Moroccan Tax Authorities Intensify Audits on Luxury Real Estate Developers

It all started with the declarations made by these developers at the tax offices in Casablanca and Marrakech. The tax inspectors suspect manipulation of tax returns and blocking of the "prior opinion" mechanism provided for in Article 234 bis of the General Tax Code. The "projects concerned are mainly located in residential areas where the urban planning has been modified, particularly those where villas have been converted into apartment buildings," reports Hespress, stating that these transformations "have been closely scrutinized by the tax authorities." The latter have noted serious inconsistencies in the declarations of the selling prices of real estate properties.

The tax inspectors discovered that the property prices declared by the developers were often well below the market reference prices, regularly revised by the Directorate General of Taxes (DGI) and the National Agency for Land Conservation, Cadastre and Cartography. These real estate developers would have discreetly imposed undeclared amounts on clients, under dubious headings. This fraud has intensified in recent months, causing a surge in land prices and an increase in the costs of construction materials and labor, particularly in the luxury housing sector. In addition, the lack of new high-end properties on the market, especially in Casablanca and Marrakech, where demand remains extremely high, has exacerbated the situation.

Some real estate developers have directed their clients to specific notaries. A way to circumvent the provisions of Law No. 31-08 on consumer protection. They are also accused of having violated the rules by failing to request a "prior opinion" from the tax administration before concluding the sales, a procedure intended to guarantee the fiscal transparency of the transactions. They have indeed used their dominant position on the market to pressure clients to waive this crucial step, under the pressure of quick decisions related to the scarcity of goods. Clients have also complained about this to the tax authorities.

Other real estate developers would have laundered the funds that should have been paid to the Moroccan treasury. "In addition to the main sales contract, they impose on their clients the signing of ancillary contracts, under the title of "additional finishing work" or "custom-made materials", which can represent up to 25% of the property value." They did not disclose these contracts to the tax authorities.