Casablanca-Economy cars in Morocco are facing a new set of challenges as the value-added tax (VAT) is set to increase. Under the 2024 Finance Law, the VAT rate for economy cars is expected to rise from 7% to 10%. This anticipated increase raises concerns about car prices and presents new challenges in the country’s automotive market.

This move is part of the Moroccan government’s efforts to restructure and update tax policies, with a focus on boosting government revenues. The expected increase in VAT is predicted to affect demand for economy cars, potentially leading to higher final prices for this car category.

The adjustment forms part of a broader fiscal overhaul encompassing import taxes, internal consumption tax (TIC), and a comprehensive three-year VAT reform initiative (2024-2026). Article 99 of the Finance Law mandates a unified 10% VAT rate for “economy cars” and associated products and assembly services, contingent upon compliance with specific regulatory procedures.

Anticipated to impact sales volumes, particularly for popular models like “Dacia,” this VAT hike has raised concerns within the automotive sector. Adel Bennani, President of the Association of Car Importers in Morocco (AIVAM), contextualizes the increase within broader tax reform initiatives initiated since 2019. He emphasizes ongoing discussions among financial and budgetary sectors and stakeholders, underscoring the measure’s commercial implications and its alignment with Morocco’s investment climate.

Bennani reflects on the history of VAT application in Morocco’s automotive landscape, tracing back to the mid-1990s when tax incentives were introduced to stimulate industry growth. He highlights the delicate balance between fiscal policy and market dynamics, affirming the need for consensus-driven solutions amidst evolving regulatory frameworks.

As the automotive sector navigates this period of transition, stakeholders are poised to engage in constructive dialogue to chart a path forward that balances fiscal imperatives with industry sustainability. With VAT reform at the forefront, Morocco’s automotive industry stands at a critical juncture, poised to adapt and thrive in an evolving economic landscape.