Exemption from VAT without right of deduction (article 91 of the CGI)

• Why does the State grant exemptions from VAT?

• Which products are exempt from VAT without the right to deduct?

• Which transactions exempt from VAT are entitled to deduction?

The term "exemption" in taxation means to exempt a natural or legal person from paying a tax or a tax, in order to benefit from this exemption the natural or legal person must meet certain criteria, which gives him the right not to be subject to taxation in relation to other taxpayers.

In terms of value added tax (VAT), an exemption allows the company to be exempted from paying this tax. This VAT exemption may concern all of the VAT or be limited to part of the amount of the tax.

Why does the State grant exemptions from VAT?

The state decides whether to exempt from VAT depending on various factors:

Economic: In order to encourage the economic development of certain sectors, the State allows companies not to pay VAT on operations relating to the sectors.
Cultural: Cultural activities often require a tax incentive to encourage their dissemination (books, music, etc.)
Social: In order to reduce the final price of certain products necessary for citizens who have low purchasing power (bread, flour, sugar, etc.)

In Moroccan taxation, the exemption from VAT can be part of three different regimes:

Exemption with right of deduction
Exemption without deduction
Exemption under the suspensive regime
In this article, we will deepen the exemption scheme without the right to deduct.

A VAT exemption without the right to deduct means that the taxpayer is exempt from VAT on the sale price (of the product or activity). The VAT he pays on the purchase price of the product or its inputs is not recoverable. Thus, the VAT on its purchases becomes an additional cost.

In Morocco, the majority of basic necessities are exempt from tax without the right of deduction, article 91 of the general tax code (CGI) determines all the products concerned by this exemption.

Which products are exempt from VAT without the right to deduct?

Article 91 of the General Tax Code specifies the products exempt from VAT without the right to deduct:

A-1) consumer products: bread, milk, raw sugar, dates produced in Morocco, all fish products, fresh or frozen meat, olive oil.

A-2) Non-consumable products:

Candles excluding those intended for decorative use
Vegetable horsehair
Locally produced rugs of artisanal origin
Scrap Metals
Water pumps that run on renewable energy intended for the agricultural sector.
A-3) Sales transactions relating to:

Articles of precious metals made in Morocco
Revenue stamps, stamped papers and prints issued by the State
Services provided by insurance and reinsurance companies
Newspapers, books, music
Papers intended for newspaper printing
Documentary films for educational

Which transactions exempt from VAT are entitled to deduction?

Article 91 of the General Tax Code also specifies the activities exempt from VAT without the right to deduct:

A-4) Any operating operation of public showers, “Hammams”, and traditional ovens.

A-5) Any operation carried out by cooperatives and their legally constituted unions whose statutes, operation and operations are recognized as compliant with the legislation and regulations in force governing the category to which they belong. This exemption is granted under the conditions provided for in article 93-II of the general tax code.

A-6) Services provided by non-profit associations recognized as being of public utility, mutual companies as well as employee social institutions constituted and operating in accordance with the provisions of Dahir No. 1-57-187 of 24 Joumada II 1383 (November 12, 1963) on the statute of the mutuality, as amended or supplemented, except that this exemption does not concern operations of a commercial or industrial nature.

A-7) All activities and operations carried out by federations recognized as being of public utility (provided for in article 8 of finance law n°68-17 for the 2018 budget year), and for sports companies constituted in accordance with the provisions of Law No. 30-09 intended for physical education and sports mentioned above.

A-8) Financial transactions:

Discounting, rediscounting and interest on government securities and loan securities guaranteed by it, as well as the various commissions allocated for the placement of the same securities;
Operations and interest relating to advances and loans granted to the State by bodies authorized for this purpose. The exemption applies to all stages of the operations resulting in the realization of advances and loans and the mobilization of the bills created in representation of these loans (provided for by article 7 of the finance law n ° 48-09 for fiscal year 2010);
Interest on loans granted by credit institutions and similar organizations to students in private or public education or vocational training to finance their studies in Morocco or abroad;
The provision of services for catering, transport and school leisure provided by private education establishments for pupils and students who are enrolled in the said establishments and continue their studies there;
Proceeds from securitization transactions for the issue of sukuk certificates by Collective Investment Funds for Securitization, in accordance with the provisions of Law No. 33-06 relating to the securitization of assets, when the State is the initiator, as well as that the various commissions which are linked to the aforementioned issue, by virtue of the provisions of the aforementioned law;
A-9) Products and medical services:

Services provided by doctors, dentists, physiotherapists, orthoptists, speech therapists, nurses, herbalists, midwives, operators of clinics, nursing homes or treatment centers and operators of medical analysis laboratories;
Sales of specialized devices intended exclusively for the disabled and on cochlear implants (provided for by article 6 of finance law n°70-19 for the 2020 budget year). The same applies to vision control operations carried out for the benefit of the visually impaired by associations recognized as being of public utility;