Morocco: Proposed cuts in VAT on commissions fail to appease insurance brokers and agents
Source: Middle East Insurance Review | Dec 2023
The government has proposed in the 2024 Finance Bill (PLF) a gradual reduction in the value added tax (VAT) on the commission income of insurance intermediaries.
The VAT rate will be reduced from 14% to 12% on 1 January 2024, cut to 10% from 1 January 2025, under the proposed reforms.
However, the National Federation of Insurance Agents and Brokers in Morocco (FNACAM) said in a media release, “This reduction in the VAT rate of 4ppt (from 14%to 10%) is a positive step forward for agents and brokers, but not sufficient, because FNACAM is calling for the total elimination of this tax. The fight is therefore not over.”
FNACAM has tried for several years to express its grievance to the Ministry of Finance and the Directorate General of Taxes that the VAT on commissions earned by intermediaries is not justified.
The federation, commenting on the commissions, said, “They do not in any way constitute a distinct or dissociable operation from the issuance of the insurance contract by the insurance company; they cannot therefore be subject to a second taxation, because insurance products are already subject to an insurance tax of 14%. A tax within a tax is an exception in Morocco. It is in contradiction of the principle of VAT, which is supposed to be applied to the final consumer, since the insurance intermediary does not receive any direct remuneration from the insured.”
The VAT on commissions is also unfair because other distribution channels, namely direct sales and bancassurance, are not subject to it said FNACAM. M