MOROCCO How To Buy / The Tax System

The Buying Procedure

Once you are decided about the property you wish to purchase, you will sign a 'Sale contract' (or a 'Sale promise' in case of mortgaging) in the presence of your notary or solicitor. You will then be required to pay a deposit and when the file is ready, you and the seller will sign the transfer of property and you will then be required to pay the remaining costs; the stamp duty and other fees, including notary fees, will be deducted from your deposit), at this stage temporary certificate of ownership will be issued by the notary and when all the paperwork and legal requirements are completed by the notary, the title deeds will be issued, this normally takes a couple of months), of course this procedure will vary in the case of a new, off-plan property

Taxes & Fees Payable on a property purchase

• Land registry fees: 1%
• Registration fees: 5% if property is sold within 5 years, 3% after that period
• Notary fees: 1% to 2% (based on the purchase price and set on a sliding scale, these fees are levied at the Notary and paid to the relevant Government department or Local Authority)
• Notary tax: 0.5%
• 2,500 euros set purchase fee

The Moroccan Tax System

The Morocco tax system is modelled after the French system and has quite a few complexities. For this reason it is better to obtain expert tax advice before making an investment.

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) 'Income Tax'

This applies to the incomes of both individuals and partnerships These incomes are:
Salaries
• Incomes from a professional activity
• Incomes and profits from securities, stocks and shares
• Incomes from farming
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 three years of property ownership.

" I.S." Tax ( Impôt sur les Sociétés) 'Corporation Tax'

If you intend to purchase a number of Moroccan properties, it may well be worth considering establishing a Moroccan Private Limited company or S.A.R.L, which normally only takes approximately three weeks. The SARL is an intermediate type vehicle, between an association of persons and a company that has share capital, bearing a resemblance to both partnerships and share companies. It is always a trading company, regardless of its corporate name and its minimum equity capital is 100,000 dirham. It may be formed by two or more members, who are only liable to the amount of their share of the equity capital in the company. Unlike a general partnership, members of a private limited company do not need to be registered merchants. The private limited company must file a memorandum of association as part of its incorporation process. The capital stock has to be fully described and paid up as the company is formed. Stocks must have the same face value and are not negotiable; they may be transferred only with the co-associates` consent. The tax rate for this type of company is again 50% less in Tangiers compared to the rest of Morocco and is based at 8,75% for the first 5 years and 17% after that time.

Property Tax

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.

"Droit d`enregistrement" 'Registration fees'

This applies to:
• Transfers of buildings between living persons and property titles or free of charge or against payment as an arm's length transaction
• Long-term leases of property companies
• The transfers of shares in property companies or the transfers of partnerships shares
With regard to transfers, the fees are 1%, 1.25%, 2.5%, 5% or 10% according to the nature of the property, which is the subject of the transfer or the contribution.
The taxes relating to deeds of partnership are:
0.25%, 0.5%, 2.5% or 10% according to the nature of the assets invested.
There is also "Droit de timbre", which is the equivalent of Stamp duty.