Tax planning for a property investment in Morocco

The taxation regime for property in Morocco is based on the complex French system. This is the reason that clients must seek professional advice of a notary before they proceed with buying the property. Since Morocco was a colony of France, the system is based on the French laws. Each case is treated as different from the other and there is no base to go by.

Tax on Rental Income
If you have given your property out for rent in any part of the world, you must be aware that the landlords are also required to pay tax on the rental income that they receive. However, in Morocco, the investors don’t need to pay tax on the first 3 years of the rental income, since these years are exempt from law. After the exempted period of three years, the investors would be required to pay tax on 60% of the rental income. The tax slabs are between 22% and 44%. In Tangier, an investor would be subject to 22% tax on 60% of their rental income.

Applicable Property Tax
Property tax is applicable on the annual rental value of the property. In this case also, the investor will have to pay tax only after 5 years of purchase of the property. The table below shows the applicable rate of Property tax based on the annual rental value of the property:

Value in dh             Percentage of tax (%)
< 3000                                        0 3001-6000                               10 6001-12000                             16 12001-24000                           20 24001-36000                           24 36001-60000                           28 >60000                                      30

If the property owners don’t stay in the property that they have bought, then a tax of 13.50% of the rental value of the property will be charged. Garbage Collection tax also needs to be paid by all the investors. However, the tax comes into effect only after 5 years of property purchase. After the 5 years are over, tax is charged at 10% of the value of the annual rental value of the property.

Capital Gains tax
Capital Gains tax is applicable when the property is sold within 5 years of the purchase. The Capital Gains tax is chargeable as 20% of the profit that the investor made at the time of selling. If the property is sold after 6 years but before 10 years, then it attracts a Capital Gains tax of 10%. If the investor sells off the property after 10 years, there is no Capital Gains tax that is applicable. The capital gains are based on the difference between the sale price and the purchase price of the property.

If you have inherited the property from some one in your family then there is no inheritance tax. Those who reside in UK can be rest assured that they don’t need to pay double taxation, since there is a treaty to that effect between Morocco and UK. This means that the investors from UK do not need to pay the Capital Gains tax twice over.

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