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A Guide to the taxes applicable in Morocco
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.
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.
Tax Reductions In Morocco
Foreign investors in real-estate businesses enjoy a convertibility system, which facilitates:
- The transfer of income produced by these investments
- The transfer of the product of a sale or a transfer of the investment
Investors in real-estate also have tax exemptions from and tax reductions in the following taxes:
- Urban Tax for new constructions for 5 years
- TPI (tax on profits from property) for the first sale of local authority housing
- The "patente" for 5 years starting from the beginning of a fiscal year of a professional activity, an industry or a business
- The tax that all undeveloped sites are subjected to, if the plot of land is subjected to the "taxe d'édilité" and is worked by companies which are in business or if the plot of land has been bought less than 5 years before
- Tax on construction deals for local authority housing
- "Droit d`enregistrement": 2.5% reduced rate for the acquisition of premises for professional use or of plots of land
- "T.V.A": 14% reduced rate for renovations, repairs or building works