Integration of the informal sector: The Tax Package
The Finance Bill for 2024 has provided for a mechanism to gradually integrate informal activities into the organized economy and fight against tax fraud. Several measures are planned, including the introduction of a new optional VAT reverse charge regime, in line with international best practices.
Thus, that scheme allows persons carrying on an activity subject to that tax to calculate the amount of VAT on their purchases made from suppliers outside the scope of that tax or to be exempt from it, without the right of deduction. The idea is to allow them to deduct the amount of this tax at the same time, with the exception of transactions involving the acquisition of land and agricultural products.
This new system would improve the transparency of commercial operations carried out by companies, and encourage integration into the organized economy (the formal sector). For the sponsors of this project, the idea is to encourage fiscal transparency and combat false invoicing. To this end, two new VAT withholding mechanisms are proposed. The first concerns withholding tax on transactions carried out by suppliers of goods and works subject to VAT. This withholding tax will be levied by taxable customers on the amount of VAT due in respect of taxable transactions carried out by suppliers of goods and works, who fail to present their customers with a certificate justifying their tax compliance with the obligations to declare and pay taxes, duties and levies laid down in the General Tax Code (CGI). This document has been issued electronically by the tax authorities for less than 3 months, reads the presentation note of the Finance Bill 2024. However, the central Government, the local authorities, State-owned entities, and other legal entities governed by public law are not required to apply the above-mentioned withholding tax, in accordance with the legislation and regulations in force.
The other mechanism concerns withholding tax on transactions carried out by service providers subject to VAT. This withholding tax will be applied to service transactions, the list of which is set by regulation, and will amount to 75% of the VAT. This withholding tax will first be applied by the central Government, the local authorities and State-owned enterprises and their subsidiaries, as well as other public bodies that pay remuneration for these services to taxable persons. Secondly, this withholding tax will apply to private legal entities and individuals subject to tax, whose income is determined according to the actual net income or simplified net income regime. This applies to entities paying the remuneration for these services to taxable individuals who have presented a certificate attesting to their good standing in terms of obligations to declare and pay taxes, duties, and levies set out in the General Tax Code. Failing presentation of this certificate, 100% of the amount of this tax will be withheld at source.
Mohamed CHAOUI
