Morocco: a new tax on rentals that hurts

“Currently, individuals with property income whose gross amount is equal to or greater than 120,000 dirhams are subject to income tax at the rates of the progressive scale, as part of their global income declaration at the end of the year, after deducting, where applicable, the withholding tax applied during the year concerned at the non-final rate of 15%. In order to ensure tax fairness and simplify this method of taxation, particularly for employees and retirees, it is proposed to allow these incomes to be taxed at the final rate of 20%, with the possibility of being exempted from the annual global income declaration for said incomes,” states the PLF note. But this tax measure, which came into force this January, will not be without consequences for the activity of landlord-owners.

To read: Real estate in Morocco: the Moroccan tax authorities on alert

“This new provision, which includes a 20% property tax and a 10.5% municipal tax, will certainly have an impact on the morale of investors in rental property. This risks discouraging investment in this niche, given that stakeholders were initially encouraged to invest,” explains Yassine Meniari, general director of AYKANA Rabat real estate agencies, to Challenge. Tax fairness is at stake. “We understand the idea of adjusting taxation fairly across sectors, but the specific features of each sector must be taken into account. And above all, real estate plays a major role in the Moroccan economy,” he adds.

To read: Morocco: changes to tax on rental income

For the CEO of AYKANA Rabat real estate agencies, it is also necessary to take measures to protect investors in rental real estate. “When you find yourself dealing with tenants who have been in arrears for 3 to 4 years and you cannot do anything, the State must also take measures,” he insists. Mohamed Lahlou, president of the Casablanca-Settat Regional Union of Real Estate Agencies (URAI), for his part discusses the likely effects on rental prices. He takes a reassuring stance: “The majority of landlords are already under the tax authorities’ radar. I do not think rents will change, because there is an existing framework regulating real estate prices.”