Income Tax in Morocco: In what cases are you exempt?

The applicable rate of Income Tax in Morocco is 20%, however, there are conditions allowing for its exemption.

The loss of exemption from Income Tax (TPI) is possible in certain cases.

Foreigners are subject to the same exemption conditions as Moroccans or Moroccans residing abroad.

You have probably already heard of the famous Taxe sur le profit immobilier, commonly referred to by its abbreviation TPI. As a brief reminder, this is an income tax imposed upon the sale of real estate. This tax applies to the real estate profit made by the person wishing to sell their property (villa, land, etc.). Regarding the applicable rate for the tax, it is set at 20% on the capital gain realized from the sale price, with a minimum of 3% of the selling price. In the case of a zero or negative capital gain, you are still liable for a minimum tax of 3% on the selling price of your property.

Under what circumstances is it possible to benefit from exemption?

Often when discussing TPI, exemption is also mentioned. The Tax Authority outlines several cases of TPI exemption. Exemption takes effect when it involves a residence used as a principal dwelling for a minimum of 6 years, and if the sale price is less than 4,000,000 MAD. Therefore, secondary residences are not exempt from TPI. It should be noted that the exemption is granted on the land where the house is built, with a maximum limit of 5 times the built-up area, and the "remaining" area will be taxed. This is often the case with large "Riads" and "Guesthouses" in cities such as Marrakech where there are vast plots of land. In terms of exemption, sales of property between ascendants and descendants and between spouses are also exempt from TPI. Thus, if you want to sell your real estate between ascending and descending parties (parents, children, brothers, sisters), you will be exempt.

Loss of exemption

It is possible in certain cases to no longer be eligible for TPI exemption, so it is important to be aware of the shortcomings that can lead to this. It is important to know that a one-year period is allowed for the realization of the sale, meaning that one has the right to vacate their house one year before being able to sell it. Beyond this year, the right to exemption is lost. The right to TPI exemption is also lost if the property to be sold is rented, as in this case, it is no longer considered a principal residence.

Note that these exemption rights are also valid for foreigners as they are covered by the same taxes governing real estate transactions in Morocco.