Draft Law on the 2026 Finance Bill: Strict Measures to Combat Tax Evasion and Enhance Revenue
Follow-up
The memorandum presenting the draft Finance Law for 2026 reveals a decisive government drive towards enhancing transparency and combating tax evasion through fundamental modifications to collection mechanisms. Among the most notable changes is the expansion of withholding at source and a comprehensive review of the deadlines for capital gains tax payments.
The government proposal aims to broaden the application of withholding at source on corporate tax and value-added tax. This initiative is seen as a proactive step to bolster transparency and tighten the noose on tax fraud and false invoicing, which have resulted in significant losses for the treasury.
Historically, withholding at source was limited to bonuses granted to third parties and certain specified services. The new proposal seeks to extend this procedure to include:
- Service bonuses provided to legal entities for credit institutions and similar bodies.
- Insurance and reinsurance companies.
- All companies that achieve a turnover equal to or exceeding 50 million dirhams.
This expansion is expected to ensure more effective tax collection and enhance financial discipline among major corporations and vital economic entities in the Kingdom, as this mechanism serves as a strong barrier against tax evasion linked to fictitious invoices.
As part of the preventive and deterrent measures, the draft law proposes a review of how income tax, related to profits from movable capital, is paid. Instead of the current system that mandates full payment of tax due before April 1 of the year following the year of the transfer, the new proposal mandates individual payments of taxes due for each transfer within 30 days from the date of completion.
This means a shift towards an almost immediate payment system, requiring taxpayers to pay the due tax promptly with an information notice, while still being obligated to submit an annual declaration that aggregates data on all completed transfers, which will be used to apply for any potential tax refunds.
The proposal also includes a provision emphasizing obligations related to the declaration of income and profits from foreign sources derived from movable capital. It stipulates the mandatory submission of an annual declaration for these incomes and profits before April 1 of the year following their acquisition, in an effort to strengthen oversight on external financial flows and ensure international tax compliance.
