Morocco increases VAT

With the New Year being just ten days old, a new tax policy that was bitterly opposed is now in effect in Morocco.

The date was September 10, 2007, and the Moroccan nationalists had just won the national election on the back of a poor 37% voter turnout. A couple of months later the new Prime Minister, Abbas El Fassi, decided that a major shake-up was needed in the country’s system of taxation. However, the steps that he took to achieve that shake-up were bitterly resented by the real estate and property industry within the budding property hub.

The 2008 Finance Act was the result, and when it was passed by the cabinet on November seventh, it threw the building sector into an uproar. The inclusion of what was seen as harsh measures on property owners and prospective buyers was the primary cause of concern. Critics have said the measures would retard economic growth in an area that has been experiencing a lot of it recently primarily due to a strong real estate market.

The first major increase was one in corporate tax to the tune of 15% effective January 1, 2008, and a further increase to 30% effective January 1, 2009.

However, this was not the major point of contention, as it was really an increase in the value-added tax that had so many people steaming. Effective January 1, 2008, the Finance Act added 6% to the value-added tax, bringing it from a 14% rate to a 20% rate starting this year.

Now, with the changes in corporate tax and value-added tax having been put into effect, concerns that were aired at the time of the initial legislation are once again being voiced. Concerns that the lack of tax breaks would reduce competition and increase prices as well as concerns that the increase in value-added tax would result in a marked decrease in demand and therefore a decrease in the currently still hot Morocco real estate market.

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