VAT reverse charge mechanism: The noose tightens around the informal economy

The tax authorities are stepping up their fight against the informal economy and tax fraud. The 2026 Finance Act, which has just been published in the Official Gazette (No. 7465 bis of 12/16/2025) extends the VAT reverse charge mechanism to taxable industrial processing companies that purchase new industrial waste, metals, and other recovered materials from suppliers that are not subject to tax or are exempt without the right to deduction. This is an activity with a high risk of tax non-compliance. These entities must now declare and pay value added tax on these purchases.
In addition to integrating the informal sector, the measure aims to enshrine the VAT neutrality so often demanded by taxable economic operators. Contrary to the provisions of the 2024 Finance Act, which made the measure optional and provided for a six-month transition period (effective July 1, 2024), the VAT reverse charge mechanism will become mandatory for industrial companies with suppliers that are outside the scope of VAT or exempt without the right to deduct VAT, as of January 1, 2026. As an exception to the provisions of Articles 87, 89, and 91 of the General Tax Code (CGI), the scheme allows for the deduction of VAT on purchases, with the exception of purchases of land and agricultural products.
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Mohamed Chorfi, a certified public accountant, was right on the mark when he made a prescient statement last September in L’Economiste (see L’Economiste No. 7092 of September 14, 2025): “The scheme is currently optional, but could well become mandatory under the 2026 finance law.

The scope could be extended to other act

If so, it would change a lot of things.” The mechanism has indeed been extended to certain industrial companies. «This scheme is in fact a niche in the tax system. I am in favor of gradually implementing certain new tax measures in order to assess their impact and determine any necessary adjustments, as well as the new activities concerned «, said Brahim Bahmad, chartered accountant and former president of the Cercle des fiscalistes du Maroc (Moroccan Tax Experts Association).
The implementation of the reverse charge mechanism in small doses is in line with the tax authorities’ vision of integrating informal activities and combating tax fraud and evasion. The scheme, whose scope could be extended to other activities under the next Finance Act depending on the results observed between now and then, enables the tax authorities to identify certain economic operators who were previously outside their radar or who were underreporting their turnover. This reverse charge mechanism also makes it possible to monitor cases where turnover thresholds are exceeded, resulting in a mandatory change in the tax regime.
Hassan EL ARIF