Regulation of Commercial Payment Terms and Financial Obligations in Morocco

Navigating the legal landscape of commercial transactions in Morocco requires a precise understanding of the rights and obligations governing financial agreements. While often discussed in the context of general rental and leasing arrangements, the Moroccan Commercial Code and subsequent financial laws establish a strict framework for payment terms, penalties for late performance, and the fiscal responsibilities of both individuals and corporate entities.

Recent legislative updates, particularly through Law No. 69.21, have introduced significant changes to the Commercial Code (Law No. 15.95). These changes are designed to ensure liquidity in the market and protect businesses from the cascading effects of late payments. This article explores the essential regulations governing payment deadlines, financial penalties, and relevant tax considerations in the Moroccan legal system.

Standard Payment Terms and Deadlines

One of the most critical aspects of commercial law in Morocco is the regulation of payment deadlines. According to the Commercial Code, specific timeframes are established to prevent indefinite delays in settling invoices.

Under Article 78 of the Commercial Code, as amended, the law allows for the establishment of payment deadlines through professional agreements. These agreements are often based on objective sectoral studies that analyse the specific data of each industry. However, the law provides a maximum ceiling: a decree, issued after consultation with the Competition Council, may set a deadline that cannot exceed 180 days.

The implementation of these rules follows a specific timeline based on the size of the entity:

• Large Entities: For individuals or legal entities with a turnover exceeding 50 million MAD (excluding VAT), the provisions became applicable shortly after the publication of Law 69.21 in the Official Gazette.
• Medium Entities: For those with a turnover between 10 million MAD and 50 million MAD, the provisions became effective as of 1 January 2024.

Penalties for Late Payment and Non-Compliance

To enforce these deadlines, Moroccan law imposes financial penalties for non-payment within the legal or contractual timeframes. This serves as a deterrent against "late performance," which can be compared to a breach of contract in a standard leasing or rental agreement.

According to Article 78, a financial penalty is imposed in favour of the Public Treasury for every violation. The penalty structure is as follows:

1. Initial Rate: A rate equivalent to the key policy rate (Director Rate) of Bank Al-Maghrib applied at the end of the first month of delay.
2. Additional Penalties: An additional 0.85% for each subsequent month or fraction of a month.

This penalty is calculated based on the total amount of the invoice, including all applicable taxes. This rigorous approach ensures that creditors are protected from the devaluation of their receivables over time.

Fiscal Obligations and Deductions

Beyond commercial payment terms, Moroccan law regulates how income and insurance premiums are handled for tax purposes. Law No. 17.89, which established the General Income Tax (IR), provides specific incentives and rules for deductions that affect the financial planning of individuals.

Under Article 99, taxpayers are entitled to a deduction equivalent to 10% of the premiums or contributions related to individual life insurance contracts. To qualify for this deduction:

• The contract must have a duration of at least ten years.
• The contract must be concluded with insurance companies or cooperatives established in Morocco.
• The annual deduction is capped at 3,500 MAD.

Furthermore, the law addresses international tax scenarios. If a Moroccan resident pays taxes abroad on foreign income, that amount may be deducted from their Moroccan General Income Tax, provided they produce documentation from foreign tax authorities detailing the legal basis for any exemptions or the calculation of the tax paid.

Public Procurement and Foreign Competitors

In the realm of public contracts (State-funded projects), Moroccan law (Decree No. 2.22.431) provides specific protections for local enterprises while regulating the participation of non-residents.

When a non-resident competitor submits a financial bid for a public tender, their offer is subject to adjustments to ensure fair competition with Moroccan-based companies. Specifically, a 15% increase or decrease may be applied to the non-resident's financial offer depending on its proximity to the "reference price" and the presence of competing bids from resident companies.

Additionally, for public works involving foreign labour, Article 519 of the Labour Code stipulates that contractors cannot recover their financial guarantee (security deposit) until they provide an administrative certificate from the provincial employment delegate. This certificate must prove that the contractor has covered the return travel expenses for any foreign employees brought into Morocco for the project.

Conclusion and Key Takeaways

The regulation of commercial and financial obligations in Morocco is moving toward greater transparency and stricter enforcement of deadlines. Whether you are managing a commercial lease, a supply contract, or a public tender, understanding these legal nuances is essential for risk management.

Key Takeaways:

• Payment Deadlines: Be aware of the 180-day maximum ceiling and the specific turnover thresholds (10M and 50M MAD) that trigger compliance requirements.
• Strict Penalties: Late payments result in penalties linked to the Bank Al-Maghrib policy rate plus a monthly 0.85% surcharge.
• Tax Incentives: Long-term life insurance (10+ years) offers specific tax deduction benefits under the General Income Tax code.
• Public Tenders: Non-resident companies face a 15% financial adjustment factor when bidding on Moroccan public contracts.

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