The subject is the subject of a lot of confusion and creates a big panic among MREs. Some media have announced that Morocco will begin to automatically communicate the banking and financial data of its diaspora to the tax authorities of their countries of residence from 2021, in accordance with the BEPS conventions signed by Morocco in 2019.
Information was followed by a press release from the Finance Department which specified that this subject has nothing to do with the BEPS tax treaties signed under the auspices of the OECD and that Morocco is not bound by any commitment to automatically exchange information for tax purposes during the year 2021.
A press release which, despite its official tone, did not calm the panic, several MRAs already thinking of emptying their accounts in Morocco for fear of being caught in the nets of the tax authorities of their countries of residence.
Médias24 has contacted sources at the OECD as well as international tax experts to disentangle the true from the false, to find out the nature of the commitments made by Morocco at the international level and what this implies for its diaspora which holds according to the latest data from Bank Al-Maghrib, more than 2.5 million bank accounts in Morocco (checking accounts, savings accounts, term deposits, and cash certificates, etc.), totaling, at the end of 2019, a sum of 185 billion dirhams.
Morocco has indeed joined the mechanism for the exchange of financial information
The first thing to know: the exchange of data has nothing to do with the BEPS conventions, as confirmed by a source at the OECD. “ BEPS treaties are about harmful businesses and tax regimes. And not natural persons. The exchange of banking data in this category is governed by a multilateral agreement between competent authorities relating to the exchange of country-by-country declarations”, specifies our source.
Here is the text of this agreement of which Morocco is one of the signatories.
What does this agreement provide? And what does it imply in Morocco?
To explain all this to us, our source at the OECD gives us the history of this agreement and how Morocco joined it.
It all started, according to our source, about ten years ago, with major international discussions on hidden accounts in financial centers considered tax havens (Switzerland, Luxembourg, Panama, etc.).
In 2014, the G20 countries agreed on a global framework or standard for the exchange of banking data with the aim of ending the banking secrecy applied by certain financial centers.
After approval of this framework by the G20 countries, our source tells us that 90 countries have come forward voluntarily to apply these new standards. OECD member countries or non-members of the organization, specify our source, including Nigeria, Kenya, Ghana, Latin American countries, and… Morocco.
This commitment by Morocco was made official, according to our source, in 2018, following a high-level visit to the OECD led by the Minister of Economy and Finance, who “officially committed to implementing these data exchange standards,” recalls our source.
In addition to the adaptation of Moroccan legislation with the terms of the multilateral agreements of the OECD, this commitment related, continues our source, to two aspects:
1- Morocco had to commit to a specific date. And the country has set 2021 as the date for the entry into force of the multilateral agreement. This commitment is established in an OECD list updated on December 10, 2020, which provides that Morocco will begin to exchange banking data with the 120 signatory countries of the agreement from September 2021, as shown in this table (line 74).
2- Apply the principle of reciprocity. If Morocco wanted to have data on Moroccans residing in Morocco who hold accounts abroad, it must also do the same when one of the signatory countries of the agreement sends it a request for financial information on one of its residents.
And to monitor the commitment of each country, the OECD has set up a periodic review system to check whether the signatory countries are respecting their commitments.
Until then, Morocco could, from September 2021, ask the 120 signatory countries of the Agreement for any information on a Moroccan resident in Morocco to find out if he holds accounts or financial assets in these countries. Hence the spirit of the exchange amnesty granted in 2020 and which was, as the Minister of Finance and the head of the Foreign Exchange Office has explained to us on several occasions, a kind of last chance given to Moroccan residents who held accounts abroad to comply with the law before the data exchange system came into effect in 2021.
The Moroccan diaspora in the crosshairs of European countries
But as international tax expert Frédéric Elbar tells us, people believed that this agreement only worked in one direction, that of Morocco which wants to obtain information on its residents, but forgot the principle of reciprocity which means that France, the Netherlands, Spain or Italy, for example, can also request information and banking information on the Moroccan diaspora living there.
“These countries have the Moroccan and North African diaspora in their sights. Because they know the mass of accounts and money they hold in their countries of origin and which is undeclared in their countries of residence. They are also impatiently awaiting the arrival of the September 2021 deadline to launch a major operation to verify the declarations made by the diaspora”, he explains to us.
It is like a backlash that Morocco is experiencing by integrating the multilateral agreement of the OECD. The country will obtain information on Moroccans who hold accounts abroad, but in fact exposes MREs, a major source of financing for the country’s balance of payments and major contributors to a certain social balance, to reprisals from the tax authorities of their country of residence. Especially when their accounts are hidden or undeclared.
The information that circulated in the Moroccan press and on social networks also created a great movement of panic among MREs, many of whom, according to testimonies collected by Médias24 in Paris, had as their first reflex the desire to empty faster their accounts in Morocco, close them, and go to the woolen stocking to escape this globalized tax hunt.
A movement of panic must have justified the rapid exit of the Finance Department, which wanted to calm people down and reassure MREs.
“We have experienced the same scenario with Turkey or Portugal which also have large diasporas in the world. The data exchange created a panic movement, which is completely normal. But everyone has to go through it to achieve global transparency in terms of banking data,” says our source at the OECD.
What risk do MREs who do not declare their accounts in Morocco
The risk for our diaspora is very heavy. To illustrate this, we have taken the case of France, the country which hosts the largest number of MREs.
According to French law, if an MRE does not declare a bank account held in Morocco, he is exposed, according to Frédéric Elbal and our OECD source, to a fixed fine of 1,500 euros.
“Holding an account abroad is legal in France. But the fact of not declaring it to the taxman is not, even if this account contains only 20 euros. The person must therefore pay a fixed fine of 1,500 euros per account and per year. If she holds three undeclared accounts over three years, it will be 1,500 euros multiplied by 9… And the French tax authorities can request the details of the accounts over 10 years, a period which corresponds to the limitation period in force in France. The bill can be very high”.
There is one exception, however, to remember: the case of an MRE who opens an account via a Moroccan CIN, with a Moroccan address. “This one is not considered a non-resident and is not concerned by the exchange of data. Because his account is considered to be that of a resident,” Mr. Elbar tells us. But these cases are in the very minority, most MRAs certainly have Moroccan CINs, but with the address of their country of residence.
The fixed fine of 1,500 euros is only the tip of the iceberg, however, as the risks can be greater when it comes to large hidden businesses or land income. And can go in some cases to the penal…
This is the case of an inheritance or a gift. If an MRE receives, for example, donations from his father or his family on a Moroccan account that he does not declare to the French tax authorities, he will not only pay the fixed fine of 1,500 euros per undeclared account, but also the duties donations which are due in France (the rate of which varies from 5 to 60% depending on the amount of the donation).
For inheritances, if someone already has an apartment in France and a second home with a total value of 600,000 euros and inherits land or real estate in Morocco that increases the value of their assets to more than 1 .3 million euros, he must pay, in addition to inheritance tax (between 5 and 45%, editor’s note), property wealth tax (from 1 to 1.5% depending on the value of the real estate assets, editor’s note )”, explains Frédéric Elbar.
Another case that Mr. Elbar explains to us: is when an MRE does business in Morocco or has land or financial income that he deposits in an account in Morocco without declaring it in France.
If he is not subject to tax in France, because he already pays taxes in Morocco on this income as required by the principle of non-double taxation, he must nevertheless declare them to the French tax authorities. Because it increases his annual income and can raise him in the tax bracket that is paid in France according to a progressive scale. And if this income is not declared and known to the French administration, he will have to pay the related income tax in addition to an 80% increase, i.e. almost double the basic tax, details our expert.
And if ever, wishes to specify our expert, the amount of the tax at stake exceeds the bar of 100,000 euros, the tax authorities automatically transfer the file to the Public Prosecutor’s Office. If the case follows the legal procedure in force, the person faces up to 7 years of imprisonment and 3 million fines. That is to say that it is not a game…
Emptying or closing an account today is useless
There remains the question of the deadline from which Morocco will be obliged to respond to the requests of the 120 signatory countries of the OECD multilateral agreement.
In its statement, the Ministry of Finance said that the year 2021 is not affected. And he is right according to all the information we have been able to cross-check. But the press release does not say everything.
Frédéric Elbar tells us that Morocco had indeed made a commitment, as shown by the OECD list adopted on December 10, 2020, on the date of September 2021. But in the meantime, the country has asked to postpone this due in the year 2022. Something he got.
This information is also confirmed by our sources at the OECD, as shown in this table which clearly shows that Morocco has benefited from a postponement until 2022.
In addition to this report obtained from the OECD, Morocco has not, according to our sources, yet issued the implementing decrees for this new legislation which governs the exchange of data between countries.
“In the absence of an implementing decree, nothing obliges Morocco to start exchanging data. Because it will simply be impossible to do. This exchange of data essentially goes through the banking system. And neither Bank Al-Maghrib nor the banks, know for the moment neither when nor how to manage and process these files. Because the implementing decree which should clarify things has not yet been released,” explains Frédéric Elbar. On this point, the ball is therefore with the government…
However, to suggest that the year 2021 is not affected is not entirely correct. Because if the exchange of data begins in 2022 as currently planned, it will relate, as we are told at the OECD, to the data for the 2021 financial year… This makes our OECD source say that the only thing that has changed is that with the first deadline of September 2021, Morocco was required to report all data regarding the 2020 financial year. Now that the deadline has been pushed back to 2022, the specter of data exchanges is pushed back one year and will cover the 2021 financial year.
Our source thus wishes to clarify that “emptying or closing an account today will be useless since the train has already left… If in 2022, the French tax administration requests information on the accounts of a person in Morocco, the Moroccan administration must communicate the data to it from January 1 to December 31, 2021. Closing an account in March or April 2021 will therefore be useless since the existence of the account will appear in any case”.
Recommendations to MREs
What he recommends to MREs, as to all the diasporas of the world who find themselves in this situation, is not to wait for the triggering of the data exchange procedure, but to proceed spontaneously with corrective declarations with the relevant tax authorities to report the existence of accounts abroad. “Generally, if we take the French case, spontaneous declarations are well received and do not expose the taxpayer to any risk, the principle of good faith or right to error obliges. But not declaring your accounts abroad and waiting for the tax authorities to investigate and discover their existence exposes the taxpayer to fines, tax increases, and several other risks,” advises our source.
This a real headache for MREs who have to turn a long page of “letting go” and adapt to the new practices of the moment. And this must be accompanied by communication and education work by the countries of origin, such as Morocco, to explain to their citizens living abroad what must now be done. The only way to avoid unnecessary panic movements, which can be costly for the Moroccan economy and its financial system…
“People need to know that we live in a new era where nothing can be hidden anymore. Morocco has postponed the deadline to 2022, but will not be able to play this card forever, at the risk of being blacklisted or put on a gray list of non-cooperative countries in terms of data exchange. You have to tell people what to expect in a clear and educational way and not let the vagueness persist…”, concludes Frédéric Elbar.
