Morocco is unique in many ways. It is an African country closest to Europe in geographical and cultural terms. Buying Guide September 2011

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Daniela Cross
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1 Morocco is unique in many ways. It is an African country closest to Europe in geographical and cultural terms. Buying Guide September 2011

2 Overview Morocco is unique in many ways. It is an African country closest to Europe in geographical and cultural terms. The country is surrounded by the Mediterranean Sea on the northern, and the Atlantic Ocean on the western side. In Morocco, tourism has grown rapidly over the past few years. This growth is largely attributed to the long term strategy of the Morocco government to promote the tourism industry abroad and within the country as well as offering tax incentives to foreign investors to set up new projects or businesses in Morocco. Given that Morocco was under French protectorate during the first half of the 20th century, the conveyancing process is very similar to the French model. It is therefore very different from the UK, with potential pitfalls to the inexperienced time buyer. Independent Solicitor It is essential to use an independent solicitor with a legal knowledge of both the UK and Moroccan legal systems, who are able to translate the documents and explain the terms to your full understanding. It is important to carry out due diligence on the property you are purchasing in order to ensure there are no encumbrances on the property. Your independent solicitor will do this on your behalf. The Notaire The Moroccan Notaire takes an important part in the Moroccan Conveyancing process. He is a public officer whose main role is to make sure that all processes have been undertaken correctly and all fees and taxes paid. It is not difficult to find a Notaire in Morocco, but it is better to find one you can feel comfortable working with and who speaks ideally English. Please note that the Notaire, unlike a solicitor in UK, is not paid to give purchasers impartial advice. Therefore it is important to instruct your own independent solicitor who can check the notary s work and can advise on other issues affecting your purchase which are not necessarily part of the Notaire s work.

3 Restrictions on buying in Morocco No restrictions apply to foreigners who wish to purchase real estate in Morocco. However, foreigners cannot buy agricultural land. In order to attract investors, the Moroccan State authorises to change the legal nature of the land from agricultural to residential. Foreign Investors need to apply for a VNA (change of use to non-agricultural land) certificate to purchase agricultural land. The procedure is quite complex. The project needs to have the authorisation of the local town hall, the urban agency, the Wilaya, the CRI, etc. An architect and a surveyor have to be appointed. Specific Steps in buying property in Morocco Properties in Morocco are subject to different law regimes depending on whether they have a title deed registered at the local Registry or not. Most of the new built properties are titled at the Land Registry. Untitled properties are governed by the traditional and rules of Muslim Law. It is unwise to purchase a property or land in Morocco without obtaining the title deeds, because you can never be sure that the property/land belongs to you. Please note that in Morocco, existing properties are purchased as seen. Structural surveys are not part of the buying process. If you intend to purchase an old property do not expect to receive a structural survey unless you request it. Once the two parties have come to an agreement on the sale price, the terms and conditions of the sale are discussed with the Moroccan Notaire who then prepares the preliminary contract or Compromis de Vente. This contract is just as important as the final document transferring title as it must contain all the clauses and conditions precedent to the sale.

4 It then takes usually 1-3 months (or longer depending on the case) for the Notaire to prepare all the necessary paperwork before getting the parties together to sign the Title Deed Acte de Vente. It is at this point that the balance of the purchase price plus any extras such as the Notaire s fees, taxes and duties are due. For off-plan properties, the signature of the deed occurs after completion of the property and issue of the habitation licence. The purchase of off-plan properties is governed by strict laws, which protect the purchasers. For example, the law forbids any payment before the signature of the preliminary contract, which can only be drawn up by a Notaire or a Moroccan Qualified Lawyer after completion of the foundations. The developers also have to provide a bank guarantee to secure purchasers investments. Unfortunately some sellers or developers are ignoring them. So clearly, it is primordial to instruct a solicitor who can undertake all the necessary checks before you commit to the purchase. Costs and Fees The most significant part of the acquisition costs are the transfer taxes and notaire fees. The total legal fees associated with the purchase in Morocco will be approximately 5.5% of the purchase price, whether it is a new built or older property. Inheritance In Morocco, the civil status of foreigners is determined by the law on nationality. So if you are English citizens, your Moroccan estate will be subject to English inheritance law. It is imperative to discuss with your solicitor on the most appropriate way to prepare your will for your Moroccan estate.

5 Taxation Overview of Moroccan Tax System: Under the Moroccan tax system, non-residents are taxed on income arising from Moroccan sources only and are liable to a number of property related taxes highlighted below. VAT: the current rate is 20% and is included in the purchase price. Moroccan income tax is payable on income arising in Morocco. Moroccan income tax is payable at progressive rates on income after allowable deductions for expenses incurred in connection with letting, selling or maintaining the property. There is no tax during the three years following the year of completion of new built property. Local Property Taxes: In Morocco, they are two main local taxes which are equivalent to the UK Council Tax. They are Taxe d habitation & Taxe de services communaux. They are calculated on the property s annual rental value, determined by comparison or direct appreciation by The Census Committee. There is a 75% tax allowance if the property is your main residence and if you make no income from it. Capital Gains tax: the capital gains tax is calculated on the real estate profit. The taxable profit is calculated by taking the difference between the price at which the property is sold, reduced by the selling costs, and the purchase price, increased by purchase costs. Capital gains are taxed at 20% with a minimum of 3% of the selling price to be paid (even if there is no gain). Moroccan Inheritance Tax: there are no Inheritance Taxes to pay in Morocco. However, if you are a British resident, you may have to pay UK inheritance tax based on your worldwide assets, which incorporates Morocco. It is recommendable to consult a tax adviser or the UK Inland Revenue for more information.

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