Tax Representation in Morocco - The Basic Principles
Tax representation in Morocco is a requirement that stems from the territoriality principles set out in the General Tax Code (CGI). This mechanism addresses the problem of the non-applicability of VAT to the importation of services.
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Territoriality of Value Added Tax
First and foremost, it is worth recalling that Value Added Tax (VAT) is an indirect, ad valorem tax on consumption. Present in the vast majority of countries worldwide, it generally constitutes the main source of revenue for governments. In all tax regulations, territoriality rules are established to determine — particularly in cross-border situations — the country in which this tax must be paid.
In Morocco, the territoriality rules are governed by Article 88 of the General Tax Code (CGI). Under this article, a transaction is deemed to take place in Morocco:
“1°- in the case of a sale, when it is carried out under conditions of delivery of the goods in Morocco;
2°- in the case of any other transaction, when the service provided, the service rendered, the right transferred, or the object leased is exploited or used in Morocco.”
Article 88 therefore draws a clear distinction between two separate tax situations: the importation of physical goods and the importation of services.
VAT on the Importation of Physical Goods
When a taxpayer in one country sells goods to a customer located outside that country, VAT is generally due in the country where the customer is based.
Moroccan tax law states this rule clearly. In addition to the provisions of Article 88, the General Tax Code grants an explicit exemption on the export of goods. The goods will therefore be taxed in the country of delivery according to that country’s rules.
Conversely, when goods produced abroad are imported into Morocco, they are subject to VAT in Morocco. In practice, VAT is collected at the moment the goods cross the customs border. This is referred to as import VAT on goods.
Ultimately, the customer pays VAT to the customs authority. Depending on the situation, the customer has the right to deduct this VAT against the VAT collected from their own customers.
VAT on the Importation of Services
In the case of a service, the concept of importation and exportation is somewhat more complex to define.
To simplify: we are dealing with a situation where a service provider located outside Morocco renders a service to a resident customer.
In this case, it is easy to understand that services rendered cannot receive the same treatment as goods, since they do not cross a customs border. VAT must be spontaneously paid by the foreign supplier.
For this reason, the General Tax Code provides a specific tax representation mechanism, set out in Article 115 of the General Tax Code (CGI). In practice, this mechanism is designed to prevent the risk of foreign service providers failing to comply with this obligation.
Tax Representation — A Mechanism Established by Article 115 of the General Tax Code (CGI)
Article 115 of the General Tax Code (CGI) provides that:
“Any person who has no establishment in Morocco and who carries out taxable transactions there for the benefit of a customer established in Morocco must accredit with the tax authority a representative domiciled in Morocco, who must undertake to comply with the obligations imposed on taxpayers carrying out activities in Morocco and to pay the Value Added Tax due.”
Furthermore, the same article provides that “In the absence of an accredited representative, the tax due by the non-resident person must be declared and paid by their customer established in Morocco.”
A Moroccan company wishing to use the services of a foreign company must therefore either:
- Itself declare and pay the Value Added Tax relating to the transaction in question; or
- Require the foreign company to designate a tax representative.
Tax Representation in the Context of Supply Contracts with Moroccan Customers
One of the most common situations arises when a supply of goods contract includes a service component (maintenance, after-sales service, training, etc.). In this case, tax representation does not apply to the goods, which are subject to import VAT. However, companies need to designate a tax representative in order to:
- First, collect from their Moroccan customers the amount of VAT relating to the service component;
- Second, prepare the VAT return for that component;
- Finally, pay the VAT on behalf of the foreign supplier.
Tax Representation in the Context of Services Provided to Individuals
Certain multinational companies offering services primarily online (Netflix, Amazon, Google, etc.) inevitably end up providing services to Moroccan customers. Under the provisions of Moroccan regulations, VAT on these services is due in Morocco.
These companies should accredit a tax representative in Morocco in order to comply with withholding tax obligations:
- Collect directly from their customers the amount of VAT relating to the service component;
- Prepare the VAT return for that component;
- Pay the VAT on behalf of the foreign supplier.
Procedure for Appointing a Tax Representative
The tax representative must be a company holding a Moroccan tax identification number and in good standing with the tax authority.
To set up tax representation in Morocco, an application must be submitted to create a tax identification number for the client company, accompanied by the following documents:
- An accreditation mandate in a pre-established format (signed and stamped by the company: signature authenticated before a notary, a municipal office, or the Moroccan embassy in the company’s country of residence);
- A certified true copy of the original service agreement (when the customer is a legal entity);
- Passports of the corporate officers of the foreign company (certified true copy);
- Articles of association of the foreign company (certified true copy);
- Certified true copy of the minutes confirming the mandate of the person signing the accreditation letter (point 6), AND an original extract from the company register (e.g., KBIS) listing that person as a corporate officer;
- Updated shareholder list (signed by the company director).
Upsilon Consulting’s Services
Upsilon Consulting provides tax representation services. We are a member of the DESUCLA network of tax representatives and handle fiscal representation for the Morocco region. The Desucla network is present in 34 other countries and offers innovative and effective solutions for its clients.
Learn more about the DESUCLA network here.
Our tax representation service offering in Morocco includes:
- Completing the necessary formalities to file a tax existence declaration;
- Providing you with a local tax representation certificate (tax domiciliation);
- Providing the tax identification number;
- Filing VAT returns throughout the contract period;
- Receiving from your customers the funds to be used for VAT payment;
- Making the VAT payment and providing you with proof of payment;
- Filing a deregistration declaration at the end of the contract;
- Formalities with the Foreign Exchange Office to reimburse any VAT credit balance, if applicable.
More generally, you are welcome to call on us for any tax advisory needs.
Contact us without hesitation for your tax representation needs.
Frequently Asked Questions
What is tax representation in Morocco?
Tax representation is a mechanism under Article 115 of the General Tax Code that requires foreign companies carrying out taxable transactions in Morocco to accredit a representative domiciled in Morocco. This representative undertakes to comply with tax obligations, file VAT returns, and pay the VAT due on behalf of the foreign company.
Who needs a tax representative in Morocco?
Any foreign company that provides services exploited or used in Morocco and does not have an establishment in the country must designate a tax representative. This includes multinational companies offering online services to Moroccan customers, as well as foreign suppliers with service components in their supply contracts.
What happens if a foreign company does not appoint a tax representative?
If the foreign company fails to accredit a tax representative, Article 115 of the General Tax Code requires the Moroccan customer to declare and pay the VAT relating to the transaction. The Moroccan customer then becomes directly responsible for the VAT obligations on the imported services.
What documents are required to set up tax representation in Morocco?
Setting up tax representation in Morocco typically requires a tax existence declaration, a copy of the foreign company’s registration documents (articles of incorporation, commercial register extract), a power of attorney authorizing the representative to act on behalf of the company, and proof of the representative’s domiciliation in Morocco. Additional documents may include a copy of the contract giving rise to taxable transactions in Morocco and the company’s foreign tax identification details.
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