Moroccan tax administration demands MAD1 billion from Nestlé Morocco

The Moroccan tax administration is claiming MAD1 billion (USD110 million) from the Swiss food and beverage group, Nestlé, following an audit carried out by the team of the national division of tax audits, reported directly to the president of the General Directorate of Taxes in Rabat, according to Financial Afrik.

The tax authorities have rejected the transfer pricing method applied by Nestlé Morocco since the prices at which the purchases and sales of goods and services between the company and the other subsidiaries of the group are invoiced.

Nestlé Morocco is accused of improperly organizing a transfer of profits to its parent company by reducing taxable income in Morocco, a process that has been executed to manipulate transfer prices.

From its headquarters in Geneva, the Nestlé group sent tax lawyers who joined the local consultants from the EY firm to assist its subsidiary in the proceedings before the National Commission for Fiscal Appeal to contest this adjustment.

The management of Nestlé Morocco approached the tax administration in order to find an amicable agreement and obtain a discount on this gigantic recovery tax.
“The method used by Nestlé Maroc is a global scheme implemented in all the group’s subsidiaries”. Imane Zaoui, Managing Director of Nestlé Morocco, stated.

According to Moroccan law, in a transaction between the tax authorities and a taxpayer, a discount on the number of tax adjustments can only relate to questions of interpretation and not of law.

Basically, it is not possible to reduce the unpaid VAT bill to the Treasury, but the tax authorities can concede a reduction on the amounts of late penalties or the level of royalties that a company has paid to its headquarter for technical assistance.

It should be noted that the 39th largest company in the world, according to Forbes, has been a subject of continuing controversy for decades. The company is accused of using child slave labor in its cocoa beans’ fields, drying up surface water resources in California as it’s taking millions of gallons from the state’s creek network, and creating misleading advertisement by discouraging breastfeeding to promote its milk formula.