Article 22: Taxable year

(a)   The taxable year is the State’s fiscal year.

(b)   A taxpayer may use a twelve-month period other than the one specified in paragraph (a) of this Article as a taxable year, in accordance with the restrictions specified in the Regulations.

(c)    If a taxpayer changes its taxable year, the interval between the last full taxable year prior to the change and the starting date of the new taxable year shall be considered as a short independent fiscal period. The first year of a new taxpayer or the last year of a taxpayer in case of discontinuation or liquidation may be a short independent fiscal year, unless it is stipulated to be a long fiscal year in accordance with Companies Law.

(d)   Groups of related companies, as defined in Article Sixty Four of this Law, shall use the same taxable year.

Article 23: Method of Accounting

(a)   A taxpayer's method of accounting must clearly reflect the taxpayer's income.

(b)   The gross income and expenses of a resident company, and any other taxpayer who keeps or is required by Law to keep commercial books according to the accounting principles generally accepted in the Kingdom, are determined according to such books after adjustment of the accounts so as to conform to the rules of this Law.

(c)    For taxation purposes, a natural person may record his transactions on a cash or accrual basis. However, if his gross income from business during a taxable year exceeds the amount specified in the Regulations, he must use the accrual method in all succeeding taxable years.

(d)  A company which keeps or is required by Law to keep commercial books must record income and expenses on an accrual basis. Otherwise, it may, for taxation purposes, use either the cash or accrual method.

(e)   Except for a change from the cash basis to the accrual basis required in accordance with paragraphs (c) or (d) of this Article, a taxpayer may change its method of accounting upon obtaining the Department’s consent.

(f)     If the taxpayer changes its method of accounting, it must perform adjustments to items of income and deduction or to debt or any other items in the taxable year following the change, so that no item is omitted nor included more than once.

Article 24: Cash-Basis Accounting

      A taxpayer who uses the cash method in its books and records shall register the received income when received or made available, and the paid expenses when paid.

Article 25: Accrual-Basis Accounting

(a)   A taxpayer who uses the accrual method shall record income and expenses when they are due.

(b)   An amount becomes payable to the taxpayer when the taxpayer is entitled to receive it, even if payment is postponed or paid in installments.

(c)    An amount becomes payable by the taxpayer when all facts determining liability have occurred.

Article 26: Long Term Contracts

(a)   For a taxpayer who uses the accrual method, income and expenses relating to a long term contract shall be calculated on the basis of the percentage of the work completed during the taxable year.

(b)   The percentage of work completed is determined by comparing the costs of the contract incurred during the taxable year with the total estimated cost of the contract.

(c)    For purposes of this Article, the term ‘long term contract’ means a contract for manufacture, installation, construction or performing services related thereto, and whose execution is not completed within the year in which execution started, with the exception of the contract expected to be completed within six months of the actual starting date of work cited in the contract.

Article 27: Stock

(a)   A taxpayer who maintains a stock shall establish and maintain inventories for such a stock.

(b)   The cost of goods sold during the taxable year shall be deducted.

(c)    The cost of goods sold during a taxable year is determined by adding the cost of goods purchased during the year to the opening stock and subtracting the value of the closing stock.

(d)   A taxpayer who uses the cash method shall calculate the cost of stock by use of the prime (direct) cost method or the absorption costing method, but a taxpayer using the accrual method shall calculate the cost of stock by use of the absorption costing method only.

(e)    The value of the closing stock is the book or market value, whichever is lower at that date. A taxpayer shall calculate the book value of the stock by use of the weighted average method. However, it may use another method, after obtaining a written permission from the Department, and it may not change the method chosen except with the consent of the Department.