Moroccan Expats Face Surprise Tax on Free Family Housing

As soon as the property is neither rented nor occupied by a direct relative (child or ascendant), the owner is considered to have received a taxable rental income.

A notion of income... even without rent

Contrary to what one might think, property tax does not apply only to rents actually collected. The Moroccan tax authorities consider that the mere fact of allowing someone to occupy a property, even free of charge, constitutes a benefit in kind, and therefore income to be declared.

Thus, if an MRE makes housing available in Morocco, free of charge, to a person other than his children or parents, he will have to declare it as rental income, just like a standard rent.

A 40% deduction, but mandatory taxation

The guide provides for a flat-rate deduction of 40% on rental income before calculating the tax. This means that only 60% of the estimated rental value of the property will be subject to tax. But this does not in any way exempt from the declarative obligation.

Example: a villa left free of charge to a cousin, estimated at 50,000 dirhams per year in rental value, generates a taxable base of 30,000 dirhams after deduction. This amount then falls within the progressive income tax scale.

Exempt cases: children and parents only

However, there are two clearly defined exemption cases by the tax authorities:
• If the property is made available free of charge to the owner’s children,
• Or to his ascendants (parents).

In these specific cases, no tax is due, and the housing is not considered to be income-generating. For all other cases (brothers, sisters, cousins, friends...), taxation applies fully.

Declaring rental income: an annual obligation

Every MRE who owns property in Morocco is required to declare their rental income every year, even if they do not receive any rent. This declaration is made electronically, via the portal of the General Directorate of Taxes (DGI), before March 1st of the year following the year of occupancy.

The payment of the tax is required according to the progressive rates applicable to the entire household income. Only an option for the 20% liberatory rate, in certain cases of rental to professionals or legal entities, can exempt from the declaration.
Essential vigilance to avoid unpleasant surprises

Tax audits targeting undeclared properties or free provisions are becoming more and more frequent. In case of non-declaration, the owner is exposed to adjustments and late payment penalties.

To avoid any unpleasant surprise, it is essential that MREs:

• Correctly identify the occupant of the housing,
• Verify if it falls within the exemption cases,
• Declare their estimated rental income as soon as necessary.

What to remember

Providing housing free of charge to a relative does not mean that this property is invisible to the tax authorities. Except for the cases strictly defined by law, this free occupancy is assimilated to an implicit rent, and subject to tax.

It is better to anticipate the declaration than to have to justify, afterwards, a non-existent exemption.