Withholding tax rates: Controversy and Confusion
Would the new withholding tax rates apply to fees and other remuneration paid to beneficiaries since January 01 even if they relate to the 2022 financial year? The answer may not be unanimous between professionals and the Directorate General of Taxes (DGI). A taste of the differences has already been given during the road show of the Director General of Taxes with the regional councils of the Association of Chartered Accountants . It is a sentence clearly mentioned in a document recently released by the DGI relating to tax measures that has caused a stir among accounting professionals. The sentence in question specifies that “These new provisions apply to remuneration paid, made available or entered into an account, from January 01, 2023 onwards, regardless of the date of their invoicing”. This means that if a service provider invoices its fees in January 2023 for services provided in 2022, these will have to be withheld at source according to the scale of the 2023 Appropriations Bill and not of 2022. In practice , a part-time lecturer, for example, will have to suffer a withholding tax of 30% instead of 17% (2022 scale) even if this concerns remuneration for the month of November or December 2022. Even more, according to a consultant, certain fees could be subject to a first withholding tax in 2022 and a second one in 2023 provided that they are allocated since the beginning of this year.
The controversy is reminiscent of the one which accompanied the application of the new minimum contribution rate (0.75% instead of 0.5%) which was originally to be applied to the 2018 financial year instead of 2019 (See L’Economiste issue # 5430 of January 14, 2019). Nonetheless, in relation to the effectiveness of the new scales, it will be necessary to stick to the articles of the General Tax Code (CGI) of 2023. Thus, Article 4-IV speaks of “allocated” and not “acquired” remuneration. However, this article has the merit of giving a clear definition. The same wording is found in Article 151-I-6 of the same CGI Code. It should be noted that what risks turning everything upside down depending on the side on which you find yourself (the administration or the practitioners), is Article 6-IV21, which is very important, since it concerns the effective dates and the transitional measures. This article states that «the provisions of Articles 73 (II-G-2° and the last paragraph), 151-III, 157 and 194-III of the General Tax Code, as amended by paragraph I above, are applicable to fees and remuneration acquired from January 1, 2023”. The term ‘acquired’ can be interpreted as ‘earned’ or ‘generated’ and not ‘attributed’ or ‘allocated’. Consequently, the literal exegesis of this provision could prove right the professionals who challenge the nature of the applicability of the new rates to the fees of 2022 because they are settled in January 2023. In principle, on the basis of the increase in he information gathered from the professionals which it met over the past few days, the Directorate General of Taxes should clarify this point in the circular of tax measures expected in the coming days because such a point may pose a problem.
Unanimity among practitioners
The professionals contacted by L’Economiste are unanimous in challenging «the retroactivity of this measure which, in principle, should only apply to remuneration, commissions, brokerage fees, and other fees generated, or earned from January 01, 2023 and not to those relating to previous financial years». “In the face of vagueness, it will be difficult to advise our clients with precision concerning the approach to be adopted. In any case, I intend to explain to them the position of the administration so that they can make an informed decision”, says a practitioner.
Hassan EL ARIF
