between 10 and 50 million dirhams, and January 1, 2025, for those surpassing 2 million dirhams but falling below 10 million dirhams.

Precision Takes Center Stage: Eradicating Ambiguity in Payment Timelines
The legislative intent behind the gradual application of Law 69-21 is rooted in the commitment to support the financial sustainability of SMEs. By initially targeting larger enterprises, the law anticipates a positive ripple effect on cash flows for SMEs, enabling them to safeguard employment, expand operations, and explore new market avenues.

Law 69-21 introduces a crucial departure from the 2011 legislation by recalibrating the calculation of payment delays. Instead of tethering payment timelines to the receipt of goods or service execution, the new law bases these on the invoice issuance date. This deliberate precision aims to eliminate ambiguity and prevent exploitation of previous uncertainties.

Flexibility with Boundaries: Balancing Speed with Responsibility
The law mandates clear delineation of payment terms. A default period of 60 days from the invoicing date is established. In cases where mutual agreement sets the payment terms, a maximum of 120 days is allowed, extending from the invoice date. An exceptional extension to 180 days is conceivable under specific conditions, such as seasonal activities, subject to regulatory approval and industry consultation.

Transparency Reigns Supreme: Shifting the Power Dynamics
One of the notable features of Law 69-21 is the introduction of a mandatory quarterly declaration system, which significantly impacts the dynamics between clients and suppliers.

Departing from traditional supplier-initiated payment claims, the new system places the onus on clients to declare their contractual payment terms to the tax authorities.

Thorough Reporting: Building a Foundation of Trust
The Law 69-21 strategically introduces a third party, the Directorate General of Taxes (DGI), into the payment equation. This intervention aims to ensure fair dealings, particularly safeguarding the interests of SMEs against potentially exploitative practices by larger clients.

The legislative framework is further fortified by stringent reporting requirements:

Quarterly Declarations: Businesses falling under the purview of Law 69-21 must submit electronic declarations at the end of each quarter, even if devoid of overdue invoices.
Professional Attestation: Declarations are not mere formalities; they require validation by a qualified professional. For businesses with a turnover exceeding 50 million dirhams, a certified auditor’s endorsement is mandatory, while smaller entities can seek validation from an accredited accountant.

Law 69-21 emerges as a transformative force, steering Moroccan business practices toward fairness, transparency, and financial sustainability. While the transition may pose challenges, particularly for businesses accustomed to lax payment practices, the potential benefits—improved cash flows, reduced financial strain on SMEs, and a levelled playing field—far outweigh the temporary disruptions. By embracing this legal evolution and adapting internal practices, businesses can collectively contribute to a robust and equitable commercial environment, fostering the growth of SMEs as integral contributors to Morocco’s economic vitality.