The regulatory framework applicable to the Moroccan real estate sector is made up of a multitude of laws and decrees, which are regularly amended and completed. Most of the laws are not codified.
The main sources of real estate legislation can be found in the following texts (non-exhaustive list):
The Moroccan real estate market has been directly and heavily impacted by the COVID-19 health crisis.
The lockdown measures implemented by the Moroccan authorities have had a negative impact on real estate, such as a significant decrease in property transactions, major interruptions in the construction supply chain and a decrease in the supply of construction materials.
The risk of default in rent or loan payment remains fairly high, particularly for small and fragile businesses.
The property asset class most affected by the pandemic so far has been hotels, with operators suffering an immediate decrease in business due to the closure of the country’s borders and the enforcement of lockdown measures.
However, the recent introduction of REITs is expected to boost the real estate sector, particularly as businesses seek to reduce their exposure to real estate risks by optimising their rented assets and disposing of their unviable properties.
The impact of blockchain, decentralised financing, proptech and other disruptive technologies on Morocco's real estate sector has been fairly remote so far.
Some reforms are expected in 2021, including a new bill on urban planning documents and a new bill on industrial areas. There is also a proposal to set up a single national portal for urban planning documents, which will allow the electronic publication of approved urban planning documents.
In addition, a draft decree modifying application decree No 12-90 relating to urban planning is currently being prepared in order to simplify the construction procedure in rural areas.
The Moroccan legal framework applicable to property rights remains complex, principally due to the variety of legal regimes governing lands and the co-existence of unregistered and registered property.
Categories of Moroccan land tenure can be summarised as follows.
Rights in rem (droit réels)
Law No 39-08 forming the Moroccan Real Property Code (Code des Droits Réels) lists Moroccan rights in rem as follows:
In addition to the general rules of contract law related to sale and purchase agreements, the transfer of private registered property is governed by specific pieces of legislation, such as:
Furthermore, specific laws apply to the transfer of certain types of real estate (land belonging to the private state domain, collective lands, individual property of unregistered land (moulkiya), etc). No specific provisions are in place to deal with the industrial, office or retail sectors.
Under Moroccan Law, ownership of registered land is transferred to the buyer only when the notarised deed of sale, to be signed before a notary public, is registered with the Land Registry (Conservation foncière). Ownership is guaranteed under the Moroccan Constitution, and the title for registered land is granted by the Land Registry, which ensures that the deeds are properly registered. The information contained in the Land Registry is available to the public and can be obtained for a nominal cost. Therefore, title insurance is not a common practice in Morocco.
Due diligence reviews are generally conducted by buyers, and cover technical, commercial and legal matters.
With regard to legal matters, the review will generally concern the following:
As a result of the COVID-19 pandemic, particular attention should be paid to the way force majeure clauses are drafted.
Moroccan statutory law imposes the following guarantees on the seller, which can be extended or limited by the parties:
In a share deal, the warranties granted by the seller include typical representations and warranties relating to the company being sold (eg, the existence of the company, share capital and ownership of the shares, corporate matters, the accuracy of the accounts, the company’s activity, financial standing, significant contracts entered into by the company, employment matters, litigation, tax matters, etc).
When considering the purchase of real estate in Morocco, investors should take the following into account:
Moroccan environmental law is based on the "polluter pays" principle, meaning that the person responsible for the pollution shall be liable for damages and is responsible for taking appropriate actions to remediate such pollution. If pollution is discovered, the burden of proof rests with the property owner, who will have to prove that the pollution was generated by the previous owner or a tenant in order to avoid liability.
Zoning and planning regulations must be checked before planning a construction project and applying for a building permit.
The plans and regulations for each local region are usually available to the public for a nominal fee from the relevant local urban agency (agence urbaine), through a dedicated application form (note de renseignement) informing about applicable uses and restrictions regarding footfall, the maximum height of buildings, etc.
No agreement with public authorities is necessary in order to facilitate a private development project. However, in some cases involving a specific real estate project (mostly to promote touristic, industrial and/or artisanal projects, as well as social housing), it is possible to request and obtain an authorisation from the relevant authorities to derogate from the applicable urban regulations.
Under Law No 7-81, the Moroccan State is allowed (following a dedicated administrative and judicial procedure) to expropriate land for reasons of public necessity or for temporary use. In such cases, the expropriated entity must be compensated. The compensation is based on the current and effective damage directly caused by the expropriation according to the value of the property on the day of the decision pronouncing the expropriation.
In the case of an asset deal, the following taxes and fees are payable:
In a share deal, the following fees are due.
As a general rule, there are no restrictions on foreign investors acquiring real estate (either directly or indirectly through the purchase of a company holding real estate assets), except for specific business sectors such as agriculture, fishery, audiovisual, banking and insurance.
Pursuant to the provisions of the Dahir relating to the purchase of agricultural land in rural areas, dated 23 April 1975, foreign individuals, or entities whose share capital is held at least in part by foreign entities, are not allowed to acquire agricultural land for agricultural purposes, and may only lease such areas for up to 99 years.
However, if a foreign investor plans to carry out a non-agricultural project on agricultural lands (such as an industrial or residential project), a specific temporary and final certificate of non-agricultural purpose may be obtained from the administration, which will allow the foreign investor to acquire the land and carry out the contemplated project.
Commercial real estate acquisitions in Morocco are generally financed by real estate investors through a combination of equity (including internal financing by the shareholders) and/or banking debt.
Lenders usually require the following securities:
It is also common to obtain personal securities, such as a guarantee from a company (usually a parent company) covering cost overruns, completion, interest and principal.
The enforcement of any security in Morocco that benefits a foreign lender would result in a transfer of the enforcement proceeds outside of Morocco. As this operation is not authorised per se under the Foreign Exchange General Instruction, such a transfer would require the borrower to obtain a spot authorisation from the foreign exchange office.
Concerning repayment under a loan agreement, the General Instruction pre-authorises foreign financing under certain circumstances that would allow a Moroccan borrower to repay a loan to a foreign lender.
The registration of a mortgage generates registration duties and land registry fees, which are charged as follows.
A fixed duty (per property) of MAD100 also applies.
There are no stamp duties on credit or security agreements (subject to exceptions).
No specific fee is required for the enforcement of a security.
In addition to corporate authorisations, a Moroccan entity must ensure that the following rules are complied with when granting any security.
Secured lenders should be able to enforce a mortgage without any obstacle, provided the following conditions are met:
Pursuant to Section 169 of Law No 39-08, priority ranks from the date of registration, with same-day registration ranking equally, and maintains its rank and validity without any additional formality, until the valid registration of its withdrawal (mainlevée).
In order to subordinate a mortgage already registered in favour of a new mortgage, a specific subordination or intercreditor agreement between the concerned creditors exchanging ranks is required. The rules of subordination among creditors will be set out in that agreement, as well as rules governing the enforcement rights.
In principle, the holder of security over real estate is not liable for environmental damage, provided it did not cause the damage itself.
Under Moroccan law, a security interest granted by a borrower may not be made void if the borrower becomes insolvent.
However, borrowers will not be authorised to proceed with the enforcement of any security interest for the duration of the borrower's insolvency proceedings. Indeed, any creditor whose receivables are not privileged by law are prohibited from commencing or continuing any individual legal action against the debtor.
In addition, the insolvency court can void securities granted during the six-month period prior to the borrower's declaration of insolvency, if it is considered that granting such security is prejudicial to the borrower's bankrupt estate.
Given the anticipated expiry of the LIBOR index, parties to foreign currency facilities based on this index with a term extending beyond 31 December 2021 must pay particular attention to ensuring that the risk of LIBOR being discontinued is sufficiently covered in those agreements. This is best done by drafting interest clauses that set out fallback options if the reference rate cannot be determined (such as alternative reference rates or interest adjustment clauses).
The general principles applicable to strategic planning and zoning are set out by Law No 12-90 on urban planning.
Strategic plans and zoning schemes are established through the issue of Urban Development Master Plans (Schémas Directeurs d'Aménagement Urbain) and zoning plans (plans de zonage). Development plans (plans d’aménagement) are prepared by each municipality, dividing the area into zones of different use, and attributing building density ratios to each zone.
In practice, public law controls whether a landowner may construct a new building or refurbish an existing building by means of an administrative authorisation to be obtained prior to commencing any construction works.
Overall responsibility for regulating the development and designated use of individual parcels of real estate lies largely with local authorities, including the urban agencies and the Regional Investment Centres (Centres Régionaux d’Investissement) responsible for issuing building permits.
The following authorisations and permits are required for the construction of a real estate project (the list is not exhaustive as the situation depends on each particular project).
As an administrative act, any decision taken by the authorities must be justified and may be appealed before the relevant authority (recours gracieux) and/or the administrative courts (recours contentieux). Third parties with a specific interest that deserves protection may also file a lawsuit before the administrative authority or court and ask for the decision to be annulled.
Generally, there is no need to enter into agreements with local or governmental authorities or agencies, nor utility suppliers, in order to facilitate a development project.
A failure to comply with the applicable regulation related to construction and planning law could result in the following:
In any case, a fine ranging from MAD1,000 to MAD100,000 may be ordered against the violating party.
Furthermore, anyone who continues to operate a project despite receiving a notification to close the construction site may be punished by imprisonment ranging from 15 days to three months.
Real estate assets can be acquired either by individuals or by legal entities. Large or high-value assets are generally owned by companies, with the most commonly used corporate forms being as follows:
Law No 70-14 dated 24 August 2016 introduced real estate investment trusts (REITs) into the investment legal framework, which are known as Organisme de Placement Collectif Immobilier (OPCI).
There are two different forms of OPCI:
A joint stock company (SA) is a form of limited liability company in which the liability of each shareholder is, in principle, limited to the amount of its contributions to the company. An SA must comprise at least two shareholders. The shares in an SA are freely transferable unless otherwise provided in the company's articles of association (which may provide for restrictions on the transfer of shares, such as a temporary lock-up or prior approval clause (agrément)).
A SARL is the Moroccan form of a limited liability company. It can be incorporated as a sole shareholder company (in which case the company is a sole shareholder limited liability company – SARLAU) and may have up to 50 shareholders. The SARL is often used for smaller businesses, especially because of its lighter and simpler management organisation and process.
Contrary to a joint stock company, a SARL cannot be listed on a stock exchange and cannot issue preference shares and debt or equity securities convertible into shares.
A real estate civil company (SCI) is a civil company whose purpose is to hold real estate assets. As a civil company, in principle an SCI cannot have a commercial or trading nature. The shareholders are indefinitely liable for the company debts, in proportion to the shares they hold in the share capital.
A joint stock company requires a minimum share capital amount of MAD300,000. Contributions can be made in cash (numéraire) or in kind (en nature). Contributions in kind are subject to a specific appraisal procedure by an independent appraiser.
A limited liability company has no minimum share capital requirement. Contributions must be made in cash or in kind, with it being specified that contributions in kind are subject to a specific appraisal procedure by an independent appraiser.
A real estate civil company requires a minimum share capital amount of MAD1. Contributions can be made in cash or in kind, or may consist of technical skills (apport en industrie).
An SA can have either (i) a board of directors (conseil d'administration) or (ii) a management board (directoire) and a supervisory board (conseil de surveillance). The CEO (directeur général) is in charge of the day-to-day management of an SA and is vested with the widest power and authority to represent the company towards third parties.
A SARL is managed by one or more managers, who must be individuals and are vested with the widest power and authority to represent the company towards third parties, except for matters legally reserved for shareholders.
A real estate civil company (Société Civile Immobilière) is managed by one or more managers, who must be shareholders of the company (if the articles of association of the company are silent on this point, all the shareholders are vested with the powers and authority to manage the company).
An SA must appoint at least one statutory auditor (two if the company is listed), and is required to file its accounts annually. These accounts must be certified by the statutory auditors, closed by the board of directors and approved by the shareholders’ meeting before being filed with the local tax authorities and the trade registry. Stamp duties apply (up to MAD200), plus the costs of the statutory auditors for the certification of the annual accounts.
A SARL must appoint statutory auditors only if its annual turnover exceeds MAD50,000,000. A SARL is also required to file its annual accounts – duly approved by its shareholder(s) – with the local tax authorities and the trade registry.
There is no requirement to appoint a statutory auditor in a real estate civil company (Société Civile Immobilière), nor to file annual accounts.
In Morocco, there are several types of arrangement allowing a person, company or organisation to occupy real estate for a limited period of time without buying it outright. The main types of arrangement are the lease agreement, the usufruct, the commodat (a free lease agreement for the use of the property) and, in connection with private state land, the authorisation to temporarily occupy publicly owned land.
In addition to general rules governing leases, as laid down by the Dahir dated 12 August 1913 forming the Obligations and Contracts Code regulating the general rules of contract law (as amended from time to time), Moroccan legislation has enacted two specific laws governing (i) commercial leases and (ii) professional and residential leases.
The Dahir No 1-13-111 dated 19 November 2013 promulgating Law No 67-12 regulates contractual relations between tenants and landlords for residential or professional premises. The professional lease is mainly relevant for liberal professionals not practising any commercial, industrial or handicraft activities.
The commercial lease is regulated by Dahir No 1-16-99 dated 18 July 2016, promulgating Law No 49-16, which sets out a complete list of situations in which it applies. Pursuant to the provisions of Law No 49-16, the landlord must grant a commercial lease for:
Law No 49-16 expressly states that a lease agreement cannot be concluded for certain premises, including:
One of the main characteristics of a commercial lease relates to the right for the tenant to renew the lease. Therefore, if the landlord wishes to terminate the lease in anticipation of the agreed contractual term, the tenant is entitled to claim compensation (indemnité d'éviction), which assessed by considering the value of the considered business.
As a general principle, rents are freely negotiable between the landlord and the tenant.
Although permitted by law, variable rents are not common in leases for office premises, but are a common feature in retail leases for premium international brands (expressed as a percentage of the annual gross revenues of the tenant’s business, subject to a specified minimum fixed rent).
The only measures relating to rents following the COVID-19 crisis affected a specific category of property: the so-called Habbous properties subject to a very specific legal regime. During the lockdown, Habbous tenants were exempted from paying their rent.
The parties are free to enter into a lease agreement for any amount of time, as the duration of commercial leases is not regulated by Moroccan Law. In practice, commercial leases are entered into for an initial period of three to nine years.
One of the main characteristics of a commercial lease is the right for the tenant to freely assign its lease and to renew the lease, which implies that, in the event of non-renewal, the tenant is entitled to an eviction indemnity based on the value of its business, among other considerations. In order to be entitled to such a right of renewal, the tenant must either have been occupying the premises for two consecutive years or paid "key money" (pas-de-porte).
Work and Repairs
The parties are free to allocate the various type of work and repairs. However, in general, the tenant is responsible for ordinary repairs and maintenance, and the landlord bears the costs of structural and major repairs, as well as repairs resulting from wear and tear, force majeure and construction defects.
Frequency of Rent Payments
The parties are free to negotiate the frequency of rent payments. Rent for commercial premises is usually payable monthly or quarterly in advance.
There is no published information on the effectiveness of a force majeure provision for justifying the non-performance of a lease.
Since the situation resulting from the COVID-19 crisis is particularly exceptional, the courts should tend to rely more on the principle of good faith of the parties. In this context, some landlords (owners of major shopping centres) have agreed to exempt their tenants from paying rent for the period of closure of their premises as imposed by the Moroccan authorities.
Under the applicable regulations, the amount of the rent, the conditions of its revision and the rate of its increase or decrease can be freely determined by the tenant and the owner.
However, Law No 07-03 on the revision of the amount of rent for premises of commercial, industrial or handicraft use prohibits increases in rent within the first three years from the date of concluding the lease agreement, or from the date of the last judicial or contractual review, and/or prohibits parties from agreeing on an increase in excess of the rates set out by law (ie, 8% for residential leases and 10% for others, including commercial and professional leases).
If no agreement has been reached between the tenant and the landlord regarding the rent revision conditions and the rate of its increase, the parties may apply for judicial review based on the rates mentioned above.
In practice, the parties generally stipulate a rent review clause that is based on the conditions imposed by Law No 07-03 (ie, an increase in rent by 8% or 10% every three years).
Law No 07-03 provides that a rent increase may only apply every three years following the conclusion of the lease or the date of the previous judicial or contractual rent review, provided that any such increase is limited as follows:
VAT is payable on rent in the following cases:
The landlord can opt to pay VAT (at 20%) regarding non-equipped business rentals. This option is made through a formal request and can apply globally or partially to the taxpayer’s activities (ie, the option can apply to a given real estate project, or to just a single building/premise/apartment).
According to Moroccan law, apart from a registration duty payable to the tax administration (fixed at MAD200), there are no additional costs to be paid by the tenant at the beginning of the lease term. It is market practice for the tenant to carry out and bear the registration duty, even though the Moroccan Tax Code (MTC) does not expressly specify which party must pay it.
The tenant generally bears the costs of maintenance and repairs for common areas (ie, gardens, parking areas, stairways and elevators), in the form of service charges, in proportion to the area of the premises occupied by each tenant compared to the total area of the property. In practice, the service charges are generally agreed through a lump sum.
Parties are free to determine which of them will pay the operating costs (eg, electricity, water, telecommunications and other utilities), but the costs of utilities are generally borne by the tenant according to its specific needs and usage.
A provision may be included in a lease under which the tenant undertakes to take out insurance covering its professional civil liability, and any damage caused to third parties or property as a result of its activities on the premises, or due to external events (fire, explosion, water damage, theft, etc). Landlords can take out an insurance policy for the building itself, though this is quite unusual.
The parties generally provide that the leased premises are rented for a specific use, with any modification being subject to the landlord's consent. In addition, the use of rented premises may be limited by legal or regulatory provisions, such as urban planning and zoning regulations.
With regard to commercial leases, the tenant may be authorised by a judge (even after a refusal by the landlord) to engage in one or more activities that are ancillary or related to the initial business activity, provided that they are not incompatible with the purpose, characteristics and location of the building, and that they are not likely to affect its security.
Law No 49-16 governing commercial leases does not provide for any details relating to works initiated by the tenant.
In any event, the parties are entitled to agree on the preferred work regime for the tenant, and it is generally provided that the tenant may not modify or improve the premises without the landlord’s prior consent, especially if the work is substantial and has an impact on the structure of the building.
Specific regulations apply to financial leases (credit bail), lease agreements for the use of agricultural land (bail à ferme), authorisations to temporarily occupy publicly owned land (autorisation d’occupation temporaire du domaine public), etc. The Habbous properties, which are subject to a very specific legal regime, were subject to particular measures following the COVID-19 pandemic crisis, with Habbous tenants being exempted from paying their rent.
The Moroccan Commercial Code provides for the regime applicable to insolvency proceedings, but does not provide for a specific regime or mechanism applicable to a lease if the tenant is declared insolvent. In the case of insolvency proceedings that do not lead to liquidation, it is customary for the court to appoint an administrator, who may decide to keep the lease in force if it is deemed necessary for the tenant's business activities.
The main forms of security provided to a landlord to protect against a failure by the tenant to pay rent are as follows:
A tenant is not entitled to continue to occupy real estate after the expiry or termination of a lease. Consequently, the landlord may obtain a court order to recover possession of the real estate if it is not vacated on the due date. In addition, the lease agreement may provide for other penalty clauses if the property remains occupied without due cause after the expiry of the lease.
Pursuant to Law No 49-16 governing commercial leases, the tenant under a commercial lease cannot, in any circumstances, be deprived of the right to assign its leasehold interest – with or without its business (ie, separately).
A notice referring to the assignment must be given by the tenant and the assignee to the landlord. Such assignment only becomes enforceable against the landlord from the date of the notification.
The tenant remains liable to the landlord with respect to all prior commitments.
According to Law No 49-16, unless set out otherwise in the lease agreement, a tenant is permitted to sublease any part of the leased premises. The tenant must notify the landlord about the sublease, and the sublease is enforceable against the landlord only from the date of notification.
Law No 49-16 governing commercial leases provides that the landlord may request a judicial termination of the lease if the lease provides for a termination clause (clause résolutoire) and at least three months’ rent remain unpaid by the tenant, despite a 15-day formal prior notice being served.
In several cases, the landlord also has the ability to deny the right of the tenant to renew the lease without paying an eviction compensation (indemnité d’éviction). Such cases include default of payment, unauthorised alterations to the premises, use of the premises in breach of the originally agreed use, sublease of the premises contrary to the terms of the lease, etc.
It is market practice for the tenant to carry out and bear the registration duty, even though the MTC specifies that the party to which the lease is advantageous must pay the registration duty, but the agreement can provide for a different situation. Such registration duty also applies to signatures of amendments and appendices.
As mentioned under 6.19 Right to Terminate a Lease, Law No 49-16 entitles the landlord to request from the court an early termination of the lease agreement and the eviction of the tenant in certain cases. However, in practice, it is a fairly long and difficult process.
Third parties are not entitled to request the termination of a valid lease agreement. However, Law No 49-16 states that any public authority may terminate the lease if it is in the public interest, in which case the landlord is not bound to pay an eviction allowance (indemnité d'éviction) to the tenant.
The parties may choose between two types of pricing mechanism for construction projects (which may sometimes be combined):
Various types of contractual regimes can be adopted by the owner:
In any case, the assistance of a Moroccan architect is mandatory when applying for a building permit, and this architect is responsible for preparing the conception plans and the building permit application file, monitoring the proper execution of the work and assisting the owner at the delivery of the work, as well as issuing the declaration of completion in order to obtain the certificate of conformity or the occupancy permit.
The devices typically used to manage construction risks under a private construction contract are as follows (and are freely negotiated by the parties):
Provisions on delay in the event that the agreed milestones or completion dates are not met (unless the delay is due to force majeure or some other unforeseen event, or is attributable to the owner) are generally used to prevent any schedule-related risk on construction projects. Delay penalties are often capped at a specific percentage of the price of the contractor agreement.
Article 264 of the Moroccan Obligations and Contracts Code provides that the amount of contractual penalties may always be assessed and then reduced by a judge.
Owners generally request security from contractors to guarantee both timely completion and the correct performance of the work. A completion guarantee/performance bond and holdbacks (usually replaced by a bank guarantee) are commonly provided by the contractor to the client (see 7.3 Management of Construction Risk). It is also market practice for the client to request an advance payment bond, payable on first demand, to guarantee the repayment of any advance payment paid by the client at the beginning of the work.
Moroccan law does not provide for specific provisions regarding the possibility for contractors and/or designers to place a lien or otherwise encumber an asset in the event of non-payment by the client. As the real estate is generally the property of the client, the latter is therefore the only one entitled to use the property as collateral.
Generally, the conditions precedent that must be met before the handover can take place are set out within the construction contract.
In practice, upon completion of the work, the parties will arrange for a provisional handover/acceptance (réception provisoire), even if there are some minor defects or snagging still outstanding, which the contractor undertakes to repair during the warranty period (which normally lasts one year). Once the guarantee period has elapsed, a final handover/acceptance takes place (réception definitive).
In any case, upon completion of construction, the owner must obtain an occupancy permit or, if the building is not intended for private accommodation, a certificate of conformity certifying that the building as erected complies with the provisions of the building permit. This certificate is a prerequisite to the use of the erected building; using a building without such permit may give rise to fines and criminal liability.
VAT is not payable on the sale or purchase of real estate. Pursuant to Article 89-I 4° of the MTC, VAT is payable on real estate work, subdivision/allotment operations and real estate development transactions (the sale of plots in a real estate project is subject to VAT at a rate of 20%).
The acquisition of large real estate portfolios has the same tax consequences as the purchase of a single real estate property: if the transaction involves the direct purchase of property, it is subject to registration fees and property registration (see 2.10 Taxes Applicable to a Transaction).
However, in order to mitigate the tax cost, it may be possible to purchase shares in a company that does not qualify as a real estate company (ie, does not have gross fixed assets composed at least 75% of real estate properties/other real estate companies). In that case, the transaction would be exempt from registration duties and no property registration fee would be payable (see 2.10 Taxes Applicable to a Transaction).
There are two main municipal taxes that must be paid when occupying commercial/industrial premises: business tax and the tax on municipal services.
Article 6-II-1° of Law No 47-06 on local taxation provides that all newly created professional activities benefit from a total exemption of business tax for the first five years after starting their activity. Business premises benefit from this exemption.
In principle, the taxable basis for business tax is based on the gross annual rental value of all the assets at the company’s disposal (including assets purchased and rented).
Companies that do not own the premises they occupy must also include the amount of rent paid to the owner for all types of leases (real estate, leasing, etc) in the taxable basis.
The applicable rate depends on the nature of the activity and ranges from 10% to 30%, applicable on the annual rental value of assets used for the activity.
Tax on Municipal Services
The taxable basis for the tax on municipal services is determined by reference to the rules applicable to business tax. In principle, the municipal tax services taxable basis is the same as for business tax (the taxable basis is reported in the same return for both taxes).
There is no exemption for the start of the activity regarding this tax (ie, it is payable from the first year).
The tax rate for the municipal services tax varies according to the geographical location of the activity, as follows:
Companies that do not occupy the premises or buildings they own are not subject to business tax and municipal tax on that property; the tenant is subject to the taxes relating to these properties on rent.
The applicable scheme is based on the distinction between individuals and companies.
According to the MTC, foreign investors owning property in Morocco are subject to corporate income tax on revenues deriving from that property (subject to double tax treaty provisions that which can govern taxation but generally real estate capital gain is subject to taxation in the country where the property is located).
The following rates apply, depending on the taxable income (ie, mainly the capital gain generated by the sale of a real estate property located in Morocco and made by a foreign investor):
The real estate rental income of individuals is subject to the following rates:
If the real estate income is paid by a professional (public or private legal entities or individuals), the personal income tax is withheld by said professional on behalf of the real estate owner, although owners can opt for a withholding waiver and handle the filing and tax payment requirements themselves.
Capital gains on real estate properties are subject to personal income tax at the rate of 20% (a specific rate of 30% applies in limited cases); in the case of a capital loss, the minimum tax payable amounts to 3% of the sale price.
The following are exempt from personal income tax:
Double Tax Treaties
Double tax treaties signed by Morocco generally provide that income from immovable property may be taxed in the Contracting State in which the property is situated.
Based on these provisions, the domestic treatment provided by the MTC is generally confirmed and the rental income derived by a foreign investor (on a property located in Morocco) will be subject to (corporate) income tax in Morocco.
When legal entities such as companies subject to corporate income tax own real estate, they may benefit from amortisation, which is deducted within the limits of the authorised rates, according to the practices of each profession, industry or branch of activity.
The rates recommended for the tax deduction of the taxable basis by the tax authorities are 4% for residential or commercial buildings, and 5% for industrial buildings built on a permanent basis.
Furthermore, the main recent innovation regarding real estate ownership is the implementation of Moroccan REITs (OPCIs), which benefit from the following tax incentives.
The OPCI may benefit from a total exemption from corporate income tax (rental income, capital gain, dividend), provided that it meets the following conditions:
COVID-19 had a significant impact on the Moroccan economy in 2020, including the real estate market. The economy was held up by three months of containment and a prohibition on shops opening. Nevertheless, with strong leadership, Morocco has reopened and limited contamination using only local containment and curfews at night.
During the containment, some tenants brought litigation arising from their inability to operate their shops or offices. Construction operations were fairly limited. COVID-19 also affected real estate transactions, due to a decrease in investor confidence and the closing of some administrations. 2021 is particularly difficult to predict.
Nevertheless, Morocco will move forward positively from this crisis, thanks to the following:
Legal and tax provisions have allowed the creation of real estate investment trusts (REITs, or organisme de placement collectif immobilier (OPCI) in French) for the past year. As of March 2021, seven OPCIs, nine OPCI management companies and ten OPCI appraisers have been created.
The OPCI is a regulated investment vehicle, whose main purpose is the acquisition or construction of buildings exclusively for rental purposes.
OPCIs can take the form of real estate investment companies (SPI) or real estate investment funds (FPI).
Their assets are composed mainly of real estate, real estate rights, shares in real estate companies or other OPCIs (minimum 60%), liquidity (minimum 10%), and securities and investments. The real estate and rights in rem, which may relate to any use (offices, shops, housing, hotels, etc), are valued at least once every six months by two real estate valuers. The assets are held by a custodian institution.
OPCIs can have streamlined operating rules (RFA) for qualified investors.
OPCIs are created, managed and directed by a management company according to the management regulations approved by the Moroccan Capital Market Authority.
They are made up of securities held by holders whose net asset value is the net assets of the OPCI divided by the number of units or shares.
The arrival of OPCIs in Morocco will help to structure the market and increase price transparency, and thus start a valuable circle of Moroccan real estate investment.
In March 2021, parliament adopted Law No 15-18 on crowdfunding (financement collaboratif), which allows and regulates the fundraising operation via an electronic platform of collaborative funding platforms (a CFPlatform).
A CFPlatform is an electronic platform that brings together project owners and contributors for collaborative financing operations. CFPlatforms can be lending, investment or donation platforms.
The law applies to projects located not only in Morocco, but also in free zones or in foreign countries. Contributions may come from resident or non-resident contributors, in compliance with foreign exchange regulations.
Law No 15-18 clearly excludes crowdfunding from the provisions relating to the bank monopoly on credit operations.
Any CFPlatform is created at the initiative of a collaborative finance company (CFCompany), which establishes the draft regulation for the management as well as the technical architecture of the CFPlatform.
CFCompanies mainly manage CFPlatforms, but may also provide advice to project leaders and generate publicity for projects proposed via CFPlatforms.
CFCompanies that provide loan or donation services shall be approved by the public administration, following the opinion of Bank Al-Maghrib. CFCompanies that provide investment services shall also be approved by the administration, but after consultation with the Moroccan Capital Market Authority.
CFCompanies can create and manageCFPlatforms of different categories.
Only commercial companies that meet the following conditions may operate as CFCompanies:
The officers of CFCompanies shall not have been banned from any activity, nor must they have been convicted of any offence that calls their honourability into question.
CFCompanies must manage the CFPlatforms in the interest of the project stakeholders.
CFCompanies cannot use canvassing to raise funds via the CFPlatforms; such provisions will surely be subject to discussion to understand the difference between canvassing, which is prohibited, and publicity, which is permitted by law.
CFCompanies shall open and manage a special bank account to collect money for each project, ensure the remittance of funds collected from contributors to the project holders and manage the funds coming from the project owners and distribute them to the contributors. CFCompanies shall not use funds raised for a project for purposes other than those for which they were intended.
Conflicts of interest are preserved and CFCompanies may not participate in collaborative financing operations as a contributor or project leader, nor may they be shareholders, either directly or indirectly, in the company that carries the project presented via the CFPlatforms that it manages.
CFCompanies shall provide administrative services to manage the contributors' simple and transparent procedures for processing the projects and the funding of such. Clear information shall be provided to each contributor on the risk, rights and responsibilities associated with the projects.
CFCompanies shall produce an annual report for each managed CFPlatform.
Some provisions are aimed at protecting the contributors and the project promoters, such as the exclusive allocation of the contribution collected to the realisation of the envisaged project. The same project cannot be proposed on more than one CFPlatform at the same time. If the amount of contributions requested for a project is reached before the end of the financing operation, the CFCompany shall suspend the contributions.
The amount raised for the benefit of a single project, within the framework of collaborative financing operations, may not exceed a maximum amount, fixed by regulation, for each category of collaborative financing, within the limit of MAD5 million (roughly EUR455,000). The cumulative contributions of an individual for each project may not exceed an amount set by regulation, up to a limit of MAD250,000 (roughly EUR22,700). The cumulative contributions of a natural person, at the end of a calendar year, to collaborative financing operations may not exceed an amount fixed by regulation, within the limit of MAD500,000.
The "investment" category of a collaborative financing transaction is carried out in the form of a direct or indirect equity investment in a company.
The "loan" collaborative financing operation is carried out in the form of a loan, remunerated or free of charge.
The "donation" category of a collaborative financing operation is carried out in the form of a cash donation, with or without consideration.
There is also a category of collaborative participatory financing operation that may be contributed by resident contributors, controlled by the Higher Council of Ulemas.
Collaborative financing is highly expected by the Moroccan market, which is eagerly awaiting the decrees that shall implement the law to start the first platforms.
The Moroccan real estate market cannot be understood without some comprehension of the scarcity of land. Most of the land in Moroccan is for agricultural purposes, and may in principle be purchased and owned only by Moroccan citizens. Moreover, the foreign exchange control means that Moroccan citizens can only have, in principle, assets located in Morocco; if such assets are money, such money must be owned in Moroccan dirhams.
Cultural behaviour also encourages individuals to see land (and real estate assets) as an investment, and as the best investment. It is not unusual to see situations where owners prefer not to sell or rent at a price they consider too low, even if the real estate assets concerned are not used at all. Such behaviour, mixed with a land pressure in some areas (urban centres, etc), leads to land prices being potentially too high for the contemplated use thereof. Such land pressure then becomes an essential part of the real estate market, which shall be the basis of consideration when contemplating a real estate transaction in Morocco.
Most of the real estate assets in Morocco are agricultural land, but that is not the class of asset that circulates the most. Housing is also a very important class of asset but most of it is purchased by individuals for their primary needs and is built mainly by small developers.
A few years ago, hospitality assets were very attractive for foreign investors, who were assisted by the State as hospitality was among the highest foreign exchange inflows.
For a few years, the Moroccan State has granted incentives and means in the industrial activities, particularly the automotive industry, which has enabled the emergence of a great economy in northern Morocco. In this market, industrials are not keen to purchase and own their real estate assets and prefer to concentrate their money on operating means. The difficulty for investors then becomes finding a good tenant, more than anything else. Some investors have also put considerable money and means into commercial real estate assets and creating the largest real estate investment fund in Morocco, which owns commercial centres and supermarkets. Clinics is another class of asset that is highly regarded by investors, but the value of such real estate is nothing without good doctors and good management.