Key takeaway: Provisions are deductible from IS in Morocco only if they meet three cumulative conditions: the nature of the risk must be specified, the amount must be estimable, and an event making the charge probable must have occurred (Art. 10-I-F-2° of the CGI). Provisions for doubtful debts require legal proceedings within 12 months. A provision that becomes groundless must be added back to taxable income.
Legal Framework for Provisions (Art. 10-I-F-2°)
A provision is an accounting charge recorded to cover a future risk or expense whose occurrence is probable but whose amount or timing is not known with certainty. For IS purposes, Art. 10-I-F-2° of the CGI makes the deductibility of provisions subject to strict conditions.
Unlike depreciation, which records a certain and irreversible decline in value, provisions reflect a probable and reversible depreciation. This uncertainty justifies the rigorous regulation of their tax treatment.
The Three Cumulative Deductibility Conditions
For a provision to be tax-deductible, it must meet three simultaneous conditions:
1. The Nature of the Risk or Charge Must Be Specified
The provision must be set up to cover a risk or charge that is clearly specified as to its nature. A global, undifferentiated provision — “provision for miscellaneous risks,” for example — is not deductible. The company must clearly identify:
- The type of risk covered (doubtful debt, litigation, customer warranty, etc.)
- The third party or transaction concerned
- The circumstances that made the risk probable
2. The Amount Must Be Estimable With Reasonable Accuracy
The provision amount must be estimable with reasonable accuracy. The tax authorities reject provisions whose amount is set arbitrarily or on a lump-sum basis, without connection to the actual risk exposure.
Accepted methods:
- Individual assessment, receivable by receivable (for doubtful debts)
- Estimates based on reliable statistical data (for warranty provisions)
- Actuarial calculations (for retirement provisions, where applicable)
3. The Event Making the Charge Probable Must Have Occurred
A provision may only be set up on condition that a specific event, occurring during or before the fiscal year, makes the charge probable (not merely possible). The distinction between probability and possibility is fundamental:
- Probable: the risk is concrete, with objective indicators of imminent realisation → deductible provision
- Possible: the risk is theoretical, with no concrete indicators → non-deductible provision
Doubtful Debt Provisions: The 12-Month Legal Action Requirement
Provisions for doubtful debts are the most common — and most scrutinised — category of deductible provisions. The CGI imposes an additional specific condition:
Legal proceedings must be initiated within 12 months of the provision being set up.
Practical Requirements
- Setting up the provision: at year-end, based on an individual assessment of each receivable
- Initiating proceedings: filing a claim in court (commercial court, court of first instance) within 12 months
- Proof of proceedings: the company must retain evidence of filing (acknowledgement of receipt, filing slip, summons)
Consequences of Non-Compliance
If legal proceedings are not initiated within 12 months:
- The provision must be added back to taxable income for the following fiscal year
- Late-payment interest (0.5% per month) and, where applicable, bad-faith penalties (30%) may apply if the administration discovers the omission during a tax audit
Exception: receivables from companies in judicial liquidation or reorganisation, where the claim is considered implicitly filed through the declaration of debt to the receiver.
Export Investment Provision (CFC) — 25%
Exporting companies may set up an investment provision corresponding to 25% of taxable profit from export operations. This “CFC provision” must be used within 3 years to finance investment in capital equipment, machinery, and tools.
Conditions of Use
- The provision must be allocated to the acquisition of capital equipment within 3 years
- If not used within the deadline, the provision is added back to income in the third year
- The company must maintain a detailed schedule of provisions set up and their use
Provisions Becoming Groundless: Mandatory Add-Back
When a provision becomes groundless — the risk did not materialise, the dispute was resolved favourably, the debt was recovered — it must be added back to taxable income for the fiscal year in which it became groundless (Art. 10-I-F-2°).
Add-Back Scenarios
| Situation | Tax Treatment |
|---|---|
| Risk did not materialise | Add-back of provision |
| Debt recovered (in full or in part) | Add-back to the extent recovered |
| Excess provision relative to risk | Add-back of excess |
| Provision used as intended | Offset against actual expense incurred |
| Provision for prescribed debt (unclaimed) | Add-back and recognition of income |
Failure to add back a groundless provision constitutes a tax irregularity subject to reassessment.
Investment Provision
The investment provision allows companies to deduct a portion of their profit intended to finance future investments. However, its regime is regulated:
- It must be recorded in a regulated reserves account
- The investment must be made within the prescribed period
- If not, the provision is added back with surcharges
To secure the creation and monitoring of your tax-deductible provisions, our tax advisory team carries out an annual audit of your provisions before year-end.
Summary of Provisions
| Provision Type | Specific Conditions | Deadline |
|---|---|---|
| Doubtful debts | Legal proceedings | 12 months |
| CFC provision (export) | Allocation to investment | 3 years |
| Litigation provision | Dispute initiated, estimable amount | — |
| Warranty provision | Reliable statistics | — |
| Investment provision | Actual completion | Statutory deadline |
Frequently Asked Questions
Can a lump-sum provision for doubtful debts be set up?
No. The tax authorities require an individual assessment of each doubtful receivable. Lump-sum provisions — calculated as a global percentage of turnover or outstanding receivables — are not deductible because they do not meet the condition of amount precision.
What happens if the provision is insufficient compared to the actual loss?
If the actual loss exceeds the provision amount, the difference is deductible as an actual expense in the fiscal year when the loss is recognised. The earlier provision is cancelled, and the actual expense is recorded.
Are provisions for stock depreciation deductible?
Yes, subject to conditions. Provisions for stock depreciation are accepted when the realisable value of stock (expected selling price less selling costs) is below their entry cost. The company must provide a detailed schedule of depreciated stock with justification for the depreciation.
Legal references:
- General Tax Code 2026 (PDF) — Art. 10-I-F-2° (deductible provisions), Art. 10-III (special provisions)
- Circular Note No. 735 — Commentary on 2026 Finance Act
- Case law of the National Tax Appeal Commission (CNRF)
READ ALSO:
- Corporate Tax Rates Morocco 2026
- Taxable Income: From Accounting Profit to Tax Base
- Non-Deductible Expenses for Corporate Tax
- Tax Depreciation in Morocco
- Deductible Expenses for IS in Morocco
- Tax Audit in Morocco: Preparation Checklist
Need help securing your provisions? Contact Upsilon Consulting, a chartered accountancy firm in Casablanca, for an annual audit of your provisions and tax return compliance.
