Reform of Income: Tax Uncertainty for Professional Incomes

Following the reforms of corporate tax  and value-added tax (VAT), which could be adjusted again next year, attention is now focused on revamping the income tax scale. Starting in January 2025, salary taxation will undergo a reorganization, in line with agreements reached through social dialogue.

As part of this process, the Government has agreed to a slight reduction in the tax burden. The monthly exemption threshold will increase to 6,000 dirhams (USD 600), extending the annual exemption from 30,000 to 40,000 dirhams (USD 3,000 to 4,000), effectively exempting incomes below this amount. The marginal income tax rate will also be reduced from 38% to 37%, along with an adjustment of the taxable income brackets.

This reorganization, approved with social partners, will lead to a monthly gain of up to 400 dirhams (USD 40) for middle-income earners and will cost the state nearly 5 billion dirhams. However, a key question remains: Will professional incomes benefit from this reform? According to tax professionals, excluding professional incomes could raise technical challenges. This issue will likely be addressed during discussions on the 2025 Finance Bill, which must be submitted to Parliament by October 20.

Meanwhile, tax revenues continue to show significant growth, with an overall increase of 13.8% compared to the same period last year, bringing the total to 231.3 billion dirhams (USD 23 billion). This growth is attributed to the strong performance of various tax categories, both direct and indirect.

Income tax (IR) increased by 13.2% by the end of September 2024, reaching 43.8 billion dirhams  (USD 4.3) compared to 38.7 billion a year earlier. Refunds amounted to 268 million dirhams (USD 26 billion), slightly above the 263 million recorded last year. Net income tax revenues were notably boosted by an 18.5% rise in real estate profits and a 20.4% increase in revenue collected by the Directorate of Personnel Expenditure (DDP), which reports to the General Treasury. Corporate tax also grew by 12.6%, reaching 55.2 billion dirhams (USD 5 bîlion)  by the end of September 2024.

The 2023 Finance Bill introduced a comprehensive reform of corporate tax rates, aiming to provide greater visibility and stability for investors through a phased approach over four years. By 2026, a unified 20% rate will apply to all companies with net taxable income below 100 million dirhams (USD 10 million), while a 35% rate will target companies with a net taxable income equal to or above 100 million dirhams (USD 10 million). Additionally, a 40% rate is reserved for credit institutions, the Caisse de dépôt et de gestion financial institution, as well as for insurance and reinsurance companies.

Khadija MASMOUDI