Guide to Investment in Morocco The Guide cannot be considered to take the place of a detailed study of each operation, but it can be used as a tool to get a general overview of the steps to be taken to acquire and register the ownership of Real-Estate property in Morocco, and which are the following: FIRST.- Reserving the Property The first step must be a formal offer for the property, which, once the basic terms of the transaction (price and object) have been discussed with the Seller, are generally drafted into a Purchase Commitment Contract or an Option-to-Buy Agreement, ratified by payment of a deposit by the Buyer. This contract binds both parties to reciprocally purchase and sell, and the Buyer risks losing the deposit if they breach it and the Seller risks having to return double the amount paid in deposit, if they are whom fail to fulfil the obligation of completing the sale. It is advisable to, while the Purchase Commitment Contract or the Option Agreement are still in effect, verify the property's situation regarding liens, encumbrances or debts that could be affecting it as well as the registration, making sure that the Seller is holder of the title deed for the property we wish to acquire and therefore has sufficient legitimacy to enter into the sales contract. SECOND.- Private Sales Contract Once the situation of the property and its title deed have been verified, the private sales contract may be signed. It differs from the Purchase Commitment Contract in that it must contain the business details such as the method of payment of the purchase price, date of delivery of the property, penalties in the event of incompliance by either of the parties, etc. Normally, upon signature of the private sales contract, the Buyer delivers an amount of money towards the entire purchase price, in other words, not as a deposit, but as part of the total price and which is deducted from the total. This amount paid at the moment of signature of the purchase contract shall not be reimbursed should the Buyer back out of the contact. Depending on the conditions agree upon with the Seller, several payments may be made towards the final purchase price and at certain times, such as upon obtaining the construction permits, or at different points of the construction of the property. These payments shall also be discounted from the total purchase price at the time when the public purchase deed is granted. THIRD.- Granting the Public Purchase Deed Once construction has been completed and the property fulfils the conditions agreed upon and technical requirements according to Moroccan legislation, the moment has arrived to visit the Notary Public. The Notary is the Civil Servant Legal Professional who guarantees compliance with the Law of any contracts signed in their presence, ensuring that the consent
of the parties to the agreement is duly informed and freely given. The Notary also has the obligation to advise the Parties regarding the fiscal aspects of the transaction agreed upon. The granting of the public purchase deed assumes the delivery of the property by the Seller and the payment of the price by the Buyer, minus those amounts paid towards the final price before the signature of the Deed, the remainder of which is paid to the Notary. FOURTH.- Title Deed and Registry Once the Public Purchase Deed has been formalised, and acting in representation of the Owners of the property, the Notary will present the title deed to the Property Registry to have the Ownership of the property acquired duly recorded. The Notary Public will also pay the builder once the property has been registered in the name of the Buyer. The process of recording the purchase at the Property Registry takes around two to three months, and the Notary will deliver the Title Deeds duly processed by the Registry, as proof of Ownership. The Notary shall also settle and pay corresponding taxes, in addition to the Property Registry Fees. FIFTH.- Utilities Contracts The Owner of the property must apply for utilities: supply of water, electricity, telephone, etc. To do so, they must open a bank account in a financial institution operating in Morocco, in order for the corresponding bills to be paid by standing bank order. SIXTH.- Taxation With regards to tax aspects, we find three taxes that affect property in one way or another, whether in the building process or sales procedures and that are: -
Property Transfer Tax, Land Transfer Registration and Stamp Tax: For Property Transfer and Land Registry Taxes, a percentage of the sales price is paid which fluctuates between one and six per cent, depending on how the transfer has taken place, in other words, whether a free transfer (donation) or a paid transfer (sale). In any event, the sale is taxed a 3% of the sales price. The Stamp Tax is also calculated on the sales price and the rate is between 0.5% and 1.5% of it.
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Value Added Tax (Taxe sur la Valeur AjouteĂŠ): In Morocco, VAT is the tax that covers each phase of the production process, therefore any operation that supplies goods and services must add VAT to their net prices. The percentage applicable to construction is 20%.
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Capital Gains Tax: This tax is applied to the increase in value of an urban Real-Estate property, as shown upon its sale. In Morocco 20% is applied to the price increase, with a minimum of 3% of the purchase price. The capital gains tax is the difference between:
The sales price minus expenses and The purchase price plus acquisition costs, expenses for investments carried out and interest paid for payment of loans related to the property. When the property value does not exceed 65,000 Dirhams, the tax is fully exempted. A total exemption can also be applied if the property has been the principal residence for the last eight years. The tax shall be settled and paid to the Tax Authority within 30 days of the transmission of the property. Several treaties exist to avoid double taxation for this. -
Urban Tax: This is applicable to properties used as principal residences or second homes, as well as properties used for commercial management or professional activities. The applicable rate for urban properties and plots used by their owners for professional purposes is 13.5% or a specific percentage of the value of the plot, the building on it or machinery (3% for plots, 4% for buildings and 4% for machinery). New commercial premises are exempt for the first five years and in the area of Tangier, exemptions reach 50% of the corresponding tax rate.
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Property Rates (Tax d´Édilité): This tax affects all buildings and in general, any type of construction. As a basic calculation, the amount of annual income collected as rent, or, if the building isn't leased, the yearly income, calculated in comparison, that would have been collected. The tax rate is 10% in urban areas, 6% in outlying areas. There are no exemptions applied to this tax, which is payable from the first year.
SEVENTH.- International Treaties With the intention of stimulating foreign investment in Morocco, more than 70 treaties have been concluded to prevent double taxation. These treaties have been signed mainly with developed countries, amongst which are Belgium, France, the United States, Canada, Italy, Sweden, Spain, England, Ireland, etc. In the case of Spain, the agreement to avoid double Taxation, signed on July 10, 1979 and which has been in effect since May 1985, is applied to those taxes on personal and corporate income, as well as Wealth Tax. The Treaty establishes the mechanisms to avoid the tax payer being taxed twice for the same reason. A brief explanation of the most common types of joint stock corporations in Morocco, which are the following: -
Public Limited Liabilities Company Must be incorporated by at least five partners. Its minimum share capital should be three million Dirhams for PLC's on the stock market and three hundred thousand in any other cases.
The face value of the shares may not be less than one hundred Dirhams. Nominative shares require at least a quarter of their face value to be laid out at the time they are made outstanding, while bearer shares must have been totally paid up at the time of subscription. Share capital must be totally subscribed at the moment of incorporation. The capital paid out may reach 25%, however, within a two-year period the entirety must be laid out. The PLC will acquire its legal personality upon its recording in the Commercial Registry Company House. The administrative body will be the Board of Administration. The Chairman of the Board may be dismissed at any time by agreement of the Board. The PLC comprises a Directorate and a Supervisory Board. The Directorate represents the corporation under any circumstances whilst the Supervisory Board audits the Directorate's performance.
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Limited Liability Corporation May be incorporated with a single partner. The minimum share capital is one hundred thousand Dirhams divided into participations, different from the shares. The face value of the participations may not be less than ten Dirhams. The LLC may be administered by one or more administrators, whether partners or not, who are known as “Gerants�.
Both for the incorporation of a PLC or a LLC, the following documents are required : -
Articles of Incorporation or By-Laws;
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Presentation of the Corporate Name and a negative certification from the Companies House, that the chosen name is available;
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The publication in a newspaper of the advertisements legally foreseen as well as in the Official Bulletin;
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The Outlay of the Share Capital.
With regards to taxation of Moroccan corporations we can find the following taxes: -
Corporate Tax: Taxes any income earned by the corporation. Tax rate. The general tax rate is 35%. Minimum tax: For those corporations that pay the 35% general tax rate, the full quota may not be less than a minimum, no matter what the tax results. This minimum contribution will be 0.50%. The amount of the minimum contribution may not be less than 1,500 Dirhams. Exemptions: Corporations are exempt during 36 months after their incorporation.
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National Solidarity Tax: This tax, linked to Corporate Tax, has been eliminated. However, profits and income that are totally exempt from Corporate Tax are subject to 25% of the quota which would have had to have been paid in the absence of exemptions.
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Patent Tax: This tax has been eliminated. It benefited all individuals or legal entities practising a professional, industrial or commercial activity in Morocco, during a five year period from beginning the activity. Permanent establishments or companies and corporations that do not have their headquarters in Morocco are exempt.
Š 2009 Planificaciones Mundiales S.L. The information contained herein is general in nature and is not intended to convey specific personal or corporate data or circumstances. No matter how hard we try to share information that is exact and current, we cannot guarantee that no changes will be introduced in the future or at the time when access is required. For that reason, this information should not be considered to be professional or expert counsel. For an exact and detailed study of your case, we recommend that the details pertaining to it be studied exhaustively to obtain the pertinent professional advice.