Compromised competitiveness of “national champions”

When it comes to taxes, there are two ways to increase tax revenue, increase tax rates or broaden the tax base. The draft budget bill for 2023 has obviously opted for the first solution. Moreover, the upward revision of corporate tax rates is considered to be tax harassment since, once again, it has not spared the handful of companies (2%) which provide to the Treasury 80% of tax revenues generated by this tax.

Thus, one of the shock measures will certainly have been the reorganization of the corporate tax scale over a four-year schedule. Indeed, it is planned to apply a corporate tax rate of 20% as the common corporate tax rate applicable to any profit below 100 million Dirhams (about 9.13 million USD). In short, it is a single rate that will affect most businesses, the overwhelming majority of which are SMEs. Beyond this amount, the rate will be 35%. But it is above all the financial sector that will see its tax scale explode since it should rise to 40% in 2026. There is also talk of instituting a withholding tax of 10% versus the 15% currently applied on profits distributed by companies that are subject to the corporate tax in order to mitigate the impact of the increase in tax rates for some of them. In the eyes of Salah Grine, chartered accountant and tax adviser to a parliamentary group, “the increase from 31 to 35% of the corporate tax rate for large companies would have the effect of putting Morocco against the current of the global trend of lower corporate tax which is moving towards a floor rate of 15% and would not fail to reduce Morocco’s attractiveness for foreign investors who could direct their investments to other destinations, or even push them to relocate investments already made in the country”. Salah Grine added that “this increase in the corporate tax would make national champions less competitive not only outside but also inside the country, due to the many free trade agreements signed by the Kingdom”.

H.E.