A unique professional contribution: 4 questions for chartered accountant Issam El Maguiri
Chartered accountant Issam El Maguiri, PhD in Management Sciences and former president of the Order of Chartered Accountants (OEC), analyzes, in an interview with MAP, the specifics of the Single Professional Contribution (CPU) system, as well as its advantages and benefits for business owners.
1. What is the CPU? And what is the difference between this system and the flat-rate profit system?
The introduction of the CPU system is a key tax measure of the 2021 Finance Law. This new system repeals and replaces the flat-rate profit system for income tax (IR), which was applicable, by option, to professional income earned by individuals (business owners and service providers) engaged in eligible activities.
This contribution encompasses the income tax on professional income, the Business Tax, and the Municipal Services Tax owed by individuals subject to income tax, based on their professional activity. Furthermore, Law No. 7-20, amending and supplementing Law No. 47-06 concerning local government taxation, provides for a permanent exemption from the business tax and the municipal services tax for individuals subject to the Single Professional Contribution (CPU) regime.
The professional income tax rate for taxpayers subject to the CPU is 10% of the taxable base, determined by applying a legal coefficient to turnover, instead of the income tax rates stipulated in Article 73 of the General Tax Code (CGI) prior to the 2021 Finance Law. However, the tax rate on capital gains and compensation (in the event of the sale of fixed assets excluding land and buildings) is reduced to 20%.
As part of the gradual rollout of universal social security coverage, the income tax (IR), calculated at the specific rate of 10%, is increased by a supplementary levy, the proceeds of which are allocated to the Social Protection and Social Cohesion Support Fund. Taxpayers under the Single Contribution Scheme (CPU) would thus progressively benefit from mandatory health insurance (AMO), family allowances, retirement benefits, and unemployment benefits.
The contribution payment could be made quarterly or annually, unlike the previous system where payment was annual.
In summary, the CPU scheme implements a tax and social security system tailored to eligible individuals based on their professional activity, allowing them to pay a single, consolidated tax, resulting in a simple, fair, and equitable system for this group of taxpayers.
2. Who will be subject to this regime? And under what conditions?
The Single Professional Income Tax (CPU) regime applies to professional income earned by individuals engaged in activities subject to personal income tax (IR), excluding professions, activities, or services defined by regulation (Decree No. 2-08-124 of May 28, 2009), pursuant to the provisions of Article 41 of the General Tax Code.
Opting for the CPU regime is subject to the following conditions:
– Annual turnover (including VAT) must not exceed 2,000,000 dirhams for commercial, industrial, and artisanal activities, and 500,000 dirhams for service providers.
– Membership in the basic Mandatory Health Insurance (AMO) scheme in accordance with applicable laws and regulations.
As long as the annual turnover has not exceeded the aforementioned limits for two consecutive years, the option remains valid. Otherwise, the standard tax regime (actual net profit regime) applies from January 1st of the year following the two years in which the aforementioned limits were exceeded.
The application to opt for the simplified tax regime must be submitted in writing, by registered letter with acknowledgment of receipt, or delivered in person against a receipt to the tax inspector of the taxpayer's tax domicile or principal place of business.
If exercising the option at the start of business activity: before April 1st of the year following the start of business activity;
If exercising the option during business activity: within the deadline for filing the overall income tax return for the previous year, i.e., no later than May 1st of the current year. This option only takes effect from the following year.
3. According to 2019 figures, of the self-employed, merchants, and very small businesses (VSBs), 720,000 opted for the flat-rate tax system, primarily the minimum contribution, with only 20% actually paying taxes. Do you think this new system can encourage tax compliance?
Within the framework of the planned tax reform and the implementation of the recommendations from the last national tax conference held in Skhirate in May 2019, the aim is to find a better system to encourage small and medium-sized enterprises (SMEs), merchants, and VSBs to comply with tax regulations. This will be achieved through the establishment of a simple, fair, inclusive, and transparent tax system for this category of taxpayers.
According to the latest tax authority (DGI) statistics from 2019, less than 20% of the population you mentioned, or 131,000, actually pay income tax, and approximately 99% of them opt for the minimum tax rate, compared to only 1% who pay a flat rate based on turnover. These statistics therefore justify a necessary review of the tax regime for this category of taxpayers, aiming for greater transparency, effectiveness, and efficiency through a realistic assessment of the tax base (instead of the previous estimated base).
This new system, which is found internationally, along with the existing system for self-employed individuals and automatic access to social security, will contribute to building a climate of trust. They will also encourage voluntary tax compliance among the target population.
Similarly, the 2021 Finance Law extended the measure encouraging the spontaneous identification of taxpayers operating in the informal sector until December 31, 2021, who will be granted amnesty for past tax liabilities.
4. What are the concrete advantages of the Single Business Tax (CPU) for businesses?
The benefits for businesses are twofold:
– The advantage of a simple and tailored tax system, in addition to social security and health insurance coverage.
– The benefit of government support programs and incentives for structured businesses, such as participation in public tenders.
With this new system, the taxable base for businesses is determined based on their actual business activity, rather than on the rental value multiplied by a coefficient determined by the tax authorities. Similarly, the provisions of Article 145 of the General Tax Code (CGI) concerning accounting obligations do not apply to businesses taxed under the CPU system.
Furthermore, businesses whose professional income is determined under the CPU system are subject to the obligation to account for and justify their purchases.
On the social front, traders registered with the CPU (Confederation of Trade Unions) will gradually gain access to mandatory health insurance (AMO), social benefits, retirement, and unemployment benefits after joining the social security system in accordance with current legislation and paying the aforementioned supplementary contributions.
Traders registered with the CPU who meet the required criteria, like other structured businesses operating in the formal sector, are also eligible for financing support programs.