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-   -   Tax Implications of owning property (http://www.propertyforum.com/forum/morocco-property/8470-tax-implications-owning-property.html)

redangel7861 25-06-2008 04:47 PM

Tax Implications of owning property
 
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.

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.

camel with three humps 26-06-2008 09:14 AM

Thank you for posting the above. Should be helpful to many people. The above is the theory, have you done any research on the practicality, working & the practise.

Certain, horror cases, not conforming to your above posting has already been posted on the forum. Eg, Notary not accepting a sale price & suggesting that the sale price was higher than declared, limitation/capping of foreign exchange repatriation.

redangel7861 26-06-2008 09:19 AM

Quote:

Originally Posted by camel with three humps (Post 61228)
Thank you for posting the above. Should be helpful to many people. The above is the theory, have you done any research on the practicality, working & the practise.

Certain, horror cases, not conforming to your above posting has already been posted on the forum. Eg, Notary not accepting a sale price & suggesting that the sale price was higher than declared, limitation/capping of foreign exchange repatriation.

Hi Camel.

That's why I requested this thread was a "Sticky" as to encourage debate on this matter. Your correct, it is what should happen in an ideal situation, buy not what happens in practice. That's why it's good that people do post their experiences with regards to what happens when they come to actually sell their property, as when the rest of us decide to sell in 5-10 years we know what to look out for and what to expect.

Most of us have purchased off-plan developments and are some way from completion, hence selling the property. It will be interesting to see how the application of the tax laws develop and if there is improvement over the years as more people beging to sell and lock in profits.

Rgds
RED

camel with three humps 26-06-2008 09:26 AM

Red: Thank you for your prompt reply. I agree that we all should be as enlightened as possible. Apart from the Capital gains tax. I also understand that the five year exemption for
Fiscalitè des collectivites locales (Refuse Collection Tax) & Taxe Urbaine (Property Tax) is also not strictly five years and have heard that some of demand specially refuse collection has been made after two to three years i.e. buy the time the collecting authority got the files or decided that they need some money.

badiabestland 01-07-2008 12:51 PM

thank u
 
Thank you for posting the subject

Cockatooz 24-07-2008 01:00 PM

That's really useful tax info, thanks.

Can anyone also advise re: tax succession ie if a married couple who are not Moroccans purchase a property in joint names, does the property automatically pass the the surviving spouse? Does this happen automatically with or without a will

Thanks

camel with three humps 24-07-2008 01:13 PM

I am no expert on Moroccan Tax affairs. I however know that any transfer on the death of one of the owners The property passes Tax free to the other. This is in so far as tax goes

In view of the above I personally, don't see the need for buying in both names. I do not know under Moroccan law as to what is the distribution position between off springs, second, third wife & there off springs etc.

As, Morocco has adopted the French system, I suppose that the lenders/notary may insist on it.

esmerelda 24-07-2008 09:20 PM

Quote:

Originally Posted by Cockatooz (Post 66946)
That's really useful tax info, thanks.

Can anyone also advise re: tax succession ie if a married couple who are not Moroccans purchase a property in joint names, does the property automatically pass the the surviving spouse? Does this happen automatically with or without a will

Thanks

This is not strictly regarding the tax issues but you should make a will if you hold any assets in Morocco. A wife will not necessarily inherit the husband's estate...if for example she has sons. Also for those with children, moroccan law allows for an equable split of the estate if the children are all boys...but if you have daughters, their "portion" must be explicitly stated. or they will not be treated as equal to the sons.

Re the actual practise in the field so to speak.... it is quite common for the purchase price to be under declared. (this is on older traditional properties) Also if you are buying one od theses types of properties as opposed to new build, you must check the tax situation of the sellers. We checked on 2 houses we bought last year & discovered that in both cases the owners had not paid tax for 13 years. Needless to say the tax was taken from the purchase price by the adul to settle the bill before we agreed to proceed!

traceyw8727 27-07-2008 06:30 PM

Quote:

Originally Posted by camel with three humps (Post 66952)
I am no expert on Moroccan Tax affairs. I however know that any transfer on the death of one of the owners The property passes Tax free to the other. This is in so far as tax goes

In view of the above I personally, don't see the need for buying in both names. I do not know under Moroccan law as to what is the distribution position between off springs, second, third wife & there off springs etc.

As, Morocco has adopted the French system, I suppose that the lenders/notary may insist on it.

I believe there are tax advantages of purchasing in joint names eg. on sale you could both claim your annual exemptions for capital gains tax (uk Tax) and also if you rent out the property, the income can be shared for tax purposes which may be beneficial depending on your respective income positions.

Tangier 09-08-2008 03:00 PM

Quote:

Originally Posted by traceyw8727 (Post 67489)
I believe there are tax advantages of purchasing in joint names eg. on sale you could both claim your annual exemptions for capital gains tax (uk Tax) and also if you rent out the property, the income can be shared for tax purposes which may be beneficial depending on your respective income positions.

Hi i have been there and done it its not like he has said it will do your head in now i have sold my property i am going to invest in spain ????? good luck


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