VAT on digital services from foreign providers: what the Finance Act 2024 changes

Buying online services from foreign companies is now commonplace: software subscriptions, website hosting, advertising, digital content, distance learning. Until 2023, some of these services escaped Moroccan VAT (TVA) in practice. The Finance Act (Loi de Finances) 2024 closed the gap by revising article 88 of the General Tax Code (CGI) and creating a new article 115 bis.

The new place-of-supply rule

Services supplied remotely, in digital form, by a non-resident with no establishment in Morocco are now deemed to be supplied in Morocco when the customer has its registered office, establishment or tax domicile in Morocco, or is occasionally resident there.

The service remains taxable in Morocco even if the customer is abroad when using it. The rule follows the consumer’s place of residence, in line with international standards.

Which services are covered?

The CGI defines a service supplied remotely as any service provided by a means of remote communication, including intangible goods. DGI circular (note circulaire) No. 735 lists, among others:

• website supply and hosting, and remote maintenance of software and equipment;
• supply of software and apps, and their updates;
• digital content: music, films, online games, images, text, information;
• video-on-demand subscriptions;
• database access;
• training, advice or support delivered remotely.

By contrast, a service booked online but physically used abroad (a hotel room or a hire car in Paris, for example) falls outside this scope. Booking online does not, by itself, make the service digital.

Obligations for foreign providers

The new article 115 bis targets non-resident suppliers that have not appointed a tax representative in Morocco and sell these services to customers who are not VAT-registered (mainly individuals). They must:

1. register on a dedicated electronic platform and obtain a tax identifier;
2. file a monthly return on the platform, before the end of the month, for the previous month’s turnover generated in Morocco, and pay the corresponding VAT at the same time, with no right to deduct;
3. keep a register of the services supplied, retained for ten years and sent electronically to the tax authorities on request.

The detailed rules are left to an implementing regulation. For individuals, the VAT is meant to be included in the price paid to the platform.

What about business customers?

If your business pays a foreign provider for a service, watch three points:

• Whether VAT is invoiced. Depending on the provider, the invoice may or may not include Moroccan VAT. Your accounting treatment and deduction depend on it.
• VAT on services from non-residents. The existing rules on services supplied by non-residents to Moroccan VAT-registered businesses still apply. The tax must be neither paid twice nor left unpaid.
• Withholding tax for corporate income tax (IS). Payments to non-residents (royalties, technical assistance, etc.) may bear the 10% withholding tax provided for by the CGI, subject to tax treaties. This is separate from VAT, but it arises on the same invoices.

An example

DGI circular No. 735 illustrates the rule as follows: a Moroccan resident on holiday in Madrid downloads a documentary film to his phone from a foreign company with no establishment in Morocco. The price is MAD 120. For the Directorate General of Taxes (DGI), the transaction is deemed to take place in Morocco: the customer is tax-domiciled there and the service is digital.

What we recommend

1. List your foreign subscriptions and digital services: software, cloud, advertising, collaboration tools.
2. Check, for each one, whether VAT appears on the invoice and how it is treated in your accounts.
3. Document the position you take for VAT and withholding tax, especially for large amounts.

Our Accounting and Tax & legal teams can review how your purchases of foreign services are treated. To discuss your situation, contact us.