Rabat – Morocco’s Directorate General of Taxes (DGI) has issued a “historic” tax reminder to Swiss food group Nestle Morocco, claiming unpaid taxes of MAD 1 billion ($110 million), reports Financial Afrik.
Nestle Morocco has been “ordered” to pay said sum to the DGI, notes the report, suggesting that the large payment is to serve as penalty for the company’s undeclared transferring of some of its Moroccan profits to Switzerland.
The Financial Afrik report claims that the Moroccan tax authorities declined to accept the method of calculating transfer prices applied by Nestle Morocco since the prices of purchases and sales of goods and services between the company and the other subsidiaries of the group are invoiced.
Nestle Morocco allegedly caused a taxable result in Morocco to be reduced by manipulating transfer prices, thereby unduly transferring profits to its parent company.
According to reports, the prices in question are used to purchase and sell products between a company’s subsidiaries and its parent company.
From its headquarters in Geneva, the Nestle Group has mobilized in-house tax lawyers and a group of local consultants to assist its Moroccan subsidiary in the procedure before the National Commission of Tax Appeals to challenge DGI’s decision.
The Swiss giant told Financial Afrik in a statement that it “has approached the tax authorities to find an amicable agreement and obtain a tax adjustment.”
In the same statement, the General Manager of Nestle Morocco revealed that “the method used by Nestle Morocco is a global scheme implemented in all subsidiaries of the group.”
Under Moroccan law pertaining to a transaction between the tax authorities and a taxpayer, a reduction in the amount of tax adjustments can only be made on matters of interpretation and not on matters of law.
This means that while it is not possible to reduce the amount of unpaid VAT to the Treasury, the tax authorities may concede a reduction in the amount of late payment penalties, or in the level of fees that a company has paid to its parent company for technical assistance.
