Moroccan Tax Authorities Probe High-End Real Estate Developers Over Cash Payments

It all started with denunciations from dissatisfied clients. According to sources at Hespress, these denunciations contain accusations against large real estate developers, the majority of whom specialize in the marketing of high-end housing (luxury housing). They accuse them of having demanded additional payments beyond the declared value of the property in the sales contracts. While the developers have committed to bearing the costs in the event of a tax review, to provide them with documentary guarantees as well as the study of reference prices in the geographical area concerned, in order to pay the tax on real estate profits (TPI) without arousing the suspicions of the tax control services, some clients have refused to pay in cash during commercial transactions.

Based on a thorough analysis of the tax returns of real estate developers, particularly with regard to the selling prices of properties, the tax inspectors found that these prices were declared lower than the reference prices per square meter updated by the DGI and the National Land Registry Agency. It was also found that the requirement made to clients by large real estate developers to pay in cash during commercial transactions is a practice that has intensified in recent times with the rise in land prices and the increase in the costs of construction materials and labor, particularly in high-end housing projects.

Another finding: some real estate developers have tried to circumvent the law and protect themselves against any tax prosecution by forcing their clients to sign annexes to the contracts, by which they agree to pay additional sums in exchange for additional work or improvements to the property.

Trying to curb the practice of "black" and reduce the volume of tax revisions in the real estate sector, the DGI has put in place the "prior notice" procedure governing the taxation of real estate profits. Governed by Article 234 quater of the General Tax Code, this procedure applies to the transfer of real estate or related real rights. It allows the taxpayer to submit a request to the DGI to know the net taxable profit, as well as the amount of tax to be paid, which protects him against any subsequent tax revision. And it is up to the administration to respond to this request within a specified time.