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.
Regime prior to 2024
Before the 2024 Finance Law, article 117 of the CGI provided for VAT withholding in only two cases: the VAT on interest paid by credit institutions, collected by those institutions on behalf of the Treasury (Art. 117-I), and the VAT due on transactions carried out by non-residents for Moroccan clients carrying out an activity outside the scope of VAT (Art. 117-III, since the 2014 Finance Law). No general withholding existed in the context of public procurement: it was the 2024 Finance Law that introduced the obligation, for the State, local authorities and public bodies, to withhold 75% of the VAT on the services listed by decree (Art. 117-V-a).
Extension by the 2024 Finance Law
Since the 2024 Finance Law (transactions carried out from 1 July 2024), article 117 of the CGI provides for two distinct mechanisms:
- Capital goods and works (Art. 117-IV): any taxable client withholds 100% of the VAT invoiced by a supplier of capital goods or works who does not present a tax compliance certificate issued less than six months earlier. The State, local authorities and public bodies subject to public procurement regulations are not required to operate this withholding.
- Services (Art. 117-V): for the services referred to in article 89-I (5°, 10° and 12°) and included in the list set by decree no. 2.23.1118, the withholding is 75% of the VAT. It is operated: a) by the State, local authorities, public establishments and enterprises and their subsidiaries, towards any taxable service provider; b) by legal persons governed by private law and by individuals taxed under the actual net income (RNR) or simplified net income (RNS) regime, towards individuals only who are taxable persons and have presented the tax compliance certificate (100% failing that); c) since the 2026 Finance Law, by credit institutions, insurance companies and companies whose turnover excluding VAT for the last closed financial year is equal to or greater than MAD 200 million, towards taxable legal persons that have presented the certificate (100% failing that). On a transitional basis, this threshold is set at MAD 500 million from 1 July 2026 and MAD 350 million from 1 January 2027 (Art. 247-XXXXVI).
Outside these cases, a private company has no withholding to operate on its legal-person service providers. Non-resident providers fall under a separate, earlier regime (Art. 115 and 117-III): reverse charge by the taxable client, withholding at source only when the client carries out an activity outside the scope of VAT.
VAT withholding rates
The withholding rate depends on the mechanism concerned and not only on the supplier’s tax situation:
| Mechanism | Supplier with tax compliance certificate (< 6 months) | Supplier without certificate |
|---|---|---|
| Capital goods and works (Art. 117-IV), taxable client | No withholding | 100% of the VAT |
| Listed services paid by the State and public bodies (Art. 117-V-a) | 75% | 75% |
| Listed services paid by legal persons governed by private law and by RNR/RNS individuals to taxable individuals (Art. 117-V-b) | 75% | 100% |
| Listed services paid by credit institutions, insurance companies and companies with turnover excl. VAT ≥ MAD 200 million (MAD 500 million from 1 July 2026, MAD 350 million in 2027) to taxable legal persons (Art. 117-V-c) | 75% | 100% |
Example: an SARL invoices a listed service of 100,000 MAD exclusive of tax (VAT 20,000 MAD) to a private company whose turnover is below the threshold: no withholding is due. The same service invoiced to a public enterprise is subject to a withholding of 75% x 20,000 = 15,000 MAD; the provider collects 105,000 MAD. An individual consultant invoicing the same service to an SARL suffers a withholding of 15,000 MAD if they present their certificate, and 20,000 MAD failing that.
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-residents to clients having their registered office, establishment or tax domicile in Morocco are deemed to be carried out in Morocco (Art. 88-2° CGI): SaaS software, cloud, online advertising, distance learning, digital content, etc. The method of collection depends on the client:
- taxable client: they reverse-charge the VAT on their own return (amount excl. VAT declared, VAT due calculated and deducted simultaneously) — Art. 115;
- client carrying out an activity outside the scope of VAT: they withhold the VAT at source on each payment and pay it to the tax collector in the following month — Art. 117-III;
- non-taxable private client: in the absence of a tax representative, the foreign provider must register on the DGI’s electronic platform, obtain a tax identifier and declare and pay the VAT quarterly without the right to deduction — Art. 115 bis. See our article VAT on digital services in Morocco.
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 (no withholding, 75% or 100%) depends on the applicable mechanism (Art. 117-IV or V) and on whether or not the supplier presents a tax compliance certificate issued less than six months earlier.
File returns and remit the VAT withheld
The amount withheld must be paid to the tax collector during the month following that of each payment, whatever the client’s filing regime (monthly or quarterly). Each payment is accompanied by a payment slip (bordereau-avis) drawn up on the form prescribed by the administration, via the SIMPL TVA portal. Amounts withheld by public administrations and public accountants are paid directly to the accountants of the General Treasury of the Kingdom. In addition, a detailed statement of withholding at source must accompany the turnover return (Art. 112-II); late filing is penalised by a fine of MAD 500 and failure to file by a fine of MAD 2,000 (Art. 204-III).
The following are excluded from withholding (Art. 117-IV and V): sales of electricity and water to public distribution networks, sanitation services and meter rental, sales and services of telecommunications operators, services of insurance agents and brokers, and services whose amount is equal to or below MAD 5,000 incl. VAT, up to a limit of MAD 50,000 incl. VAT per month and per supplier.
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 10 years in accordance with Article 211 of the CGI 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 operated, as the case may be (Art. 117 CGI): by any taxable client, at 100%, on invoices for capital goods and works from a supplier who does not present a tax compliance certificate issued less than six months earlier; by the State, local authorities and public bodies, at 75%, on the services listed by decree; by legal persons governed by private law and RNR/RNS individuals, at 75% (100% without certificate), on those same services when rendered by individuals; and, since the 2026 Finance Law, by credit institutions, insurance companies and companies whose turnover excluding VAT is equal to or greater than MAD 200 million (MAD 500 million from 1 July 2026, MAD 350 million in 2027), on services rendered by legal persons. Clients carrying out an activity outside the scope of VAT also withhold the VAT due by their non-resident providers (Art. 117-III).
What is the difference between 75% and 100% VAT withholding?
The rate depends on the mechanism. For capital goods and works (Art. 117-IV), the taxable client withholds nothing if the supplier presents a tax compliance certificate issued less than six months earlier, and withholds 100% of the VAT failing that. For services listed by decree (Art. 117-V), the State and public bodies always withhold 75%; the other persons required to withhold (private companies towards individuals; banks, insurance companies and large companies towards legal persons) withhold 75% if the provider presents their certificate and 100% failing that. It is therefore in the supplier’s interest to keep their tax situation up to date.
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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