Accounting Rules in Force in Morocco: A Complete Guide

Accounting rules in force in Morocco in relation to Corporate Tax (IS).

Companies must understand and correctly apply the accounting rules in force in Morocco. In the Moroccan business world, this is essential for the success and compliance of companies.

These rules, regularly updated and adjusted to meet economic and legislative requirements, form the foundation of financial and tax management within the Kingdom.

In this article, we will explore the accounting rules in force in Morocco, highlighting their crucial role in the Moroccan economic landscape.

By offering a clear and precise overview, we aim to inform entrepreneurs, accountants, and investors about the standards governing accounting in Morocco, thereby enabling them to better navigate the complex and constantly evolving regulatory framework.

This article is current as of the accounting provisions in force from January 1, 2024.

For all your bookkeeping, accounting supervision, audit, and advisory needs, do not hesitate to contact us.

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What Are the Accounting Rules in Force in Morocco?

Morocco follows the General Chart of Accounts (CGNC), a rigorous accounting framework that applies to all Moroccan companies, regardless of their size or sector of activity.

The CGNC, in force since the Dahir of December 25, 1992, aims to provide a true and transparent view of companies’ financial positions. It is divided into two main parts:

First, the General Accounting Standard and the General Chart of Accounts for Enterprises, covering aspects such as:

valuation methods;
financial statements;
…
Second, the fundamental accounting principles such as going concern, prudence, and clarity. The CGNC is a general framework under which charts of accounts are developed. The Moroccan accounting system is primarily structured around a General Moroccan Chart of Accounts for Enterprises (PCGE). This plan is not fully aligned with international standards (IFRS). On several topics, it departs from them to take into account local specificities.

The PCGE covers various aspects such as revenue recognition, the classification of assets and liabilities, and the principles of consolidation and combination of accounts. It is imperative for Moroccan companies, regardless of their size, to comply with these standards to ensure the regularity of their financial statements. A simplified framework is also available for very small companies.

This compliance is crucial not only for internal management but also for relationships with investors, banks, and tax authorities.

Furthermore, Morocco has developed sector-specific charts of accounts to address the specific needs of different sectors, such as agriculture, banking, insurance, real estate, and associations.

These plans are designed to address the particularities of each sector, thereby ensuring that accounting standards are adapted and relevant.

For example, the Insurance Chart of Accounts addresses the specificities of insurance operations, while the Real Estate Chart of Accounts focuses on real estate transactions.

The existence of these sector-specific plans reflects Morocco’s commitment to maintaining high accounting standards while taking into account the realities of each sector.

This comprehensive and sector-specific approach ensures that accounting in Morocco is both compliant with international standards and adapted to local specificities, thereby providing a reliable framework for financial management and decision-making.

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How Do the Accounting Rules in Force in Morocco Differ from International Standards?

The Moroccan accounting system, while largely aligned with international standards, has notable specificities.

The CGNC draws on universally recognized general accounting principles, but it also incorporates aspects specific to the Moroccan context.

For example, while following the global trend of convergence toward International Financial Reporting Standards (IFRS), Morocco maintains certain practices adapted to its economic and legal environment.

Historical Cost

A notable difference concerns asset valuation. While IFRS favors a fair value approach, the CGNC relies more heavily on historical cost, a method considered more stable and predictable in a developing economic context such as Morocco’s.

Asset-Based Approach and Prudence

The accounting treatment of leasing contracts in Morocco, under the General Chart of Accounts (CGNC), differs significantly from the approach adopted by international standards such as IFRS. In Morocco, the CGNC favors the legal and asset-based approach to the detriment of the economic and financial reality of leasing contracts. This contrasts with international standards, which favor the primacy of economic reality over legal form.

In practice, this means that under the CGNC, a leasing contract is recorded as a simple rental agreement. The lessee records the transaction as a rental expense, while the lessor, as the owner of the asset, records it on the asset side of its balance sheet.

This difference illustrates the divergence between the Moroccan approach, which focuses on the legal form of transactions, and international standards, which emphasize the economic substance of transactions. This has significant implications for how Moroccan companies present their financial statements, particularly regarding transparency and comparability with international standards.

A Unique Approach

These differences are not merely a reflection of local particularities but also a response to the unique challenges faced by Moroccan companies. By adapting international standards to its specific context, Morocco ensures that its accounting system remains relevant and effective, while facilitating dialogue and comparison with international players.

The following table provides some indicative examples of the main points of impact (CGNC vs. IFRS)

Accounting Item	Treatment Under Local Standards (CGNC)	Treatment Under IFRS	Adjustment Required
Asset valuation	Historical cost	Fair value	Asset revaluation
Treatment of leasing contracts	Legal and asset-based approach	Economic and financial approach	Reclassification of assets and liabilities
Valuation of provisions	Prudence method	Probability of occurrence method	Revaluation of provisions
Presentation of financial statements	Presentation by nature	Presentation by function	Reclassification of line items

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Upsilon Consulting: Your Partner for Accounting in Morocco

Moroccan accounting rules and international standards As mentioned in the previous section, the Moroccan accounting system has notable specificities compared to international standards. These differences can significantly impact how Moroccan companies present their financial statements, particularly regarding transparency and comparability with international players. Upsilon Consulting understands these differences and can help Moroccan companies navigate Morocco’s complex accounting environment. Our chartered accountants have extensive experience in applying both Moroccan and international standards, and they can help you:

Understand the requirements of Moroccan and international standards
Implement accounting systems that comply with the standards
Prepare financial statements in compliance with both local and international standards

Upsilon Consulting is your ideal partner to help ensure that your company complies with applicable accounting standards and presents accurate and transparent financial statements. Upsilon Consulting has helped Moroccan companies navigate Morocco’s complex accounting environment, particularly through:

Drafting procedures manuals and tailored accounting standards to manage dual-standard accounting;
Project management assistance for implementing accounting software or ERP systems to ensure the process meets legal requirements;
We assist clients on a daily basis to maintain their accounts under local standards and prepare reporting under different standards.

Contact us today to learn more about how we can help you.

Contact Upsilon Consulting

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What Are the Impacts of Moroccan Accounting Rules on Local Companies?

The adoption of the General Chart of Accounts (CGNC) in Morocco has a considerable impact on how local companies manage and present their financial information.

First, the CGNC ensures a certain level of uniformity and standardization of accounting practices in Morocco, thereby facilitating the understanding and comparison of financial statements for local stakeholders. This is particularly important for investors, creditors, and tax authorities who rely on this information to assess the performance and financial health of companies.

However, by focusing primarily on the legal form of transactions, as in the case of leasing contracts, the CGNC may limit the ability of financial statements to reflect the underlying economic reality of companies.

This approach can create challenges for Moroccan companies seeking to attract foreign investment or operate in international markets, where accounting standards such as IFRS are more commonly used and valued for their emphasis on transparency and economic substance.

In many cases, groups are therefore required to maintain dual sets of accounts to achieve both objectives.

Moreover, while the CGNC provides a solid accounting framework adapted to the Moroccan context, it requires local companies to remain constantly vigilant about regulatory changes and normative updates. This compliance requirement can be challenging, particularly for small and medium-sized enterprises that may lack specialized accounting resources or expertise.

In summary, while the CGNC contributes to the regularity and standardization of accounting practices in Morocco, it also presents unique challenges for local companies, particularly in a globalized economic context where the comparability and transparency of financial information are crucial.

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What Is the Impact of the Accounting Rules in Force in Morocco on Corporate Taxation?

Corporate Tax (IS) is a direct tax that applies to profits earned by companies in Morocco. Certain types of companies, such as partnerships, may be exempt from it. In that case, they are generally subject to Income Tax (IR).

The General Tax Code (CGI) defines the accounting rules in force for Corporate Tax (IS). The Moroccan legislator regularly updates these provisions to adapt to economic and tax developments.

Corporate Tax (IS) Tax Base - Accounting Rules in Force in Morocco

Book One of the General Tax Code defines the rules for determining the Corporate Tax (IS) base. This book addresses the rules for taxing industrial and commercial profits.

Title One of this book specifically concerns Corporate Tax (IS) and defines the methods for calculating this tax.

Companies subject to Corporate Tax (IS) must maintain accounts that comply with Moroccan standards in force.

Each taxpayer must organize its accounting to enable the determination of taxable income, which serves as the basis for calculating Corporate Tax (IS).

Companies must determine taxable income by applying tax rules to accounting results.

Deductible Expenses

Deductible expenses are those that:

First, the company must have incurred in the direct interest of the business
Second, have a real and verifiable consideration.

Taxable Revenue

Taxable revenue is that which the company generates in the normal course of its business activities.

Companies subject to Corporate Tax (IS) must also comply with certain tax obligations, such as:

First, filing an annual corporate tax return;
Second, paying Corporate Tax (IS) advance installments throughout the fiscal year.

Accounting Rules in Force in Morocco - Specific Rules

Regarding the accounting rules specific to Corporate Tax (IS), the General Tax Code notably provides that:

First, companies must maintain a journal and a general ledger. The journal must contain all transactions carried out by the company, while the general ledger must group these transactions by account.
Second, companies must also prepare an annual balance sheet and income statement.

The balance sheet must reflect the company’s net worth at the end of the fiscal year,
while the income statement must present the company’s revenue and expenses during that fiscal year.

The General Tax Code also provides specific rules for determining taxable income.

Thus, certain expenses are deductible from taxable income, such as interest charges on loans taken out to finance the company’s operations.

Other expenses are not deductible, such as tax or criminal penalties.

Furthermore, the General Tax Code provides specific rules for taking provisions into account when calculating taxable income. Provisions are amounts that the company sets aside to cover risks or future expenses.

Provisions for doubtful receivables or inventory losses can be deducted from taxable income, subject to certain conditions.

Finally, it is important to note that companies subject to Corporate Tax (IS) must comply with the Moroccan accounting standards in force. These standards are regularly updated to adapt to economic and tax developments.

Frequently Asked Questions

What are the main sources of accounting rules in Morocco?

The primary sources are the Accounting Law (Law No. 9-88), the CGNC (Code Général de Normalisation Comptable), and the General Tax Code. Sector-specific rules apply to industries such as banking, insurance, and real estate. Together, these texts form the complete regulatory framework governing accounting in Morocco.

Do Moroccan accounting rules apply to all types of businesses?

Yes, all commercial entities operating in Morocco must comply with Moroccan accounting rules, regardless of their size or sector. However, the level of complexity varies: larger companies face additional requirements such as statutory audits and consolidated reporting, while small businesses follow simplified procedures.

How do Moroccan accounting rules interact with the tax system?

The General Tax Code directly influences accounting practices by defining which expenses are deductible, how provisions should be treated, and what depreciation methods are acceptable. Companies must maintain their accounts in accordance with both accounting standards and tax regulations, and any divergence can trigger adjustments during a tax audit.

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Accounting Rules in Force in Morocco: A Complete Guide | Upsilon Consulting