Definition of temporary cessation of activity.
Legal framework for the temporary transfer of activity
Social impact in the event of temporary cessation
Which entities are eligible for the temporary cessation of activity?
What is the procedure in the event of a resumption of activity?
What are the consequences in the event of non-compliance with the conditions of this tax framework?
Definition of temporary cessation of activity
Partners can decide to temporarily suspend the activity of their company when it encounters difficulties:
- Activity is at a standstill
- Production does not allow the activity to continue
- Temporary difficulties that prevent them from continuing their activity
The partners can also decide to terminate to change the activity of the company or to mark a period of stoppage in order to better prepare for a later development phase.
The temporary cessation of the company's activity makes it possible to reduce the charges and reorganize the company to make it more competitive and more profitable.
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Legal framework for the temporary transfer of activity
The temporary cessation of activity was introduced in Morocco as part of the 2018 finance law.
This measure allows companies to have a simplified tax framework for the temporary cessation of activities. Eligible companies are:
- Legal persons or natural persons, subject to corporation tax;
- Persons or companies subject to income tax on professional income. This measure concerns taxpayers subject to the RNR (actual net result) and RNS (simplified net result) regime.
The objective of the measures introduced by the 2018 finance law is to:
- Make it possible to lighten the tax calendar by reducing the number of declarations required, particularly in terms of VAT.
- Exempt beneficiary companies from paying the minimum contribution
In terms of VAT, only one annual VAT declaration is due at the end of January of each year.
Article 150a 2nd paragraph of the General Tax Code (CGI), stipulates that the companies concerned must continue to file their tax declarations provided for in terms of corporation tax and income tax in respect of professional income.
A company that declares a cessation of activity keeps its registration in the Trade Register. There is continuity of the legal existence of the company. Thus, a resumption of activity will not require new registrations.
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Social impact in the event of temporary cessation
The decision to temporarily cease activity gives the company the possibility of suspending employment contracts. Thus, the company's cash flow is reduced in relation to wage exchanges throughout the period of temporary cessation.
This suspension of employment contracts responds to a prior formalism, in particular notification to employees and to the labor inspectorate.
Which entities are eligible for the temporary cessation of activity?
In terms of the tax system, the following are eligible for this system:
- Companies subject to corporation tax;
- Companies subject to income tax on professional income;
The declaration of cessation of activity to be filed must indicate the reasons which prove and explain the temporary cessation of activity. This declaration must be filed within the month following the closing date of the last exercise of the activity.
This temporary termination option has a validity period of two financial years which is renewable for one year.
What is the procedure in the event of a resumption of activity?
If the company decides to resume its activity during its period of cessation of activity, it is obliged to notify the administration. The company must send the administration an information letter, according to a model established by the administration, within a period which must not exceed one year from the date of recovery.
The company must also regularize its tax situation for the financial year concerned under the conditions of common law.
What are the consequences in the event of non-compliance with the conditions of this tax framework?
By way of derogation from the provisions relating to ordinary law limitation periods, the duties due as well as the penalty and the related increases, for which the taxpayers in breach are liable, are immediately established and payable in full, even if the limitation period has expired. .
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