In brief: Withholding tax on VAT is a collection mechanism introduced by the 2024 Finance Law, codified in article 117 of the CGI. It requires certain clients to withhold a portion — or even the full amount — of the VAT invoiced by their suppliers, and to remit it directly to the Treasury. This mechanism aims to secure State tax revenues and to combat VAT fraud.
Principle of VAT withholding tax
The VAT withholding tax mechanism is based on a simple principle: instead of leaving the supplier to collect the VAT and remit it to the tax administration, it is the client who withholds part or all of the VAT shown on the invoice. The client then remits this amount directly to the Public Treasury.
In practice, when a supplier issues an invoice including VAT, the client does not pay the full amount inclusive of tax. The client withholds the portion of VAT required by law and remits it to the tax administration on behalf of the supplier. The supplier therefore receives the amount exclusive of tax plus the residual VAT (where applicable).
This mechanism constitutes a collection guarantee for the State. It prevents situations where a supplier collects VAT from its clients without remitting it to the Treasury, which represented a significant shortfall for public finances.
Persons liable to withhold VAT
Article 117 of the CGI designates the persons required to operate the withholding of VAT. The scope of persons concerned was significantly extended by the 2024 Finance Law.
Historically liable persons
Before the 2024 reform, VAT withholding primarily concerned:
- The State and its branches;
- Local authorities (regions, prefectures, provinces, municipalities);
- Public establishments;
- Legal persons governed by public law in general.
These entities were already required to withhold VAT on payments made to their suppliers, as part of public contracts and public orders.
Extension by the 2024 Finance Law
Since the 2024 Finance Law, the scope of persons subject to the withholding obligation has been extended to legal persons governed by private law for certain transactions. This extension aims to strengthen VAT collection across all economic circuits and to reduce the risks of non-remittance of the tax collected.
The extension notably concerns transactions with suppliers who do not hold a valid tax compliance certificate (ARF — attestation de régularité fiscale), as well as transactions with non-resident service providers.
VAT withholding rates
The withholding rate varies according to the supplier’s tax situation. Article 117 of the CGI distinguishes two scenarios:
75% withholding of VAT
When the supplier presents a valid tax compliance certificate (ARF), the client withholds 75% of the VAT amount shown on the invoice. The supplier then receives the amount exclusive of tax plus 25% of the VAT invoiced.
Example: A supplier invoices a service of 100,000 MAD exclusive of tax, with VAT of 20,000 MAD (20% rate). If the supplier holds a valid ARF, the client withholds 75% x 20,000 = 15,000 MAD which is remitted to the Treasury. The supplier receives 100,000 + 5,000 = 105,000 MAD.
100% withholding of VAT
In the absence of a tax compliance certificate, the client withholds 100% of the VAT invoiced. The supplier then receives only the amount exclusive of tax.
Example: With the same invoice of 100,000 MAD exclusive of tax and 20,000 MAD of VAT, in the absence of an ARF, the client withholds the full 20,000 MAD. The supplier receives only 100,000 MAD.
Practical point: The tax compliance certificate is issued by the tax administration to taxpayers who are up to date with their filing and payment obligations. It is an essential document for suppliers who wish to receive a portion of the VAT invoiced. It is therefore strongly recommended that businesses keep their tax situation up to date to avoid full withholding.
Transactions subject to VAT withholding
VAT withholding applies to several categories of transactions:
Services provided by non-residents
When a foreign service provider provides a service used or exploited in Morocco, VAT is due in accordance with VAT territoriality rules. The Moroccan client must withhold and remit the corresponding VAT, as the non-resident service provider generally does not have a tax identification number in Morocco.
Dematerialised digital services
Since the 2024 Finance Law, services provided remotely in dematerialised form by non-resident providers to clients established in Morocco are subject to VAT. The withholding mechanism fully applies to these transactions: SaaS software, cloud computing services, online advertising, distance learning, supply of digital content, etc.
Certain local services
Withholding tax may also apply to services provided by suppliers resident in Morocco, particularly in the context of public contracts and payments made by legal persons governed by public law. The extension to legal persons governed by private law, introduced by the FL 2024, broadens this scope to transactions with suppliers who do not hold an ARF.
Client obligations regarding VAT withholding
The client who operates the withholding assumes several obligations:
Withhold VAT from the amount paid
Upon each payment, the client must calculate the amount of VAT withholding and deduct it from the payment made to the supplier. The withholding rate (75% or 100%) depends on whether or not the supplier presents a valid ARF.
File returns and remit the VAT withheld
The client must declare the amounts withheld and remit them to the tax administration via the SIMPL TVA electronic filing portal. This return must be filed within the legal deadlines, according to the client’s applicable filing regime (monthly or quarterly).
Retain supporting documents
The client must retain all supporting documents relating to the withholding:
- The supplier’s invoices showing the VAT;
- A copy of the supplier’s tax compliance certificate (where applicable);
- Proof of remittance of the withholding to the Treasury;
- Returns filed on SIMPL TVA.
These documents must be retained for the tax statute of limitations period (4 years under ordinary law) and presented in the event of a tax audit.
Issue a withholding certificate
The client must provide the supplier with a certificate indicating the amount of VAT withheld at source. This document enables the supplier to exercise their right to offset.
Right to deduction for the supplier
The supplier subject to VAT withholding retains a right to deduction. The VAT withheld by the client and remitted to the Treasury constitutes a VAT credit that the supplier can offset against the VAT for which it is liable on its own returns.
In practice, the supplier records in its VAT return the amount of withholding suffered, based on the certificate issued by the client. This amount is deducted from the VAT due. If the amount of withholding exceeds the VAT due, the supplier has a VAT credit that can be carried forward or, under certain conditions, refunded.
This mechanism ensures the fiscal neutrality of VAT for the supplier: the withholding does not constitute an additional tax burden but merely a transfer of the remittance obligation from the supplier to the client.
Non-resident suppliers: reverse charge
When the supplier is a non-resident business providing services used or exploited in Morocco, the Moroccan client carries out the reverse charge of VAT. This mechanism, distinct from but complementary to withholding, works as follows:
- The Moroccan client calculates the VAT due on the service invoiced by the non-resident;
- It declares this VAT as output VAT in its return;
- If it has a right to deduction, it can simultaneously deduct this VAT as recoverable input VAT.
The reverse charge applies notably to services provided by foreign providers who do not have an establishment in Morocco, including the dematerialised digital services covered by the FL 2024 reform. This mechanism allows these transactions to be subject to Moroccan VAT without the foreign provider having to register in Morocco.
Note: Reverse charge and withholding are two mechanisms that may be combined. The client must be vigilant regarding the obligations incumbent upon them in each situation and ensure the correct application of the CGI provisions.
Reference texts
- Article 117 of the CGI: defines the VAT withholding mechanism, the persons liable, the applicable rates and the filing obligations. See the General Tax Code 2026.
- Circular Note No. 735: specifies the modalities of VAT withholding application within the framework of the reform launched by the 2024 Finance Law.
- Article 88 of the CGI: VAT territoriality rules determining the connection of transactions to Moroccan territory.
- Circular Note No. 717 — Volume 2: general comments on the VAT regime.
TOOLS
VAT Qualification Morocco 2026 — Free tool: Determine in just a few clicks whether your transaction is outside scope, exempt or taxable, and at what rate. Compliant with the 2026 CGI.
FAQ
Who must operate VAT withholding in Morocco?
VAT withholding is incumbent upon the clients designated by article 117 of the CGI: the State, local authorities, public establishments and legal persons governed by public law. Since the 2024 Finance Law, this obligation has been extended to legal persons governed by private law for certain transactions, notably those carried out with suppliers who do not hold a tax compliance certificate or with non-resident service providers.
What is the difference between 75% and 100% VAT withholding?
The withholding rate depends on the supplier’s tax situation. If the supplier presents a valid tax compliance certificate (ARF), the client withholds 75% of the VAT invoiced. In the absence of an ARF, the client withholds the full amount (100%) of the VAT. It is therefore in the supplier’s interest to keep their tax situation up to date to limit the impact of the withholding on their cash flow.
Does the supplier lose the VAT withheld at source?
No. The VAT withheld by the client and remitted to the Treasury constitutes a VAT credit for the supplier. The supplier can offset it against the VAT for which it is liable on its own returns. If the credit exceeds the VAT due, it can be carried forward or, in certain cases, be the subject of a VAT credit refund. The withholding therefore does not constitute an additional tax burden for the supplier, but merely a cash flow timing difference.
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