Investment/VAT exemption: How the new system works

Will the economic machine finally get going again after the publication of the Circular on Tax Provisions 2024? In any case, it is expected to answer many of the questions that taxpayers and practitioners are asking. One of the provisions on the minds of those concerned concerns the new system of VAT-exempt purchases of capital goods, with the right to deduct both on the local and international markets (see L’Economiste no 6683 of 17/01/2024).

Since January 1, 2024, this incentive has been subject to the compulsory presentation of sufficient guarantees, already listed in a summary note published by the Directorate General of Taxes (DGI) and taken up in greater detail by the circular note. These include bank guarantees, pledges of public contracts or business assets, bills of exchange, and mortgages. According to some advisers, the conditionality of this incentive has blocked transactions for many economic operators since the Finance Law came into force. «Since January of this year, many of my clients have not posted any sales, pending clarification of the terms and conditions for VAT-exempt purchases of capital goods. What’s more, banks didn’t know what type of bank guarantee was required. For new investors, the banks require the counterpart in sufficient provisions. This is not an easy task», says a chartered accountant. As a result, some businesses have been unable to enter into any commercial transactions since the beginning of the year, due to the lack of visibility for banks regarding the nature of the required guarantee. The practitioner recommends that the administration publish a note on the operating procedure for bank sureties and other types of guarantee. Moreover, not all such guarantees can be formalized with banks, trustees, or accounting firms. In some cases, the services of a notary are required.
As a reminder, a few days ago the Customs administration issued a press release informing the operators concerned that capital goods imports initiated up to December 31, 2023 and paid for in full or in part in 2024 will continue to be subject to the old VAT regime. The new procedure for benefiting from the domestic VAT exemption (Article 92-I-6 of the CGI Code), as specified in the DGI circular just published, consists for taxpayers in submitting a request and provide evidence of regular bookkeeping, enabling the goods he intends to purchase to be entered in a fixed asset account giving rise to depreciation.
Hassan EL ARIF