80% of income taxpayers set to be exempt under 2025 Finance Law

 Minister Delegate to the Minister of Economy and Finance responsible for the Budget, Faouzi Lekjaa signaled “positive” developments regarding the ongoing tax reform process under the current government.

He said that the “forthcoming income tax (IR) reform, outlined in the draft 2025 finance law, which is currently under discussion and set for a vote in the House of Councilors, will significantly broaden the exemption threshold, raising the proportion of individuals exempt from income tax to 80%.”

“Through the second reading of the draft finance law, we will endeavor to introduce a reform targeting a group of considerable importance to all of you: retirees,” he said alluding to the potential for “exempting pensions from tax deductions.”

In response to questions from five parliamentary groups on the completion of the government’s tax reform agenda, Lekjaa elaborated on Monday evening, December 2, that “the draft 2025 finance law proposes a reform of the income tax system, revising the tax brackets such that incomes below 6,000 dirhams will be exempt from taxes, thus raising the exemption rate to 80%.”

He stressed that this reform is “crucial to alleviating the tax burden on low and middle-income earners.”

The Minister further noted, “This reform is expected to cost over 5 billion and 205 million dirhams. If all goes as planned, the second reading will incorporate a reform you have specifically requested, and we will attempt to include it in this draft. It concerns a demographic that commands your attention—retirees.”

The government accepted amendments put forward by both parliamentary groups and the General Confederation of Moroccan Enterprises, which called for the full exemption of pensions and income received under the basic pension system from income tax. These amendments were passed during the vote on the 2025 finance law in the second chamber of Parliament.

Lekjaa also underscored the positive fiscal outcomes resulting from tax reforms, stating that “the reforms, guided by the framework law on tax reform—stemming from the national debates in 2019—have resulted in a remarkable increase in state tax revenues, rising from 201 billion dirhams in 2021 to more than 329 billion dirhams in 2025, representing an increase of 127 billion dirhams, or over 63%.”

He emphasized that “the key achievement lies in the fact that this surge in revenue was attained through an expanded tax base and the implementation of withholding at source, avoiding the need for additional tax burdens.” He also indicated that, if the current trend persists, the government aims to double tax revenues through the 2026 finance law.

In addition to being “fundamental, structural reforms for public finances in Morocco,” Lekjaa pointed out that these measures have been accompanied by efforts to “enhance tax transparency and accessibility,” as well as to “simplify administrative procedures.”

He also highlighted the government’s commitment to combating tax evasion by improving tax audit procedures and gradually implementing the withholding tax system. He noted, “Many harmful practices that undermined the national economy and business transparency were linked to invoicing practices, particularly regarding value-added tax.”

Several parliamentary groups, both from the majority and the opposition, praised the government’s responsiveness to tax reform proposals, particularly in terms of unifying tax systems for local tax collection in regional municipalities.

In response, Lekjaa stated, “we intend to make local taxes a tool for local development, not the reverse.” He emphasized that the Moroccan tax administration is working to “broadly incorporate information technology into its operations to improve efficiency, enhance control, and simplify procedures for taxpayers.”

He concluded by asserting that “taxes, as a mechanism for promoting social justice in line with the constitution and global standards, will enable the government to redistribute wealth to lower-income groups through direct social support and improve aid directed at marginalized populations.”

The Democratic Confederation of Labour, in its amendments to the 2025 finance law, proposed exempting retirees’ pensions from income tax.

This proposal was echoed by the National Union of Labour in Morocco, which also advocated for adding pensions to the list of tax-exempt categories to “improve the living conditions of this group,” during discussions of the finance bill in the second chamber of Parliament.