VAT in Morocco: cash basis (encaissement) or accrual basis (débits)? When VAT falls due, with a worked example

Cash or accrual basis: when does VAT become payable?

The taxable event (fait générateur) is what creates the VAT debt; chargeability (exigibilité) is the period for which you must declare it. In Morocco the default regime is the cash basis (encaissement): VAT arises from the full or partial collection of the price of goods, works or services. An invoice issued but not yet paid therefore creates no VAT to pay over yet.

The accrual basis (débits) is an option: VAT is then paid according to the debit, which coincides with invoicing or with recording the receivable in the accounts, whether or not the customer has paid. These rules are set by the General Tax Code and change with the finance laws, so have your situation confirmed by your expert-comptable (chartered accountant).

Advances, part payments, unpaid invoices: what happens under each regime?

On the cash basis, every amount received makes the VAT it contains payable. An advance paid with the order, before the invoice, is a partial collection: its VAT is due for the period in which it is received. A payment of half the gross amount makes half of the VAT payable, split in proportion to each rate if the invoice has several.

On the accrual basis, all of the invoice's VAT is due for the invoicing period. Advances received before the invoice nevertheless remain taxable when received, and the invoice then makes only the remaining VAT payable.

Unpaid invoices are where the real difference lies. On the cash basis, an invoice that is never paid costs no VAT. On the accrual basis, the VAT has already been paid over: a credit note adjusts it if the sale is cancelled or reduced, but for a receivable that has simply gone unpaid, whether and how the VAT can be recovered must be reviewed with your accountant.

Worked example: a 12,000.00 DH invoice collected in two instalments

A business that files monthly issues an invoice in March for 10,000.00 DH excluding VAT, plus 2,000.00 DH of VAT at the standard 20 % rate, i.e. 12,000.00 DH including VAT. The customer pays 6,000.00 DH in April, then 6,000.00 DH in May. The table below shows the VAT payable each month under each regime.

On the accrual basis, the 2,000.00 DH is declared for March and paid before the end of April, although only half the price has been collected. On the cash basis, VAT follows the money received: 1,000.00 DH for April, then 1,000.00 DH for May. For a quarterly filer the gap reaches about three months: first quarter on the accrual basis, second quarter on the cash basis.

• VAT contained in each 6,000.00 DH payment including VAT: 6,000.00 × 20 / 120 = 1,000.00 DH, not 6,000.00 × 20 % = 1,200.00 DH.
• With an advance: if the customer paid an advance of 3,600.00 DH including VAT in February, its 600.00 DH of VAT is due for February under both regimes; on the accrual basis, the March invoice then makes only 1,400.00 DH payable.
• Related purchase: a supplier invoice of 4,000.00 DH plus 800.00 DH of VAT, received in March and paid in May, gives 800.00 DH of deductible VAT in May under both regimes.
• Over the three months the total is the same: 2,000.00 − 800.00 = 1,200.00 DH. Only the timing changes.

When does the VAT on your purchases become deductible?

The regime you choose only governs your sales. On purchases the rule is the same for everyone: the right to deduct arises with the full or partial payment of the supplier invoice made out to the business. Under the General Tax Code, it arises at the end of the month of payment: an invoice from March paid in May is in practice deducted in the May return, and an invoice paid by half gives the right to deduct only half of its VAT.

This right must be exercised within a limited time, which at the time of writing is one year from the month or quarter in which it arose. Your business customer, too, deducts the VAT on your invoices as it pays them, even if you are on the accrual basis.

• Record the date and method of every supplier payment: both appear in the statement of deductions.
• Check on every invoice the supplier's ICE and IF numbers, as well as your own ICE number.
• Deduction of VAT paid in cash is capped: prefer bank transfer, cheque or bill of exchange.

How does the option for the accrual basis work?

The option is exercised by a declaration to the local tax office. At the time of writing, the General Tax Code requires it to be made before 1 January, or within thirty days of starting business. A business leaving the cash basis attaches the list of its customers with outstanding balances and pays, within the set deadline, the VAT on those receivables, so that unpaid invoices from the old regime do not escape tax.

The switch therefore has an immediate cash cost: have it quantified by your accountant, together with the conditions and duration of the option, before deciding.

Which regime suits your business, and which mistakes should you avoid?

The choice depends on how fast your customers pay and how much time you spend on follow-up. The cash basis protects cash flow but requires matching every payment to its invoices and splitting VAT by rate; the accrual basis makes the calculation simpler, since you only total invoices, credit notes and advances, but makes you advance VAT to the State.

Common mistakes: filing on the accrual basis without having opted; forgetting the VAT on advances; applying 20 % to a gross payment; forgetting credit notes; deducting VAT on purchases not yet paid.

• Customers paying at 60, 90 or 120 days, public contracts, construction billed by progress statements: the cash basis avoids advancing VAT on money not yet received.
• Retail paid mostly on the spot: both regimes give almost the same result.
• Many small invoices paid quickly by reliable customers: the accrual basis lightens follow-up.
• High outstanding receivables or frequent late payers: the accrual basis is risky.

How does SOGESTIO calculate VAT under your regime?

SOGESTIO prepares the VAT return on the cash or the accrual basis, according to your company settings. VAT is calculated line by line and totalled by rate, and customer receipts and supplier payments are recorded with their dates, which assigns each amount to the right period.

The return shows output VAT, input VAT and the credit carried forward; the statement of deductions is exported in EDI XML format for SIMPL-TVA. SOGESTIO prepares; the business or its accountant validates and files. Test it on your own invoices with the 14-day free trial, no card required.