Dividends: withholding tax now depends on the date of distribution

The season of general meetings approving the 2024 accounts has just ended. For individual shareholders, the question of paying dividends comes up again, now with a simpler rule introduced by the Finance Act (Loi de Finances) 2025.

Before 2025: a rate based on the year the profit was earned

The Finance Act 2023 had provided for a gradual reduction in withholding tax on dividends and similar income from 15% to 10%. But the rate depended on the financial year in which the distributed profit was earned:

• profits from financial years beginning before 2023: 15%;
• financial year beginning in 2023: 13.75%;
• financial year beginning in 2024: 12.5%;
• financial year beginning in 2025: 11.25%;
• financial year beginning in 2026: 10%.

Distributions were deemed to come from the oldest years first, so companies had to track their reserves precisely by year of origin.

Since 2025: only the date of distribution counts

The Finance Act 2025 replaced this mechanism with a timetable based on the date of distribution:

Amounts distributed from	Withholding rate
1 January 2025	12.5%
1 January 2026	11.25%
1 January 2027	10%

These rates apply whatever financial year the profits come from, including old reserves built up before 2023, which were previously taxed at 15%.

Example

A private limited company (SARL) formed in 2013 and owned by individuals has:

• MAD 400,000 of optional reserves from its 2022 profit;
• MAD 1,000,000 of retained earnings from 2023;
• MAD 1,500,000 of 2024 profit.

At its meeting on 15 June 2025, it decides to distribute MAD 2,500,000.

• New rule: 2,500,000 × 12.5% = MAD 312,500 of withholding tax.
• Old rule, for comparison: 400,000 × 15% + 1,000,000 × 13.75% + 1,100,000 × 12.5% = 60,000 + 137,500 + 137,500 = MAD 335,000.

The reform simplifies the calculation and reduces the tax on old reserves.

Your options as a shareholder

1. Distribute in 2025 or wait? Each year you wait lowers the rate by 1.25 points. On 1 million dirhams (MAD), distributing in 2027 rather than 2025 saves MAD 25,000 of withholding tax. But weigh this against shareholders’ cash needs, the company’s plans and the risk of the law changing.
2. Old reserves: they are no longer penalised at 15%. Companies that held back from distributing old reserves can reconsider.
3. Interim dividends: the payment date determines the rate.

What does not change

• Between companies subject to corporate income tax (IS): dividends received by a Moroccan company subject to IS remain exempt from withholding, provided it presents a certificate of share ownership showing its tax identification number (IF).
• Non-residents: the domestic rate may be reduced under the applicable tax treaty, on proof of residence.
• Return and payment: the withholding is paid over within the month following payment of the dividend, and the annual return of distributed income is still required.
• Deemed distributions: article 13 of the General Tax Code (CGI) treats other sums allocated to shareholders as dividends. These must be examined case by case.

Our advice

Before deciding to distribute, look at the whole picture: the company’s financing needs, the director’s remuneration, shareholders’ current accounts and the rate timetable. Build a multi-year distribution policy.

Our Tax & legal team prepares your general meetings and optimises shareholder remuneration within the rules. To discuss your situation, contact us.