The Government incentives to UK buyers include:
0% tax on rental income for the first 5 years
0% capital gains tax if profit is under the ?40K or after 10 years of ownership
0% inheritance tax when a property passes to a family member
100% repatriation of funds when you sell
THE TAX SYSTEM
The Morocco tax system is modeled after the French system and has quite a few complexities. We always consult and work closely with our international tax advisers prior to offering our investors tax reduction strategies.
The following information is a very basic guide to the Morocco tax implications for UK investors:
BUY AND HOLD/LET STRATEGY
PERSONAL INCOME TAX ON RENTAL INCOME (IGR)
UK investors utilizing a buy let strategy will be responsible to pay tax on this income. In Tangier 60% of this income is taxable at 22% (other parts of Morocco are taxed at 44%). The city of Tangier has a 50% reduction on rental income tax adding yet one more advantage to invest in Tangier.
There is also a three year exoneration for the first three years the property is owned.
PROPERTY TAX (Taxe Urbaine) (Personal vaction home option)
Property taxes are paid annually. The first five years owners have full exoneration (Property agencies are NOT included). After 5 years the tax is based on the property's annual rental value.
This is done with a graduated tax table:
< 3000 dh 0%
between 3001 and 6000 dh 10%
between 6001 and 12000 dh 16%
between 1201 and 24000 dh 20%
between 2401 and 36000 dh 24%
between 36001 and 60000 dh 28%
> 60,000 dh 30%
There is a 75% discount if the home is your permanent or vacation home residence.
PROPERTY RENTAL TAX (Taxe Urbaine) (Investor option)
Investors pay 13.50% on the rental value of the property.
GARBAGE COLLECTION TAX (Fiscalite des collectivites locales)
There is a 5 year exoneration from the garbage collection tax. Tax is levied at 10% of the property's annual rental value.
BUY AND SELL STRATEGY
CAPITAL GAINS TAX (Taxe sur les Profits Immobiliers - TPI)
Capital gains tax is 20% of profit with a minimum of 3% of the sale price. TPI is based on the sale price less the purchase price.
Purchase price includes the following:
? Credit expense
? Registration cost
? Notary fees and tax
? Repairs
? Brokerage fees
? Inflation (based on a government table)
The second option in calculating the purchase price is to just add 15% to the purchase price. This option is often used in the case that invoices are not available to justify the expenses.
EXONERATION FROM CAPITAL GAINS
The property is sold after owning it for more than ten years.
The property is owned for more than 5 years but less than 10 years. In this case the TPI tax 10% of any capital gain over 1 million dirhams.
INHERITANCE TAX
This tax is 0% for family members. Expert advice should always be obtained prior to implementing any inheritance tax planning strategies.
The most important piece of advice we can offer on this subject is ? make a Moroccan will!
UK-MOROCCO TREATY
There is a double tax treaty between the UK and Morocco that ensures investors do not suffer Capital Gains tax in both countries.
CORPORATE TAX
If you intend to purchase a number of Moroccan properties it may well be worth considering establishing a Moroccan Private Limited Company ?The private limited company (SARL) (Setup time is about 3 weeks).
The SARL is an intermediate type between associations of persons and of capital, bearing 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 dh. 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 shall have the same face value and are not negotiable; they may be transferred only through contracts. "Parts Sociales" may be transferred to third parties outside the company only with the co-associates' consent.
? Tangier is 50% of the tax rate in the rest of the country.
? 8.75% for the first 5 years
? 17% after 5 years
Again remember that the Moroccan tax system is quite complex so alway get expert tax advice before making an investment.
