Morocco’s 2026 finance law introduces a new mechanism requiring the withholding of value added tax at source on services, a reform that will be phased in gradually between July 2026 and January 2028, according to guidance issued by the General Directorate of Taxes.
The tax authority has formally notified credit institutions, similar financial bodies, insurance and reinsurance companies, as well as firms with annual turnover of at least 200 million dirhams excluding tax, that VAT due on services will now be partially or fully withheld at the time of payment to service providers subject to VAT.
Under the new framework, the rollout will follow a staggered timeline. From July 1, 2026, the withholding obligation will apply to banks and equivalent institutions, insurance and reinsurance companies, and firms whose annual turnover exceeds 500 million dirhams based on their most recently closed financial year.
From January 1, 2027, the measure will be extended to companies with turnover of at least 350 million dirhams, before being generalized from January 1, 2028, to firms reaching the threshold of 200 million dirhams in annual turnover.
The General Directorate of Taxes said the entities concerned will be required to withhold 75 percent of the VAT amount due when paying fees or compensation to taxable service providers, provided those providers submit a certificate proving their tax compliance status.
If the service provider fails to present this certificate, the withholding rate will rise to 100 percent of the VAT due, effectively transferring full collection responsibility to the paying entity.
The tax authority stressed that the measure is grounded in articles 117 V C and 247 XXXXVI of the General Tax Code and forms part of broader efforts to strengthen VAT collection, reduce evasion, and secure public revenues.
Officials said the gradual implementation is intended to give businesses time to adapt their accounting systems and cash flow management to the new withholding regime.
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