Zombie companies: A final “respite”?

They are inactive, they do not fulfill their reporting obligations… and they fear tax audits. Really inactive companies, which are more than 200,000 according to figures put forward by the Ministry of Finance during discussions of the draft budget, will benefit from certain advantages provided that they put their situation in order. From January 1, 2023 onwards, companies who have not achieved any turnover or who have paid the minimum contribution during the last four financial years will be exempt from tax audits.

For this, they must subscribe to the declaration of total cessation of activity. These companies will also benefit from the automatic cancellation of increases, fines and penalties for failure to declare and pay taxes due for non-prescribed financial years. This is a “small amnesty” on the increases and penalties that will benefit companies that are really inactive and wish to put their situation in order. In addition to the subscription to the declaration of total cessation of activity provided for in Article 150 of the General Tax Code (CGI), these companies are required to pay a lump sum tax of 5,000 Dirhams (about 500 USD) for each fiscal year that is not time-barred. That said, the transactions carried out by these companies remain taxable, depending on the case, either to IS (Corporate Tax) or to IR (Income Tax) under the conditions of common law.

The tax administration can also initiate the control procedure according to the rules of  “common law” in the event of fraud, forgery, or the use of fictitious invoices. The Draft Budget Bill also specifies that financial years that have been the subject of one of the procedures for rectification of the tax bases are excluded from this transitional regime. Validated on Thursday, December 8 by the Parliament, the draft budget also provides for measures in favor of companies that do not carry out any activity and no longer fulfill their tax obligations. For this category, the automatic taxation will be suspended. At least according to Article 228 Bis which cites companies that have not complied with any obligation to declare and pay taxes provided for by the CGI (General Tax Code) for the last three closed financial years, and also companies that have not carried out any operation or activity for 3 years according to the information available to the administration. These companies will be invited by notified letter to subscribe to the declaration of cessation of activity provided for in Article 150 of the CGI Code. To do so, companies will have a thirty-day period. Once this period has lapsed, those companies will be listed by the tax authorities in the register of inactive companies and the procedure for automatic taxation provided for in Article 228 will be suspended. If, in the meantime, the administration finds that an inactive company has carried out operations or resumed the exercise of a taxable activity, it will be removed from the register of inactive companies. In this case, the tax authorities will initiate the procedure of automatic taxation according to the procedures provided for, even if the limitation period has expired but without it exceeding 10 years.

Khadija MASMOUDI