Buying real estate in Morocco is a great opportunity for foreigners or Moroccans living abroad to make a profitable property investment. However, as in all countries, real estate is subject to taxes. If you are French, the tax treaty between Morocco and France states that taxes related to a property must be paid in the country where it is located, whether they concern rental income, capital gains from resale, or simply local property taxes. Before committing to a property purchase in Morocco, here is an overview of the main taxes you will need to pay. This article will not cover registration fees when purchasing a property, as they will be addressed in a separate post soon.
The Urban Tax
Some compare it to the French property tax. It is a tax applied to all residences, whether primary or secondary. Its rate varies depending on the rental value of the property, with a maximum of 30%. The rental value of a property is determined by the census commission and is re-evaluated by 2% every five years.
Moroccan law provides exceptions to the payment of the urban tax. Newly built properties are exempt from this tax for a period of five years. This exemption also applies to habitable extensions.
A 75% tax reduction is also granted to Moroccans residing abroad.
The Municipal Service Tax
This is a municipal service tax similar to the French housing tax. However, it is payable by the property owner, though it can be contractually transferred to the tenant.
The tax base for the municipal service tax is the same as that of the urban tax, namely the rental value of the property. The applicable rate is 10% in urban areas and 6.5% in peripheral zones.
A 75% tax reduction is granted for properties occupied free of charge as a primary residence by the owner's close family. This reduction also applies to Moroccans residing abroad, provided the property is used as their primary residence.
Property Income Tax
To make your real estate investment in Morocco profitable, you may consider renting it out. This will generate rental income, which is subject to taxation in Morocco. As a reminder, the tax treaty between France and Morocco states that taxes must be paid in the country where the property is located.
Previously, the taxable base for this tax was calculated from the total gross rent received during the year, with a 40% deduction applied. However, Morocco’s 2019 Finance Law changed the property tax system.
Since the 1st January 2019, the taxable gross income is now calculated by adding the total gross rent received plus any expenses borne by the landlord but charged to the tenant (such as fire insurance premiums) and subtracting the expenses paid by the owner (such as property management fees, concierge salary, etc.). This new method more accurately reflects the actual income, making the former 40% deduction obsolete.
If the taxable gross income is less than 30,000 dirhams, the owner is exempt from property tax. Beyond this amount, the tax rate is 10% for rental income below 120,000 dirhams and 15% for rental income equal to or above 120,000 dirhams.
Tax on Real Estate Capital Gains
The TPI (Taxe sur le Profit Immobilier) applies to capital gains made when reselling a property. The standard rate is 20%, but it can increase to 30% for undeveloped land in urban areas.
