Taxation of the agricultural sector in Morocco

• What is farm income?

• What are the processing activities?

• Who is considered a farmer?

• What tax advantages for the agricultural sector?

• What are the reporting obligations?

• What are the categories of taxable income?

• What is the tax reduction rate?

We answer all these questions in this article. Everything you need to know about the taxation of agricultural activities.

What is farm income?

An agricultural income is the profits made by a farmer and / or breeder and coming from any activity inherent in the exploitation of a plant and / or animal production cycle whose products are intended for human and / or animal consumption, as well as processing activities of said products, with the exception of processing activities carried out by industrial means.

Income can only be considered agricultural when it meets the following cumulative conditions:
It must be carried out by a farmer and/or a breeder.
It comes from any activity inherent in the operation of a plant and/or animal production cycle.
Whose products are intended for human and/or animal consumption.

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What are agricultural processing activities?

Agricultural processing activities fall within the scope of farm income provided the following conditions are met:
These activities must be carried out by a farmer and/or stockbreeder and relate to the agricultural products coming from his exploitation.
However, in the case of an aggregator, these activities must relate to the agricultural products originating from its holding and/or from the holdings of the aggregated farmers.
They must, at the end of the treatment process, maintain the agricultural products in their natural state. These include, in particular, conditioning activities (cleaning, sorting, drying, etc.), packaging, storage and warehousing of agricultural products.

Who is considered a farmer?

One can be a farmer / breeder by form or by purpose:
Farmer by form: it is the legal form of “farmer” which confers the status of farmer.
Farmer by object: it is the object of the operation carried out that confers the status of farmer.
The legislator has remained silent on the definition of a plant and/or animal exploitation cycle, which leaves the field open to the different interpretations that the taxpayer could make.

What are the exemptions for the agricultural sector?

The temporary exemption for the agricultural sector expired on December 31, 2013, in accordance with the provisions introduced by the LF for the 2009 budget year.
As part of the implementation of the recommendations resulting from the national tax meeting of 2013, article 4 of the aforementioned LF n° 110-13 provided for the maintenance of the exemption for small and medium-sized farms and progressive taxation of large farms
This exemption concerns farmers operating in the form of companies or as natural persons.

With regard to agricultural companies subject to corporate tax: Total permanent exemption for farmers who achieve a turnover of less than 5.000.000 dirhams in respect of their agricultural income as defined inarticle 46 of the CGI

NB : For companies with several farms, this exemption applies to the overall turnover achieved by these companies for all of their farms.

With regard to agricultural operators who are natural persons: Total permanent exemption from income tax for the benefit of these persons who achieve a turnover of less than 5.000.000 dirhams in respect of their agricultural income as defined inarticle 46 of the CGI

NB : For persons who become taxable for a given fiscal year (Fiscal Year n), they can only benefit from the above-mentioned permanent total exemption when the turnover achieved remains less than five million (5.000.000) dirhams for three (3) consecutive exercises (exercises n+1, n+2 and n+3).

To remember: For persons who become taxable for a given financial year (Fiscal Year n), they can only benefit from the above-mentioned permanent total exemption when the turnover achieved remains below five million (5.000.000) dirhams for three (3) consecutive years (years n+1, n+2 and n+3).
Example:

• Ex n: Turnover: 5.500.000 DH → taxation.
• Ex n+1: Turnover: 4.900.000 DH → taxation.
• Ex n+2: Turnover: 4.700.000 DH → taxation.
• Ex n+3: Turnover: 4.800.000 DH → taxation.
• Ex n+4: turnover: 4.500.000 DH → exemption.
  
  

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What are the reporting obligations of farmers?

The benefit ofexemption does not exempt companies from fulfilling their reporting and accounting obligations, as provided by the CGI, namely:

the obligation to keep accounts in accordance with the legislation and regulations in force the obligation to produce all the mandatory tax declarations.

(the declaration of existence, the declaration of tax result, the declaration of termination, merger, demerger or transformation of a company, the declaration of remuneration paid to third parties, the declaration of income from shares, the declaration of income investment products and the declaration of remuneration paid to non-residents).

In terms of income tax, article 86 of the CGI by exemption from the filing of the declaration of global income, taxpayers having only permanently exempt agricultural income.

How is the other income of farmers taxed?

Agricultural companies as well as individual agricultural operators remain subject to corporate tax or income tax on other categories of income under common law conditions, in particular:

• work and services carried out on behalf of third parties.
• rentals of movable and immovable property.
• participation products.
• non-current products.

capital gains from the sale of fixed assets and securities.

What is the reduced rate applied to agricultural activities?

In terms of IS : The agricultural companies taxable with the IS, if they are taxable, benefit from a rate of IS capped at 20%.
In terms of IR : Net taxable income earned by farmers referred to in Article 47-II is taxed at a rate of 20%, when they are not exempt.

Tax control of agricultural activities

Article 210 of the CGI relating to the right of control, applies in terms of control rules and right of observation available to the tax administration to agricultural holdings.