Withdrawing Receipts From Rental Income

[markseka]

We have purchased an apartment in Marrakech which we are renting.

We have been told that we cannot apply the rental receipts toward payment of the mortgage - rather we are supposed to use only funds from a foreign account (i.e., US) toward payment of the mortgage.

Does this sound right?

Also, are there laws limiting the amount of the rental income that we can withdraw from Morocco to the US?

Any guidance would be most appreciated!

Thanks.

Mark

 

[SaidiaSpy]

Hi Mark

What you have been told is correct.

Morocco, like most 3rd World countries has exchange control.

You can NOT have your property's mortgage serviced by its rental income - legally.

You HAVE TO send foreign exchange in to service the debt.

Many people have made the mistake of buying a property in Morocco thinking that it will pay for itself. Long term perhaps, but short and medium term, you have to fund it from abroad.

Also, you can NOT have your rental income sent out of Morocco.

This is how it is in Morocco. Tourism and property for foreigners are just means to Morocco getting much-needed foreign exchange.

Your property manager on the ground (I assume you have a good, honest one?) might know of a way of getting your Dirhams in to your bank account, but doing so is illegal under current Moroccan law.

Saidia Spy

 

[redangel7861]

Saidia Spy,

Whats the rule on sales??

I own a two bed apartment in Marrakech (Atlas Golf). What is the rule concerning proceeds from property sales i.e. can the funds be repatriated back to the UK??

Thanks

RA

 

[SaidiaSpy]

RedAngel,

Should you not have asked that question at the time of buying?

Saidia Spy

 

[redangel7861]

I did, and I was told it was ok ie. Repatriation of funds from sale proceeds is allowed once all relevant taxes on gains have been paid.

 

[SaidiaSpy]

RedAngel,

I hope whoever you that is around when you want to sell.

The theory is this: if the amount of foreign exchange involved is less than €200k, then after filling in a series of forms and chasing people up, after some time, your monies can be repatriated.

If the amount involved is greater than €200k, then this can take up to 5 years to get out of Morocco.

The reality is this: I have never heard of anyone getting their money out of Morocco legally.

They want foreign exchange to come in to the country, but to never leave. Simple as that.

The Moroccans will throw up all sorts of hurdles and excuses and empty promises to string you along. The government's foreign exchange department in Rabat (Office d'Change) is a law unto itself.

Having a good personal relationship with your bank manager is vital if you want to jump to the top of the queue.

Hopefully, as Morocco's economy develops and modernises, this exit hurdle will be relaxed and then done away with. This will engender more confidence which should help the property market.

The Moroccan property market is not a playground for greedy short-term "flippers". They have got their fingers badly burnt. Morocco is most suited to long-term strategic investors.

People wanting properties for personal use are advised to draw up a will in Morocco that is legalised at the local authority offices. Leaving a property in Morocco to your children is a burden they will not want if it is intestate. If you have not done so, buy and act upon a few books about buying and selling property in Morocco.

There are also all sorts of taxes that come in to play when selling.

Saidia Spy

 

[gqs]

Saidiaspy

What is the basis for saying that you cannot use rental receipts to service your mortgage debt, do you have any documentary evidence or what is your area of expertise? I am getting conflicting advice from the developer we have purchased from saying that what you have said is incorrect (They developer obviously has a bias as he wants to sell units)

I am not saying who is right and who is wrong but if you are right then that has serious consequences for any buyer in Morocco unless the purpose is solely for their own use.

On my understanding providing the funds are paid into the country in the right way i.e. you have the relevant paperwork lodged at the relevant offices then removing these funds is not a problem, if you havn't then you are in trouble.

GQS

 

[localhelp]

gqs,
Perhaps I can shed a little light on your problem.

Your bank account in Morocco, unless you are a resident and have a residents card, will be a convertable account. This means that only foreign currency can be paid into that account, no Moroccan dirhams can be put into that account. Therefore any monies collected as rent cannot be put into the account to pay the mortgage if they are collected in dirhams.
If your agent collects rental income in euros or sterling then they can pay into your convertable account and this can pay the mortgage.
However, things to take into account,
1. Nearly all rentals will be to Moroocans and will be paid in dirhams.
2. Neither you or your agent can legally change dirhams into euros or sterling inside Morocco.

The conclusion is that your agent is right, in that you can pay the mortgage with the rental income. He is however being economical with the truth and in practise this cannot be done legally unless you are paid the rental income in a currency you can put into your account.
"Please do not trust agents without them earning your trust first"

M.

 

[localhelp]

Just to add a few words to the above....

If you can get the money into your account to pay the mortgage you will have to keep a record of all these entries, their sources and taxes paid in order to get the relevant paperwork from the Moroccan exchange office. That's not going to be an easy task.
As mortgages to foreign buyers are new to Morocco, I don't think the developer/agent has any idea how this will work out, as indeed do you or I. Morocco is a work in progress. Rules that we have today might not exist tomorrow and laws can be rewritten.
Example. Capital gains tax will reduce after 5 years and continue to fall over the next 5 years to zero. Not any more, when I got to 5 years of ownership I asked my notaire how much it will be reduced. He said, sorry, the law has changed and that I would have to wait 8 years before I could benefit from a tax break.

M.