In brief: VAT on banking and credit operations in Morocco is levied at the reduced rate of 10%, covering interest, commissions, and all services by credit institutions. VAT-registered businesses can recover this input VAT, while individuals bear it as a permanent cost. Learn about VAT rates and scope in Morocco.
VAT on banking and credit operations in Morocco is 10%. This Value Added Tax applies to all financial products and services provided by banking institutions in the country. Understanding the scope of this tax is essential for businesses, financial professionals, and individuals who want to manage the true cost of their banking operations.
VAT on banking and credit operations in Morocco applies to:
- Interest and commissions on loans
- Banking service commissions for account management and transfers
- Foreign exchange commissions on currency operations
- All operations carried out by credit institutions generally
Legal Framework: Article 89 of the General Tax Code
The Moroccan General Tax Code (CGI) defines the scope of VAT on banking operations through Article 89. This provision states that all operations carried out by credit institutions in the course of their regular business activity are taxable, whether they are principal or ancillary operations.
The applicable VAT rate is set at 10% in accordance with Article 99 of the CGI. This reduced rate, compared to the standard 20% rate, reflects the legislator’s intent to limit the tax burden on the cost of credit and banking services for Moroccan businesses and consumers.
It is important to note that the taxable base includes all remuneration received by the banking institution, including interest, commissions, bank charges, and ancillary fees.
Which Organizations Are Subject to VAT on Banking and Credit Operations?
VAT on banking and credit operations applies to credit institutions operating under Law No. 34-03 on credit institutions and similar bodies (later replaced by Law No. 103-12).
These institutions carry out, as their regular profession, one or more of the following activities:
- Receiving funds from the public
- Credit operations including loans and financing
- Payment services, providing customers with all means of payment or managing them
Furthermore, these institutions may also carry out operations related to their main activity. Also subject to VAT are similar organizations such as microcredit associations, the Caisse de Depot et de Gestion (CDG), the Caisse Centrale de Garantie (CCG), and financing companies.
All of these operations are subject to VAT as banking and credit operations.
Breakdown of Banking Operations Subject to 10% VAT
Banking Operations
These include:
- Interest on loans (mortgage loans, investment loans, working capital loans);
- Payment, covering, confirmation, and transfer commissions;
- Interest on debit accounts;
- Commitment fees and highest overdraft commissions.
Portfolio Operations
- Commissions on collection and acceptance of bills;
- Discount charges;
- Bank commissions for returned unpaid bills.
Commissions
These mainly include:
- Guarantee commissions for acceptances and endorsements
- Transfer commissions charged by the bank on fund transfers
- Account maintenance fees and management charges
Banking Operations Exempt from VAT
Certain operations carried out by banking institutions benefit from a VAT exemption without the right to deduction (Art. 91 CGI):
- discounting and rediscounting operations and interest on government securities and government-guaranteed debt securities, as well as commissions for placing such securities (Art. 91-V-1°);
- operations and interest relating to advances and loans granted to the State (Art. 91-V-2°);
- interest on loans granted to students of private or public education or vocational training to finance their studies (Art. 91-V-3°);
- income from securitisation operations for the issuance of sukuk certificates where the State is the originator (Art. 91-V-5°);
- credit operations carried out by microcredit associations for the benefit of their customers (Art. 91-VII).
Services rendered to customers established abroad and used outside Morocco are, for their part, exempt with the right to deduction (Art. 92-I-1°). By contrast, commissions received by a bank for presenting insurance contracts are not exempt: they are subject to the 10% rate without the right to deduction, like the services of insurance agents and brokers (Art. 99-B-2°). Interest paid by the bank to its depositors does not constitute taxable turnover; it has no impact on output VAT.
VAT on Banking and Credit Operations: Alternative Products
The development of participatory finance in Morocco has introduced new categories of products subject to specific VAT treatment. For a detailed analysis of this regime, see our guide on VAT and participatory finance.
Murabaha
A Murabaha contract is a purchase and resale contract whereby:
- First, the credit institution purchases, at the request of a customer, a movable or immovable asset;
- Second, it sells it to the customer at its acquisition cost plus an agreed-upon margin.
The profit margin (ribh) received by the bank under a Murabaha contract is subject to VAT at the 10% rate, similar to conventional interest.
Ijara
Ijara is a leasing contract whereby one party rents an asset for a determined rent and term. The owner of the asset (the bank) bears all risks associated with ownership.
The asset may be sold at a negotiable price, resulting in the sale of the Ijara contract. This contract may be structured as a hire-purchase arrangement, in which each rent payment includes a portion of the agreed asset price, and it may cover a term spanning the expected useful life of the asset.
The VAT treatment of Ijara rent payments depends on the purpose of the contract (Art. 96-8° and 99-B-1° CGI):
- Ijara Mountahia Bitamlik relating to a dwelling for personal residential use acquired by an individual: VAT at the 10% rate, assessed solely on the rental margin set in the contract;
- Other Ijara contracts (business premises, equipment, contracts entered into by companies): VAT at the standard rate of 20%, assessed on the amount of the rent paid at each instalment.
Musharaka
Musharaka is an equity participation contract in which the bank and its customer jointly participate in financing a project. Ownership rights are allocated in proportion to each party’s contribution. The bank’s share of the result is a participation income and not the remuneration of a credit operation: it is not covered by Articles 96-8° and 99-B-1° of the CGI, which only mention Murabaha, Ijara Mountahia Bitamlik, Salam and Istisna’a contracts.
VAT on Leasing (Credit-Bail) in Morocco
Leasing is a widely used financing method in Morocco. Rent payments made by the lessee under a leasing contract for movable or immovable property constitute rental of goods (Art. 89-I-10°-b CGI) subject to VAT at the standard rate of 20% on the gross amount of the rent. The 10% rate does not apply to leasing: it is reserved for banking and credit operations proper and for the participatory financing contracts referred to in Article 99-B-1°.
For businesses, VAT on leasing payments is recoverable under the standard rules, provided the asset is used in a taxable activity. However, for passenger vehicles, VAT on lease payments is not deductible in accordance with Article 106 of the CGI.
VAT Deduction Prorata for Banks
Banking institutions carry out both taxable and exempt operations. In this case, they are subject to the prorata deduction system provided for in Articles 104 and following of the CGI.
The deduction prorata is calculated as follows: the numerator includes taxable turnover plus the corresponding VAT, and the denominator includes total turnover (taxable and exempt) plus VAT on taxable operations.
This mechanism has a significant impact on the cost of bank investments, as non-deductible VAT constitutes a permanent charge for the institution.
VAT on Banking and Credit Operations - Other Banking Operations
Foreign exchange and other ancillary operations include:
- Foreign currency commissions on purchases or sales
- Consumer credit operations
- Custody fees for deposited securities
- Safe deposit box rental
- Cash-in-transit services
- Precious metals operations involving gold, metals, and coins
- Securities operations including placement, subscription, purchase, management, custody, and sale of securities, negotiable debt instruments, or any financial product
These operations also include:
- Offering personal insurance, assistance, and credit insurance operations to the public;
- Intermediation in fund transfers;
- Advice and assistance in wealth management.
Microfinance Institutions and VAT
Microcredit associations governed by Law No. 18-97 benefit from a specific regime: the credit operations they carry out for the benefit of their customers are exempt from VAT without the right to deduction (Art. 91-VII CGI). Interest earned on microcredits therefore does not bear the 10% VAT applicable to credit institutions, but, in return, the VAT charged on these associations’ purchases is not deductible.
However, the legislator has provided certain relief measures to promote financial inclusion. Microcredit associations may benefit from specific exemptions on certain social operations, in accordance with the provisions of the CGI.
VAT on Operations Related to Credit and Banking Operations
Operations treated as banking and credit operations are also taxed at 10%.
These mainly include:
- First, commissions on stock exchange operations;
- Second, commissions on UCITS operations.
Impact on Businesses and Consumers
For VAT-registered businesses, the tax on banking operations is recoverable. This means that the effective cost of VAT on bank commissions and interest is neutral for these businesses.
However, for individuals and VAT-exempt businesses, this 10% tax constitutes a permanent additional cost on all their banking operations. It is therefore essential to factor in this cost when comparing financing offers.
Filing and Payment of Banking VAT
Credit institutions are required to declare and remit the collected VAT under the monthly filing regime, as their turnover systematically exceeds the thresholds set by the CGI.
Electronic Filing
VAT in Morocco is paid on the SIMPL VAT portal. Banking institutions must break down their turnover between operations taxable at 10%, those taxable at 20%, and exempt operations.
Frequently Asked Questions
What is the VAT rate on banking operations in Morocco?
Banking and credit operations in Morocco are subject to VAT at the reduced rate of 10%. This applies to interest, commissions, fees, and other charges levied by credit institutions and assimilated entities. Stock exchange and UCITS commissions are also taxed at 10%.
Can businesses recover VAT charged on banking services?
Yes, VAT-registered businesses can recover the 10% VAT charged on banking commissions and interest as input VAT. For individuals and VAT-exempt entities, however, this tax constitutes a permanent additional cost that cannot be recovered.
Are Islamic banking products subject to VAT in Morocco?
Participatory finance products follow their own rules. The remuneration agreed in advance in a Murabaha contract (as well as the margin on Salam and Istisna’a contracts) is subject to VAT at the 10% rate, like interest on conventional loans. For Ijara Mountahia Bitamlik, the 10% rate applies only to the rental margin on a dwelling acquired by an individual for personal residential use; other Ijara contracts are taxed at 20% on the rent of each instalment. The bank’s share of the result in a Musharaka is a participation income, not the remuneration of a credit operation: it does not fall within the taxable base defined in Article 96-8° of the CGI.
How do credit institutions file their VAT returns?
Credit institutions are required to file and remit VAT under the monthly filing regime, as their turnover systematically exceeds the thresholds established by the CGI. Declarations are submitted electronically through the SIMPL VAT portal, where banking institutions must break down their turnover between operations taxable at 10%, those taxable at 20%, and exempt operations.
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