Buying Property in Morocco | Essential Guide | Morocco
Why invest in property in Morocco?
“90% of all millionaires become so by owning property” ANDREW CARNEGIE
It is no shock that over half of the people on ‘The Times
Rich list’ have made their money via property.
A house acquired for approximately £5000 in the 1970’s
would be worth approximately £250,000 today, an increase of almost 5000%.
In certain locations, in Morocco apartments and houses
have doubled in value over the last 3-5 years.
On average a property doubles in value every 7 years.
All the above are just a few examples of why property has been the most
consistent investment over the last 20 - 30 years.
Supply & Demand in Morocco
The main reason for the constant increase in property
values can be explained by using basic economics. If the demand for
a commodity exceeds the supply, the price will always rise. Population
growth compared to the lack of new houses available continues to generate
price increases. Leverage and the use of OPM (Other People’s Money)
One of the reasons why more people are now investing
in property than ever before is the increased availability of finance
(mortgages).
If you were to acquire £100,000 worth of shares, it would
cost you personally £100,000 . If you wanted to acquire a £100,000 investment
property, you could generally borrow at least 70% (£70,000) and therefore
only need to fund 30% of the acquisition personally (£30,000) . A Quick
comparison
Therefore, your investment has risen by 5 times more
by investing in property than in shares, by using leverage & OPM
(other people’s money).
Risk
Also, £100,000 invested in shares could obviously rise
in value. The decline of the dot-com industry recently illustrated how
quickly a £100,000 investment can be reduced to zero.
The probability of a £100,000 property becoming worthless
is virtually zero. There are of course peaks & troughs in the property
markets but historically, property always rises in value over the medium-long
term.
Options
The other major advantage of Property is the options
you have as an investor. If you want to make a ‘quick profit’ you can
Buy to Sell (also known as buy to turn), whereby you merely sell the
property on as quickly as possible. Alternatively you can Buy to let,
whereby you keep the property and it generates a regular income for
you. See other sections of this website for further details on Buy to
Sell and Buy to Let.
Why invest in Morocco?
With miles of un-spoilt beaches & the same warm,
sunny days experienced by other Mediterranean resorts, the attraction
is clear from the outset.
The Attraction
* Property prices 50% less than other European
resorts
* Low cost of living
* Beautiful Golf Courses, Tennis Clubs, & Riding Clubs
* Mediterranean climate
* Yacht club & berth fees for under £27/month
* 10 year build guarantee (similar to NHBC)
* French, Spanish & English widely spoken as well as traditional
Arabic
* Costa del Sol is just 30 minutes away by hydrofoil once past the border
* Moorish culture at its best
* Enjoy a luxury lifestyle for very little
It's Financial Benefits
Morocco offers additional benefits from a financial standpoint
which makes it a highly attractive prospect for purchasers:
* Low property taxes
* Safe investment – Notary supervised property registration similar
to France & Spain
* Easy repatriation of investment should you re-sell in the future
* Only 20% tax on any capital gains
* Property market booming – average rises of 15% per year achievable
* Rental occupancy reaching 85% most years during the Peak Season
* 70% mortgages available with current 7% mortgage rates
Currency in Morocco
A Euro equals 10.8 Dirhams, & a Sterling Pound equals 16.3 Dirhams. The unit of currency is
the Dirham (Dh), which is divided into 100 centimes. Business visitors
are advised to consult their banks for the current rate of exchange.
No import of Dirhams is allowed. Overseas visitors need to change their
currency into Dirhams locally.
The Moroccan Central Bank
(Bank Al Maghreb) fixes the value of the Dirham using a basket of currencies
including the Euro, Dollar and Yen. The Dirham is not yet fully convertible.
Mortgages in Morocco
At Azure Overseas Property Limited we work with you to secure
the most attractive and flexible Moroccan mortgage. We have built
a strong relationship with several of the largest banks in Morocco such
as Credit Du Maroc and BMCE.
Current interest rates are at about 7% for a variable rate mortgage.
Our banks will loan you up to 35% to 40% of your net salary without
prior credit checks or confirmation of existing obligations.
The mortgages are 70% of the property sale price for non-resident
foreign propety owners.
We have built special agreements with the banks so that we can often
get your loan approved in 24 hours.
In order to facilitate this, you will need to have the following paperwork
ready:
EMPLOYEES:
1. Attestation of employment
2. Bank statements (the last six months)
3. Your pay stub (the last three months)
BUSINESS OWNERS:
1. Company statutes (Bylaws) (showing who owns company)
2. Certificate of incorporation
3. Company tax statements (the last two years)
4. Bank statements (the last Six months)
The Moroccan Tax System
The Morocco tax system is modeled after the French
system and has quite a few complexities. We always consult and work
closely with our international tax advisers prior to offering our investors
tax reduction strategies.
The following information is a very basic guide to
the Morocco tax implications for UK investors:
BAND HOLD/LET STRATEGY ?
PERSONAL INCOME TAX ON RENTAL INCOME (IGR)
UK investors utilizing a buy let strategy will be
responsible to pay tax on this income. In Tangier 60% of this
income is taxable at 22% (other parts of Morocco are taxed at 44%).
The city of Tangier has a 50% reduction on rental income tax adding
yet one more advantage to invest in Tangier.
There is also a three year exoneration for the first
three years the property is owned.
PROPERTY TAX (Taxe Urbaine) (Personal vaction
home option)
Property taxes are paid annually. The first
five years owners have full exoneration (Property agencies are NOT included).
After 5 years the tax is based on the property's annual rental value.
This is done with a graduated tax table:
< 3000 dh
0%
between 3001 and 6000 dh
10%
between 6001 and 12000 dh
16%
between 1201 and 24000 dh 20%
between 2401 and 36000 dh
24%
between 36001 and 60000 dh
28%
> 60,000 dh
30%
There is a 75% discount if the home is
your permanent or vacation home residence.
PROPERTY RENTAL TAX (Taxe Urbaine) (Investor
option)
Investors pay 13.50% on the rental value
of the property.
GARBAGE COLLECTION TAX (Fiscalite des
collectivites locales)
There is a 5 year exoneration from the garbage collection
tax. Tax is levied at 10% of the property's annual rental value.
BUY AND SELL STRATEGY
CAPITAL GAINS TAX (Taxe sur les Profits Immobiliers
- TPI)
Capital gains tax is 20% of profit with a minimum
of 3% of the sale price. TPI is based on the sale price less the
purchase price.
Purchase price includes the following:
-
Credit expense
-
Registration cost
-
Notary fees and tax
-
Repairs
-
Brokerage fees
-
Inflation (based on a government table)
The second option in calculating the purchase price
is to just add 15% to the purchase price. This option is often
used in the case that invoices are not available to justify the expenses.
EXONERATION FROM CAPITAL GAINS
-
The property is sold after owning it for more than ten years.
-
The property is owned for more than 5 years but less than 10 years.
In this case the TPI tax 10% of any capital gain over 1 million
dirhams.
INHERITANCE TAX
This tax is 0% for family members. Expert
advice should always be obtained prior to implementing any inheritance
tax planning strategies.
The most important piece of advice we can offer on
this subject is – make a Moroccan will!
UK-MOROCCO TREATY
There is a double tax treaty between the UK and
Morocco that ensures investors do not suffer Capital Gains tax in both
countries.
CORPORATE TAX
If you intend to purchase a number of Moroccan properties
it may well be worth considering establishing a Moroccan Private Limited
Company –The private limited company (SARL) (Setup time is about 3 weeks).
The SARL is an intermediate type between associations
of persons and of capital, bearing resemblance to both partnerships
and share companies. It is always a trading company, regardless of its
corporate name and its minimum equity capital is 100,000 dh. It may
be formed by two or more members who are only liable to the amount of
their share of the equity capital in the company. Unlike a general partnership,
members of a private limited company do not need to be registered merchants.
The private limited company must file a memorandum
of association as part of its incorporation process. The capital stock
has to be fully described and paid up as the company is formed. Stocks
shall have the same face value and are not negotiable; they may be transferred
only through contracts. "Parts Sociales" may be transferred to third
parties outside the company only with the co-associates' consent.
-
Tangier is 50% of the tax rate in the rest of the country.
-
8.75% for the first 5 years
-
17% after 5 years
Again remember that the Moroccan tax system
is quite complex so alway get expert tax advice before making an investment.
< Property in Morocco