Property income in Morocco: what will change in 2023 ?

If you are a property owner and you rent out your property or are considering doing so, here's what you need to know about taxation in this regard and the changes brought about by the 2023 Finance Law.

Rental Income : What Does It Refer To?

Rental income refers to the income generated from the leasing of real estate properties. This includes houses, apartments, offices, and even land.

These income sources include the rent received, as well as ancillary income such as rental charges collected from tenants or insurance compensation received in case of damage.

In Morocco, rental income is subject to income tax.

Income Tax on Rental Income: What's the Basis ?

Income tax on rents is calculated based on the taxable gross income. It is calculated as follows :

Amount of rent received + expenses borne by the owner charged to the tenant - expenses paid by the owner

Gross taxable income below 30,000 dirhams used to be exempt from property tax until recently.

Beyond that, two tax rates apply:

• 10% for incomes below 120,000 dirhams
• 15% for incomes exceeding 120,000 dirhams

Declaration and Payment of Income Tax on Rental Income for Individuals :

If you plan to rent out a property you own, the declaration and payment procedures may vary depending on the circumstances.

Scenario #1 : You rent out your property to individuals

The income received should be declared annually via the internet, and the tax must be paid before March 1 of the following year.

Scenario #2 : You rent out your property to professionals*

In this case, it is the tenant who is responsible for remitting the tax through an annual declaration. This is known as withholding at source.

*Professionals refer to "legal entities of public or private law and natural persons whose professional income is determined under the regime of real or simplified net income, who pay rents to natural persons."

2023 Finance Law : What Are the Changes ?

The 2023 Finance Law makes adjustments to the taxation of rental income. Here are the main points:

• Rental Income below 30,000 dirhams

Rental income below 30,000 dirhams is no longer exempt from tax. Therefore, you will be required to pay tax on it.

However, professional tenants who rent from individuals for annual amounts below 30,000 dirhams are exempt from withholding at source.

• Withholding at Source

Except for annual amounts below 30,000 dirhams, this regime is still in place (exclusively for professional tenants as defined earlier). However, the applied rates are no longer liberating. This means that property owners are now obligated to declare their rental income.

• Reinstatement of Deduction

It had been abolished in 2019 and is now reinstated. Gross rental income benefits from a 40% deduction. Agricultural properties are excluded from this provision.

Please Note :

If you received rental income in 2022, you were required to file an annual declaration for these income sources and pay the corresponding tax before March 1, 2023, in accordance with the previous tax regime of Article 82 ter of the CGI. However, if you receive rental income from January 1, 2023, onwards, you are subject to the new tax rules of the 2023 Finance Law.

Salima Hamrini Editor and journalist specializing in real estate.

25 Oct 2023