VAT withholding at source from 1 July 2024: how it works

The Finance Act (Loi de Finances) 2024 added two paragraphs (IV and V) to article 117 of the General Tax Code (CGI). They create two VAT (TVA) withholding mechanisms aimed at tackling false invoices and improving transparency. They apply to transactions carried out from 1 July 2024.

Mechanism 1: suppliers of capital goods and works

A VAT-registered customer must withhold all the VAT due by its supplier of capital goods or works if that supplier does not provide a tax compliance certificate less than six months old.

• The certificate is provided at the time of invoicing or, at the latest, at payment. If an advance is paid, it is requested when the advance is paid.
• The customer must check that it is genuine on the website of the Directorate General of Taxes (DGI).
• Businesses that make only out-of-scope supplies, or exempt supplies without the right to deduct, do not have to withhold.
• The State, local authorities and public bodies subject to public procurement rules do not apply this withholding.

Mechanism 2: services

A second withholding covers a list of services set by decree (Decree No. 2-23-1118, lists A and B).

Who withholds?	From which providers?	Withholding rate
The State, local authorities, public establishments and enterprises and their subsidiaries, other public bodies	VAT-registered providers	75% of the VAT
VAT-registered companies and individuals taxed on actual or simplified net profit	VAT-registered individual providers	75% with a tax compliance certificate, 100% without one

Exclusions

The withholding does not apply to:

• electricity and water supplied to public distribution networks, sanitation and meter rental;
• transactions by telecommunications operators;
• services of insurance brokers and agents;
• services of MAD 5,000 or less, including tax, up to MAD 50,000 including tax per month and per supplier. Once the month’s total with the same provider exceeds MAD 50,000, even a small invoice is subject to withholding.

Note also that a service between two private-law companies does not trigger withholding under the second mechanism, which, on the private side, targets only individual providers. Purchases of goods for resale are not affected either.

Timing and reporting

• Withheld VAT is paid to the tax collector during the month following payment, with a payment slip (bordereau-avis).
• The turnover return must include a detailed statement of withholdings. Filing this statement late incurs a MAD 500 fine; failing to file it, MAD 2,000.
• On the supplier’s side, any VAT credit arising from the withholding can be refunded, up to the amount of VAT withheld.

An example

Based on the cases set out by the DGI in its circular (note circulaire): in August 2024, a private limited company (SARL) pays an individual provider MAD 30,000 including tax for a security service. The provider does not provide a tax compliance certificate.

• Amount excluding tax: 30,000 / 1.2 = MAD 25,000.
• VAT: 25,000 × 20% = MAD 5,000, withheld at 100%.
• The SARL pays MAD 25,000 to the provider and MAD 5,000 to the DGI in September. If asked, it gives the provider a document certifying the withholding.

Had the invoice been MAD 3,500 including tax, with the month’s total for this supplier below MAD 50,000, there would have been no withholding.

If the provider had produced its certificate, the same invoice would trigger a 75% withholding: 5,000 × 75% = MAD 3,750 paid to the DGI, and 25,000 + 1,250 = MAD 26,250 paid to the provider.

Finally, for an industrial machine costing MAD 600,000 including tax, bought from a company without a certificate, the SARL withholds all the VAT, i.e. MAD 100,000, and pays only MAD 500,000 to the supplier.

Your checklist before 1 July

1. Identify the suppliers concerned: capital goods, works, individual service providers.
2. Ask them for a recent tax compliance certificate and arrange for it to be renewed every six months.
3. Adapt your payment process: invoices will no longer always be paid gross of VAT.
4. Set up your accounts: an account for withheld VAT awaiting payment, and tracking of the MAD 5,000 and MAD 50,000 thresholds per supplier.
5. Prepare the statement to attach to your VAT return.
6. Tell your suppliers, especially the self-employed, about the new payment method to avoid disputes.

If you are a service provider yourself, keep your certificate up to date: without it, your customers will withhold 100% of the VAT and your cash flow will suffer.

Our Accounting team can adapt your supplier procedures and VAT returns. To discuss your situation, contact us.