Tax Implications of owning property

[redangel7861]

The Morocco tax system is modelled on the French system and is quite complex.

The following information is a very basic guide to the Moroccan tax system as it applies to UK investors:

"I.G.R" Tax( Impôt général sur le Revenu or Income Tax)
This applies to the incomes of both individuals and partnerships. UK investors utilizing a "buy to let" strategy will be responsible for tax on this income. In Tangiers, which has its own tax system, 60% of this income is taxable at 22% (in other parts of Morocco this income is taxed at 44%) the city of Tangiers having a 50% reduction on the taxation of rental income, important to note that there is an exemption from payment of taxes during the first five years of property ownership.

Taxe Urbaine (Property Tax)
This applies to:
Buildings built and being built, of all kinds, which are totally or partially occupied by their owners as a main home or second home, or put at the disposal of their spouse, ascendants or descendants as a dwelling place free of charge;
Buildings, which are put at the disposal of a professional activity or any kind of business by their owners;

Machines and devices, which are in establishments, which produce goods of services; put at the disposal of any kind of business by their owners
The "Tax Urbaine" applies to those businesses within urban administrative districts and their outlying zones, those within delimited zones and those within summer and winter resorts and spas.
Plots of land: 3%

Buildings, layouts, materials and equipment (mechanized, technical and computer equipment): 4%

Property Tax in Morocco is paid annually but for the first 5 years owners have full exemption, after that period tax is based on the property` s annual rental value, there is a 75% discount if the home is your permanent or vacation home residence, there is also Property Rental Tax to pay investors who have purchased for this reason will be liable to pay 13.50% on the rental value of the property.

Taxes sur les profits Immobiliers (TPI) 'Capital Gains Tax'
This is based on 20% of the difference between the purchase price and the sales price with a minimum of 3% of the sale price, although when a property is sold more than 10 years after purchase then it is exempt from Capital Gains Tax.
If the property is owned for more than 5 years but less than 10 years the TPI tax is 10% of any capital gain over 1 million Dirhams, this is based on the property being a primary residence and the tax is to be paid within 2 months of the sale of a property.

With regard to taking the proceeds out of the country, foreign investors are allowed to sell at any time and enjoy free repatriation of capital and profit, as long as the money used to purchase the property comes from overseas.

Inheritance Tax
This tax is 0% for family members but expert advice should always be obtained prior to implementing any inheritance tax planning strategies, the most important advice is to make a Moroccan will!

UK-Morocco Double Taxation Treaty
There is a double tax treaty between the UK and Morocco that ensures investors do not suffer Capital Gains Tax in both countries.

Fiscalitè des collectivites locales (Refuse Collection Tax)
There is a 5 year exemption from the Rubbish collection tax but after this period it is levied at 10% of the property’s annual rental value.

 

[Lee Filkins]

Thank you for posting the above. Should be helpful to many people. The above is the theory, have you done any research on the practicality, working & the practise.

Certain, horror cases, not conforming to your above posting has already been posted on the forum. Eg, Notary not accepting a sale price & suggesting that the sale price was higher than declared, limitation/capping of foreign exchange repatriation.

 

[redangel7861]

Thank you for posting the above. Should be helpful to many people. The above is the theory, have you done any research on the practicality, working & the practise.

Certain, horror cases, not conforming to your above posting has already been posted on the forum. Eg, Notary not accepting a sale price & suggesting that the sale price was higher than declared, limitation/capping of foreign exchange repatriation.

Hi Camel.

That's why I requested this thread was a "Sticky" as to encourage debate on this matter. Your correct, it is what should happen in an ideal situation, buy not what happens in practice. That's why it's good that people do post their experiences with regards to what happens when they come to actually sell their property, as when the rest of us decide to sell in 5-10 years we know what to look out for and what to expect.

Most of us have purchased off-plan developments and are some way from completion, hence selling the property. It will be interesting to see how the application of the tax laws develop and if there is improvement over the years as more people beging to sell and lock in profits.

Rgds
RED

 

[Lee Filkins]

Red: Thank you for your prompt reply. I agree that we all should be as enlightened as possible. Apart from the Capital gains tax. I also understand that the five year exemption for
Fiscalitè des collectivites locales (Refuse Collection Tax) & Taxe Urbaine (Property Tax) is also not strictly five years and have heard that some of demand specially refuse collection has been made after two to three years i.e. buy the time the collecting authority got the files or decided that they need some money.

 

[badiabestland]

thank u

Thank you for posting the subject

 

[Cockatooz]

That's really useful tax info, thanks.

Can anyone also advise re: tax succession ie if a married couple who are not Moroccans purchase a property in joint names, does the property automatically pass the the surviving spouse? Does this happen automatically with or without a will

Thanks

 

[Lee Filkins]

I am no expert on Moroccan Tax affairs. I however know that any transfer on the death of one of the owners The property passes Tax free to the other. This is in so far as tax goes

In view of the above I personally, don't see the need for buying in both names. I do not know under Moroccan law as to what is the distribution position between off springs, second, third wife & there off springs etc.

As, Morocco has adopted the French system, I suppose that the lenders/notary may insist on it.

 

[esmerelda]

That's really useful tax info, thanks.

Can anyone also advise re: tax succession ie if a married couple who are not Moroccans purchase a property in joint names, does the property automatically pass the the surviving spouse? Does this happen automatically with or without a will

Thanks

This is not strictly regarding the tax issues but you should make a will if you hold any assets in Morocco. A wife will not necessarily inherit the husband's estate...if for example she has sons. Also for those with children, moroccan law allows for an equable split of the estate if the children are all boys...but if you have daughters, their "portion" must be explicitly stated. or they will not be treated as equal to the sons.

Re the actual practise in the field so to speak.... it is quite common for the purchase price to be under declared. (this is on older traditional properties) Also if you are buying one od theses types of properties as opposed to new build, you must check the tax situation of the sellers. We checked on 2 houses we bought last year & discovered that in both cases the owners had not paid tax for 13 years. Needless to say the tax was taken from the purchase price by the adul to settle the bill before we agreed to proceed!

 

[traceyw8727]

I am no expert on Moroccan Tax affairs. I however know that any transfer on the death of one of the owners The property passes Tax free to the other. This is in so far as tax goes

In view of the above I personally, don't see the need for buying in both names. I do not know under Moroccan law as to what is the distribution position between off springs, second, third wife & there off springs etc.

As, Morocco has adopted the French system, I suppose that the lenders/notary may insist on it.

I believe there are tax advantages of purchasing in joint names eg. on sale you could both claim your annual exemptions for capital gains tax (uk Tax) and also if you rent out the property, the income can be shared for tax purposes which may be beneficial depending on your respective income positions.

 

[Tangier]

I believe there are tax advantages of purchasing in joint names eg. on sale you could both claim your annual exemptions for capital gains tax (uk Tax) and also if you rent out the property, the income can be shared for tax purposes which may be beneficial depending on your respective income positions.

Hi i have been there and done it its not like he has said it will do your head in now i have sold my property i am going to invest in spain ????? good luck

 

[bess]

Hi Tangier - irt would be helpful if you gave some details rather than a scare story?

 

[Tangier]

Hi Tangier - irt would be helpful if you gave some details rather than a scare story?

What the agents tell you about owning a property in Morocco Tax property tax rental its not true.

You must own yor property NOW for 8yrs or more-not to pay any tax. when i had my house it was 5yrs. i sold it after 5yrs but was told that i still had to pay 20% tax.

Thats all the Agents will try and do is sell you the property then thats it.

Now i rent my property.

Its up to you thats what a moroccan will say its your money.

And thats true??????

 

[lurcher21]

Hi i have been there and done it its not like he has said it will do your head in now i have sold my property i am going to invest in spain ????? good luck

Me too! Buyers beware - the Moroccan Government steals from you as much as other individuals. Our property was sold for a genuine, 100% declared, amount, and then we were hit by the bombshell of a revision of TPI tax on 50,000 euros extra of non-existent 'profit' as they said the house was worth more than we sold it for when property prices were rising monthly and the sale of the house had taken 5 months to complete!

 

[Tangier]

Moroccan Tax

Me too! Buyers beware - the Moroccan Government steals from you as much as other individuals. Our property was sold for a genuine, 100% declared, amount, and then we were hit by the bombshell of a revision of TPI tax on 50,000 euros extra of non-existent 'profit' as they said the house was worth more than we sold it for when property prices were rising monthly and the sale of the house had taken 5 months to complete!

Like is said its one tax for us and one tax for a moroccan it makes me sad that thay want the investment but thay want to take all the tax.

The agents here tell you no tax to pay for 5yrs ( this is not True ) as soon as you buy a property the Tax Bill starts and with a not a moroccan name its on the value on the house ( when i had my house i was paying 2500,dh the house next door owner Moroccan was paying 300dh per year)

Let me tell you if you sell your Property for a loss or the same price as you paid for it you will have to pay a TAX.

Thay will not accept that you have not made a profit on the sale of the property...

In Morocco the agent and the builder will ask you to declare Half Dont .............

 

[moroc]

This Is scary stuff I seriously whant to buy in Morocco but these stories are giving me secound thoughts, any body got success stories

 

[esmerelda]

This Is scary stuff I seriously whant to buy in Morocco but these stories are giving me secound thoughts, any body got success stories

Ok there is a difference between tax you pay for service (garbage collection etc) and capital gains tax that is payable when you sell your property. This thread is mixing these 2 up!
Service taxes are variable by district & are payable as & when you own your property. CGT only on when you sell your house. There ARE different rules for resident moroccans, expat moroccans and foreigners...this is not something that happens in an underhand way but is clearly stated policy.
For foreigners as it stands there is no CGT to pay IF you own your property for 10 years and then sell. If you sell before then, there is a sliding scale dependent on how long you have had the property.
Re price declared. There is a difference between the declared sale price and the actual sale price....this has been common practice for many years as a way to underpay tax & I would not be surprised if the gov. were starting to crack down on it...it does not affect new build properties (or should not) as the prices for these are all clearly marketed ..it DOES affect resales particulalry of older properties. ..be wary of this as of course as the new owner if you agree a lower declared price then when you come to sell...your paper profit is higher than it actually was...so you get stung with a higher tax bill (unless you can convince the new owner to take a lower declared price...& so the circle goes on!!!) DO NOT think this practice is solely the preserve of moroccans ...expat owners will try this one too. Hope this helps

 

[bess]

Thank you for putting it so clearly.
It is worth pointing out that if you have shared ownership, ie you own an apartment in a block,the service charges are decided by an elected comittee which appoints the company or person who carries out the work.
For example on costs, Moroccans may prefer to have the pool in use only in the high season, the English are more immune to cold water and might be sad if it is drained- but obviously if the cost is shared there has to be general agreement.
You might want to bear this sort of issue in mind if investing in an apartment already built - find out what the service charges have been and what they are spent on, it is difficult to have influence later if you do not speak the language of a discussion.
Personally I think it is fair that foreigners pay different tax to Moroccans, especially if we are buying to invest: hopefully both we and Morocco can gain overall.

 

[Tangier]

Ok there is a difference between tax you pay for service (garbage collection etc) and capital gains tax that is payable when you sell your property. This thread is mixing these 2 up!
Service taxes are variable by district & are payable as & when you own your property. CGT only on when you sell your house. There ARE different rules for resident moroccans, expat moroccans and foreigners...this is not something that happens in an underhand way but is clearly stated policy.
For foreigners as it stands there is no CGT to pay IF you own your property for 10 years and then sell. If you sell before then, there is a sliding scale dependent on how long you have had the property.
Re price declared. There is a difference between the declared sale price and the actual sale price....this has been common practice for many years as a way to underpay tax & I would not be surprised if the gov. were starting to crack down on it...it does not affect new build properties (or should not) as the prices for these are all clearly marketed ..it DOES affect resales particulalry of older properties. ..be wary of this as of course as the new owner if you agree a lower declared price then when you come to sell...your paper profit is higher than it actually was...so you get stung with a higher tax bill (unless you can convince the new owner to take a lower declared price...& so the circle goes on!!!) DO NOT think this practice is solely the preserve of moroccans ...expat owners will try this one too. Hope this helps

Ok why Should there be a difference between the tax-- if you live here you should pay the same no matter what we all pay the same in the UK and spain and france ......
One more thing Difference between DECLARED AND UNDECLARED black or white thats up to you but i would say never do this.... there is a case in Tangier in the last week that was going on and the Moroccan Man that sold is in prison doing 5yrs the english person has lost the property so i would say that is bad advice.

Any way thay know whats going on and the price of property in Morocco

My advice is keep it white Never do Black you could end up in Prison .......

 

[lurcher21]

Ok why Should there be a difference between the tax-- if you live here you should pay the same no matter what we all pay the same in the UK and spain and france ......
One more thing Difference between DECLARED AND UNDECLARED black or white thats up to you but i would say never do this.... there is a case in Tangier in the last week that was going on and the Moroccan Man that sold is in prison doing 5yrs the english person has lost the property so i would say that is bad advice.

Any way thay know whats going on and the price of property in Morocco

My advice is keep it white Never do Black you could end up in Prison .......

Do this and you could still get 'stung' for extra capital gains tax - just like we did. We honestly declared the full selling price - what good did that do us. They still stung us for CGT on the extra they said the property was worth. And ours was a villa we had built ourselves - after buying a plot of land. And one of us is a native speaker of the language. My advice after our nightmare is ''Don't buy!'' It's like a minefield for unsuspecting and naive foreign buyers. Everyone is out to rob you! Be warned.

 

[bess]

Hi Tangier- I suppose I was thinking more of those buying holiday propert/investment, perhaps it is different if you are a non Moroccan living and working there. Investers or those in receipt of high 'foreign ' wages can probably afford more than the average Moroccan. If the investment opportunities were equally as lucrative in our own country we probably would not invest in property abroad, so maybe it is fair that they should make more profit from us?