VAT 2024: exempt basic products and the first transitional rates

The VAT (TVA) reform introduced by the Finance Act (Loi de Finances) 2024 is being rolled out in three stages, from 2024 to 2026. The first stage has applied since 1 January 2024. It affects both the prices households pay and the way businesses manage their VAT credit.

Products now exempt

Article 6 of the Finance Act 2024 extends the exemption to widely consumed products. The regime is not the same for all of them. With the right to deduct, the seller recovers the VAT paid on its purchases; without it, that VAT becomes a cost.

Product	Position before 2024	From 1 January 2024
All pharmaceutical products	7% for most (some already exempt)	Exempt with the right to deduct, domestically and on import; however, raw materials and packaging for medicines move from 7% to 20%
School supplies and their components	Taxed	Exempt without the right to deduct, domestically and on import
Water for domestic use (public supply, sanitation, meter rental)	7%	Exempt with the right to deduct
Butter of animal origin	14% (traditionally made butter was already exempt)	Exempt without the right to deduct
Canned sardines, powdered milk, household soap	Taxed	Exempt

For medicines, exemption with the right to deduct means that any VAT credit arising on these sales from 1 January 2024 can be refunded under the conditions of the General Tax Code (CGI).

The rates that change in 2024

For other transactions, the law brings rates into line gradually:

• Electricity: 14% → 16% in 2024, then 18% in 2025 and 20% in 2026. The law states that these rate changes have no impact on the regulated selling prices of electricity.
• Electricity from renewable energy (sales by producers): 14% → 12%, then 10% in 2025.
• Electricity meter rental: 7% → 11%, then 15% and 20%.
• Urban transport and road transport of passengers and goods: 14% → 13%, then 12% and 10%. Rail transport and medical transport remain at 20%.
• Other transport (in particular domestic air and sea transport): 14% → 16%, then 18% and 20%.
• Refined sugar: 7% → 8%, then 9% and 10%.
• Economy car: 7% → 10% from 2024.
• Water for non-domestic use supplied to public networks: 7% → 10% from 2024.
• Services of insurance brokers and agents: 14% → 12%, then 10% in 2025.

Example: a transport SME

A road haulage company invoices a job of MAD 100,000 excluding tax in January 2024. It now charges VAT at 13%, i.e. MAD 13,000, compared with MAD 14,000 in 2023. Its purchase rates do not change: fuel, maintenance and equipment remain taxed at their own rates. The gap between VAT paid on purchases and VAT collected may therefore widen slightly. Monitor it closely to avoid building up a structural VAT credit by 2026.

Your January checklist

1. Check product records and VAT codes in your invoicing software and tills before issuing your first invoices of 2024.
2. Deal with transactions that straddle the change: the Finance Act includes transitional rules for transactions that began before 1 January 2024. Review each ongoing contract, especially subscriptions and public contracts.
3. Review published prices and commercial terms where the rate goes up.
4. Recalculate your deduction ratio if part of your business becomes exempt without the right to deduct: VAT on overheads becomes partly non-recoverable.
5. Plan ahead for 2025 and 2026: each 1 January brings a new stage.

What next?

The second half of the year brings another important change: VAT withholding at source and the reverse-charge regime, which apply to transactions carried out from 1 July 2024.

Our accounting team checks how your rates are set up and reviews your VAT returns. For a review of your transactions, contact us.