VAT is the tax businesses handle most often: on every invoice issued, every purchase and every return. It is also the one where a wrong rate or a non-compliant invoice becomes costly fastest.
In 2026, two developments deserve business leaders’ attention: the completion of the rate reform introduced by the 2024 Finance Act, and the extension of VAT withholding under the 2026 Finance Act (Law No. 50-25).
Two rates, plus exemptions
The 2024 Finance Act set out a three-year plan to simplify VAT rates. At the end of this transition, in 2026, VAT is organised as follows:
| Rate | Examples |
|---|---|
| 20% (standard rate) | Most goods and services, now including conventional electricity and intercity transport |
| 10% (reduced rate) | In particular catering and accommodation, certain banking transactions, urban and road transport, renewable electricity, refined sugar |
| Exempt with right to deduct | Exports and similar transactions, medicines, certain agricultural inputs |
| Exempt without right to deduct | Basic necessities such as bread, milk and school supplies |
The former intermediate rates have been phased out: the products concerned have been reclassified at 10%, 20% or as exempt.
Good practice: check the rate for each of your product or service lines, especially if your business used to fall under a rate that no longer exists. An invoice at the wrong rate exposes you to a tax reassessment, and your client may be denied the deduction.
Collecting and deducting: how it works
The principle is unchanged. A business collects VAT on its sales, deducts the VAT paid on its purchases, and pays over the difference.
For VAT on a purchase to be deductible, several conditions must be met:
- the expense must relate to a VAT-able activity;
- the invoice must be compliant, showing in particular the supplier’s tax identification number and common company identifier (ICE);
- payment must follow the methods required by the General Tax Code, particularly for larger amounts paid in cash;
- the expense must not be among the exclusions from the right to deduct, such as passenger cars or entertainment costs.
When deductible VAT exceeds collected VAT, the business holds a VAT credit, carried forward to later returns. Refunds are only available in limited cases, notably for exporters and businesses in an investment phase.
Filing: monthly or quarterly
Returns are filed online on the Tax Administration (DGI) portal. The frequency depends on the previous year’s turnover:
- monthly for businesses with turnover of at least MAD 1 million;
- quarterly for others, and for new businesses in their first year.
The return and payment are due in the month following the period concerned. Late filing triggers penalties, even when the return shows a credit.
VAT withholding: what the 2026 Finance Act changes
Since 2024, certain clients must withhold part of the VAT invoiced by their service providers and pay it directly to the Treasury. The provider only receives the portion not withheld.
The 2026 Finance Act extends this mechanism to services between businesses, phased in according to the client’s size:
| Clients concerned | Effective date |
|---|---|
| Credit institutions, insurance companies and businesses with turnover of at least MAD 500 million | 1 July 2026 |
| Businesses with turnover of at least MAD 350 million | 1 January 2027 |
| Businesses with turnover of at least MAD 200 million | 1 January 2028 |
The withholding covers 75% of the VAT invoiced when the provider presents a tax compliance certificate, and 100% otherwise.
What this means:
- If you invoice large clients, part of the VAT will no longer be paid to you by your client: plan for the effect on your cash flow and VAT credit position.
- Keep your tax compliance certificate up to date: without it, the full VAT is withheld.
- If your business reaches the thresholds, you become a collector: supplier payment processes and returns must be adapted.
In short
- Two rates in 2026: 20% and 10%, plus exemptions with or without the right to deduct.
- Deduction requires a compliant invoice and traceable payment.
- Monthly filing from MAD 1 million of turnover, quarterly below.
- VAT withholding gradually extends to large companies from 1 July 2026.
Ascensu handles your tax returns, including VAT, and helps you check your rates, your invoices and the impact of withholding on your cash flow.
Official sources
This article is provided for general information, as at its publication date. It is not personalised advice: the rules change and every situation must be reviewed on its own facts.