Tax audit in Morocco: what you need to know

As part of their prerogatives, tax authorities routinely carry out control operations to check the accuracy of companies' tax returns. These operations are carried out either on-site or based on documents provided by the taxpayers.

What are the different kinds of tax audits in Morocco?    

Tax audit, as its name suggests, manifests itself in the right of the tax authorities to monitor the tax obligations of companies. It allows the tax authorities to ensure the accuracy of the tax bases declared above, based on the accounting of companies or accounting documents. As a corollary of the declaratory system, control is not, however, an absolute right. Yet, the public authority responsible for the administration and control of the company and individual taxation has the broadest possible power to require the taxpayer to provide all the information necessary for its audits and investigations. In practice, tax inspectors carry out their audit in two ways. 

The remote tax audit and its characteristics  

The tax administration, which includes the General Department of Taxation, which is part of the Ministry of Economy and Finance, as well as the local tax authorities, can carry out its control remotely. It is called a remote tax investigation and is not to be confused with the on-site tax inspection itself, which involves a critical examination of the taxpayer's returns.  

In practice, this is a series of operations carried out by the tax inspectors responsible for monitoring the taxpayer's file. This kind of tax audit aims to ensure that the returns submitted do not contain any errors or omissions and that taxpayers have complied with their reporting obligations per the guidelines provided for by law.  

Unlike the on-site tax inspection, this procedure consists of correcting material errors in the returns submitted by taxpayers, most often of which are exclusively formal in nature. However, the real challenge of this kind of tax audit is to assess the level of tax risk of taxpayers.  

The purpose and procedures of the on-site tax audit  

Unlike a remote investigation, on-site tax inspection takes place at the premises of the company. In principle, it is characterized by a review of the company books and by the search for external elements.

In this particular case, the tax auditor does not only examine the information made available to him by the company. He goes in search of them in the logic of a more in-depth investigation. The purpose of the on-the-spot audit, carried out by specialized audit teams, is to examine the company's accounts to compare them with material elements provided or not by the taxpayer concerned, to ensure in particular that assets and stocks exist. In short, it claims to be somewhat useful insofar as the chances of inspectors going on the wrong track are slim since they go beyond the elements made available to them by the taxpayer. Besides, by being on-site, tax inpectors can conduct a thorough investigation of the company's business and its potential impact in terms of tax liabilities.

But this process is often criticized. The presence of a tax inspector on a company's premises can be an additional stress factor for managers and employees and can potentially disrupt the smooth running of the company. 

What is certain, however, is that the tax authorities cannot arrive at your company at any time without notice. Indeed, the on-site tax investigation itself must abide by the law and the General Tax Code.  

How is an on-site tax audit carried out?  

At first, the taxpayer receives a tax notice, by registered mail or by hand. Before the inspection starts, a first meeting is held to discuss some general points, such as the company legal framework, its shareholders and its financial situation.

Further to this first contact, the tax investigation schedule is set. The tax investigation lasts between 3 and 6 months, depending on the size of the company. For companies whose declared revenue is less than 50 million DH, the duration is three months. Beyond this amount, the period is six months.  

What happens after an on-site tax audit?  

Expensive and not easy to carry out, an on-the-spot inspection is not without consequences. Two scenarios may arise before the end of the audit engagement.

Either the tax inspector sends a notice of non-adjustment if he has no reproach to make to the taxpayer even if, in practice, this alternative is very theoretical, or he proceeds to notification of adjustment to rectify the tax bases declared by the taxpayer.  

How to react to a notification of tax audit?  

First of all, it is essential to know that a company is not required to give an immediate response after receiving the notification letter. Indeed, the taxpayer has a period of 30 days to reply. He can either accept the notified adjustments, and in this case, the procedure is closed, or he can contest the proposed corrections in whole or in part. In this case, the tax authorities may either take into account the taxpayer's objections if they are deemed justified and abandon the notified bases or maintain its initial position. In all cases, it must notify its opinion to the company concerned.  

If no reply is provided to the tax authorities or if the company delays in responding by exceeding the legal deadline, taxation will be established based on the notified elements. Consequently, the taxpayer who feels aggrieved by the tax authorities' decision must respect the statutory periods to preserve his right to contest the tax authorities' position through administrative or even judicial litigation.  

Tax administration's prerogatives 

If the taxpayer has his rights and obligations, the same applies to the tax authorities. Tax inspectors may enquire to identify possible breaches of the company's accounting and tax rules and requirements. 

After receipt of the notification of finding, delivered against receipt, the company must immediately comply. In case of refusal to access the premises or to present the requested documents, a tax penalty applies for by the law against the taxpayer who must then pay a fine of 2.000 DH and a penalty payment of 100 DH per day of delay within the limit of 1.000 DH.

At this level, the notification requirements no longer apply. The tax inspector can arrive at your company's premises at any time and may allow himself to get his hands on some of your most sensitive documents. This operation can take up to eight business days, and in the end, a notice of closure signed by a representative of the company who keeps a copy must be given to you by the tax agent.  

Some practical advice to close a tax audit under the best conditions 

Regardless of the powers available to the tax authorities, taxpayers can assert several rights by being assisted, for example, by counsel of their choice. It is therefore recommended to be supported by a chartered accountant as soon as a tax inspection starts. Having expert advice is an undeniable asset because its expertise allows you to avoid certain pitfalls, facilitate communication with the tax inspector, and prepare the ground for the negotiation of an amicable agreement.  

Do not hesitate to contact us if you wish to be assisted in a tax audit procedure, as our accounting firm has acquired extensive experience in supporting companies with their tax audits in Morocco. 

Karim Hemras

is a CPA and tax advisor. He is the founder of WeCount.ma, the accountig firm that helps foreign companies with their accounting, payroll and tax compliance, so that they can grow confidently in Morocco and Africa.