Withholding tax on salary : recovering the excess

Definition

What this covers

Withholding at source on salary income is operated by the employer or annuity payer domiciled or established in Morocco, on behalf of the Treasury, on each payment made art. 156-I GTC. It is calculated as the year goes along, on the basis only of the situation known to the payer.

That mechanism is, by construction, approximate : it disregards income received elsewhere, charges deductible from global income, changes in family circumstances and periods not worked. Where the amount withheld at source and paid over to the Treasury exceeds the tax corresponding to the taxpayer's annual global income, the taxpayer automatically receives a tax refund art. 241 bis-I GTC.

The text is precise on two points : the refund is calculated on the basis of the global income return referred to in article 82, and must be made before the end of the year of the return. Without a return, there is no basis for the calculation, and therefore no refund.

Scope

Who is concerned

• An employee whose employer operated the withholding without taking account of a family allowance or a deduction to which they were entitled.
• An employee who worked for only part of the year, the withholding having been calculated as though the remuneration had run over twelve months.
• An employee who changed employer, or received salaries from several employers, none of whom knew the global income.
• A recipient of salary income who bears interest on a home loan or pays retirement insurance premiums.
• An employee whose family circumstances changed during the year, the change being taken into account only from the first month following the one in which it occurred art. 74-II GTC.

The automatic refund is not specific to salary : it covers the total withholdings made by the persons referred to in articles 156, 157-I, 159-II and 160 bis, compared with the tax due on global income. An employee who also receives rental income subject to withholding must consider the whole.

Applicable rules

The filing exemption and how it is lifted

Article 86 exempts from filing the annual global income return those taxpayers having only salary income paid by a single employer domiciled or established in Morocco and required to operate the withholding at source art. 86-2° GTC. That exemption is the pivot of the subject, because it is conditional : it applies only "unless they consider themselves overtaxed or claim the deductions provided for in articles 28 and 74".

Anyone who considers themselves overtaxed, or who intends to claim one of those deductions, falls outside the exemption and becomes required to file again.

The deductions whose invocation lifts the exemption are of four kinds :

• Donations : the amount of donations in cash or in kind made to the bodies referred to in article 10-I-B-2° art. 28-I GTC.
• Housing used as a main residence : up to 10% of taxable global income, interest on acquisition or construction loans, the remuneration agreed in advance under a "Mourabaha" contract or the rental margin under an "Ijara Mountahia Bitamlik" contract art. 28-II GTC.
• Retirement insurance : up to 10% of taxable global income, the premiums relating to contracts of at least eight years taken out with insurance companies established in Morocco, whose benefits are paid from the age of forty-five completed years. A taxpayer having only salary income may deduct them only up to 50% of their net taxable salary received regularly in the course of their activity art. 28-III-A GTC.
• Family allowance : a sum of MAD 600 per dependant is deducted from the annual amount of the tax, without the total reductions exceeding MAD 3,600 art. 74-I GTC.

A specific safeguard also protects employees : errors, omissions and shortfalls relating to tax withheld by the employer are not adjusted in the name of the recipient of salary and assimilated income where the return filed matches the particulars on the payslip art. 223 GTC. It leaves the burden of the error with the party who made it and covers only salary and assimilated income.

Deadlines and limitation

The timetable

1. During the year

   The employer operates the withholding on each payment and pays it over to the Treasury. The amounts withheld appear on the payslip.

2. Before 1 March

   Filing of the global income return for the previous year, for recipients of income other than professional income art. 82-I GTC. It serves as the basis for calculating the refund.

3. Before the end of the year of the return

   The deadline the code assigns to the refund : article 241 bis-I provides that it "must be made before the end of the year of the return".

4. Until 31 December of the 4^th year

   The period during which the administration retains its power to make good shortfalls, errors and omissions identified art. 232-I GTC.

The code sets no deadline specific to a refund application under article 241 bis-I : since the refund is automatic and calculated on the basis of the return, it is the filing deadline that governs. The deadline imposed on the administration carries no penalty and no late-payment interest.

Documents and supporting evidence

What the file contains

The file rests on the following items :

• Remuneration and withholding details : payslips for the year. The code requires no employer's certificate here : it requires the return itself to state the amount taxed by way of withholding, the amount of the levy and its period, together with the identity of the employer art. 82-I GTC.
• Evidence of the deductions claimed : documents relating to the loan or financing contract, to the use of the property as a main residence, or to the retirement insurance contract. The code itself names those documents for taxpayers other than employees taxed by withholding : a certified copy of the loan, "Mourabaha" or "Ijara Mountahia Bitamlik" contract and the payment receipts or debit advices, attached to the annual return art. 28-II GTC.
• Family circumstances : documents establishing the dependants within the meaning of article 74-II and the date of any changes that occurred.
• The taxpayer's tax details : tax identification number, identity documents and standing in respect of other categories of income.

This list is indicative ; the exact composition of the file depends on the situation.

Points to watch

What can cause a file to fail