Real Estate Investment Taxation

Framework Applicable to International Investors

Moroccan real estate taxation applies to foreign investors under identical conditions to those of residents. It is based on formalized and predictable rules, the understanding of which constitutes a key element of any wealth management strategy.

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1. Acquisition Taxation

When purchasing residential property, fees include:

• Registration duties: 4% of the acquisition price
• Land registry fees: approximately 1.5% of the price
• Notary fees: 1% of the sale price excluding taxes (excl. VAT), plus applicable VAT

In practice, the overall acquisition cost is around 6% to 7% of the property price.

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In Case of Mortgage Financing

Additional fees apply:

• 1% of the loan amount (mortgage registration duties)
• Approximately 1.5% of the guaranteed amount (mortgage registration with land registry)
• Additional notary fees

The overall cost related to the mortgage represents approximately 2.5% to 3% of the loan amount, excluding bank charges.

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2. Taxation During Ownership

Local Taxes

Built properties are subject to:

• Housing tax
• Municipal services tax

These taxes are calculated on the rental value of the property and remain moderate by international standards.

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3. Taxation of Rental Income

Long-term Rental

Rents are taxed in the property income category:

• Standard deduction of 40%
• Taxation of the balance according to the progressive income tax scale (marginal rate up to 38%)

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Seasonal Rental

The tax classification depends on the level of organization of the activity.

• If classified as property income → 40% deduction and progressive scale
• If classified as professional activity → taxation on actual profit, with application of professional income tax or corporate tax if held through a company

In certain cases, the activity may be subject to VAT (20%).

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4. Taxation on Sale

The taxation applicable upon resale depends on the ownership structure.

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A. Individual Ownership (Natural Person)

The sale is subject to tax on real estate profits.

• Rate: 20% of the taxable net capital gain
• Minimum taxation: 3% of the sale price

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Determination of Net Capital Gain

The capital gain corresponds to the difference between:

• The sale price
• And the adjusted acquisition price

The adjusted acquisition price consists of:

1. The initial purchase price
2. Acquisition costs:
   • either at a flat rate of 15% of the acquisition price,
   • or actual justified costs if higher
3. Duly justified improvement works
4. Application of a revaluation coefficient published annually by the tax administration

The notary calculates and withholds the tax at the time of sale.

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B. Ownership Through Company

When the property belongs to a Moroccan company:

• The capital gain is integrated into taxable income
• It is subject to Corporate Tax (IS)
• The 3% minimum does not apply

The upper Corporate Tax rate can reach approximately 31% depending on the profit level.

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VAT

The resale of an existing residential property is in principle not subject to VAT.

VAT at the rate of 20% may apply notably:

• In case of sale of a new building
• Within the framework of a development or similar activity

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5. Principal Residence

In case of actual occupation of the property as a principal residence in Morocco, a capital gain exemption may apply subject to duration and justification conditions.

Prior analysis is recommended to secure eligibility.

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6. Repatriation Guarantee

When the initial investment was made in foreign currency and declared in accordance with exchange regulations:

• The invested capital
• Rental income
• The net capital gain

May be freely transferred abroad.

Preservation of the exchange certificate is essential.

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Summary

For an investment exceeding €1M, the Moroccan tax framework is based on:

• Controlled acquisition duties
• Capital gain taxed at 20% for individuals
• Legal minimum of 3% of the sale price
• 15% flat rate applicable to acquisition costs
• Corporate tax applicable in case of corporate ownership
• VAT limited to specific cases
• Regulated guarantee for capital repatriation