Investing in Morocco
The real estate market in Morocco has been booming for some years now, which is not due to any chance. Indeed, various reasons may encourage the investment in Morocco, such as the attractive taxation, a legal arsenal adapted to investors’ needs and a flexible foreign exchange regulation.
An attractive taxation and flexible exchange regulations
In terms of taxation, Morocco has put in place numerous attractive incentives:
- Transfer guarantees outside of Morocco of the revenues from sale of real estate, without a time or an amount limit.
- Guaranteed transfer outside of Morocco of the net capital gain from the sale of immovable property.
- Exemption of tax on real profit if the sale of the building is used as a principal residence for at least 6 years.
- Exemption from property tax for 5 years, for new buildings used as a main residence, then a 75% deduction.
- No inheritance taxes.
- Tax treaties, aimed at avoiding double taxation of non-residents, concluded with many countries
Your tax obligations as a purchaser
Becoming a homeowner in Morocco involves a certain number of tax consequences that it is good to know beforehand in order to measure the full scope of it. This will help you avoid unpleasant surprises. Here are the main contributions to which you will be exposed (Please note that these data are provided as an indication and are subject to fluctuation):
- Acquisition costs
When purchasing built premises or land the acquisition costs are 7 to 8% of the purchase price.
- After acquisition
In Morocco, when buying a property, there are several types of taxes that one will have to pay to the State. Here are some of the main taxes:
a) Property tax:
Property tax is paid annually. It is due by the owners of buildings and constructions of any kind occupied in whole or partially by their owners as their main or secondary residence, or put graciously at disposal of their spouses, ascendants and descendants as a residence
New buildings intended for the owner’s main residence are exempt from tax for a period of five years following their completion. The property tax is assessed on the rental value of the property. The owners benefit from a deduction of 75% of the said rental value if the property is used by their owners as a primal residence.
b) Municipal service tax:
Similar to the property tax, the municipal service tax is annually assessed on the property’s rental value, and even those which are temporarily exempted from it, as determined by municipal tax authorities. The municipal tax is levied at a rate of:
- 10.5% of the annual rental value of properties located in urban areas.
- 6.5% of the annual rental value for properties located on the outskirts of cities.
c) Real estate revenues:
If the property is rented, the owner must declare the rental income. Rental income is subject to individual income tax (based on the gross amount) at the following rates:
- 10% for the annual total gross revenues lower than 120.000 MAD.
- 15% for the annual total gross revenues equal to or exceeding 120.000 MAD.
d) The special status of French retirees:
The retirees benefit from an advantageous exemption measure:
the retirement pensions received in Morocco by these retirees are taxed as income with an 80% deduction.
e) Tax on property profit:
The tax on property profit may possibly concern you if you decide to resell your property.
- It consists in the difference between the selling price and the updated purchase price plus expenses and investments. The rate is set at 20% of the profit and must never be less than 3% of the selling price.
- The seller may be exempted from this tax if the property sold has been used as a principal residence for more than six years.
- The seller of a principal residence who sells it before the six year period can be exempted under the following conditions:
- The seller commits to reinvest the sale price in the acquisition of a principal residence within a period of six months from the date of sale of the first principal property.
- The seller can benefit only once from this exemption. The selling price of the previously mentioned building must not exceed 4,000,000 AMD.
In a general way, most European countries have a double taxation agreement with Morocco, this in order to make sure that people do not pay tax twice on the same income.
It is the concept of fiscal residence that will determine whether the Moroccan tax law is applied in terms of taxation : An individual will be considered as a tax resident in Morocco if they have their principal residence in Morocco. (Reference should be made to the texts of Conventions between Foreign Governments and the Kingdom of Morocco aiming to avoid double taxation as well as to establish rules for mutual administrative assistance in tax matters).
A flexible foreign exchange regulation
In Morocco, the Exchange Office is an economic institution under the Ministry of Finance. It regulates and controls all aspects of foreign exchange inflows and outflows.
For several years now, it has instituted rules aimed to encourage foreign investment, particularly real estate investment.
Foreigner residents and non-residents in Morocco benefit from a regime of total convertibility, concerning:
- Foreign currency sums brought into Morocco to finance a property investment (including the personal contribution and the monthly loan payments)
- Rental income of real estate which acquisition is financed by sums coming from abroad.
- Proceeds from the resale of the property: To enjoy these benefits, it is important to make your investment with funds coming from abroad on a convertible dirham account or directly on the account of the notary handling the transaction.
Once the transaction is completed it is imperative to ensure the traceability of the funding in foreign currency of the investment in the form of credit notes, bank certificates or other transfer forms
The role of notaries
It is essential to entrust your investment to a notary who is invested with a mission of public authority. It is he who prepares the original sale contracts, ensures their conservation but his role is not limited to authenticate the acts.
He also has a role of counsel in various legal and tax matters such as:
- Real estate: the notary’s counsel covers all aspects of real estate sales.
- The patrimonial field: in particular issues relating to donations and inheritance. (Last will and testament, division of an inheritance, etc.)
- The tax field: payment of taxes, tax optimisation, etc.
- The field of business law: The notary is impartial and unbiased: he provides in the same way counsel to all parties involved in the transaction entrusted to him, so as to preserve the interests of each party.
Par/By Maitre Reda Boulmane - Notaire