Hi, I know there are many people who have purchased in Morocco & especially Saidia. I was wondering if anyone has looked into "tax" implications..., by this I mean the amount of tax payable on rental income, I believe I have some understanding on the matter but wanted to know other people's views.
For example how much tax would be payable on say a 10k rental income for first year of ownership? then how much tax would be payable on say the same 10k income but after 5 years of ownership ?
I would speak to your Moroccan accountant about the tax situation regarding foreign national owning/renting property out in that country. If you are resident in the UK for tax purposes then you have to declare your income on your UK tax return (irrespective of where it’s derived). You will of course be able to offset various costs against your headline gross rental income. Places such as the US have a tax treaty with the UK so you don’t have to pay tax twice (but you still have to declare it). I’m not sure if Morocco has a treaty, that’s a question for your UK accountant.
There appears to be a lot of ignorance by Brit buyers of overseas property. People were raving about the lowering of Capital Gains tax in Spain recently. But again if your tax resident in the UK it will be payable are you marginal rate minus allowable deductions. I would have sought specialist advice as part of the due diligence before buying, but with the Inland Revenue having a big push on offshore investments, it’s never too late.
Just to add my two penny's worth, although I'm no tax expert. Pablo is correct, in that it doesn't matter where the money is earned, you have to treat any income received the same as any other salary - at your rate of income tax. Morocco does have a tax treaty with the UK, so at least you're not liable to pay it twice, but you have to pay the difference in the UK. ie, if you're on 40% here, and Morroco charges you 10% (for example), then you're liable to an addition 30% on your UK tax. Like any rented property, you can offset, ie management fees, insurance, interest on mortgage, inspection visits, depreciation etc.
There was an announcement at the weekend that the revenue are introducing an amnesty for foreign investors, following which they'll be receiving information from the banks on who may have overseas property & then going in heavy. be warned & seek tax advice
I understand the tax implications in the UK. My concern is the tax deducted in Morocco. You are correct in saying that the double tax treaty means you will nor pay tax twice (any tax paid in Morocco being deducted from your UK tax bill), however, any tax you pay in Morocco in excess of your UK liability is not refundable. Furthermore, whilst in the UK you can make deductions from your rental income such as mortgage income and expenses etc. (which usually reduces the tax liability substantially), I have not seen anything that shows you can do the same in Morocco.
Based on the info I have on Morrocon taxes at present, assuming a 10k annual income (both estimated and actual) the taxes payable in Morroco for the first three years would be £1500.
In the fourth and fifth year this would rise to £4140 as the tax on rental income started to apply to foreign investors. In year 6 and beyond this would rise to £7140 as the Urban tax (based on rental value not income) came into effect for overseas buyers. (Note that the tax on rental income and urban tax are taxed on an increasing scale according to the income - I have shown the top rate).
I am really hoping that someone can tell me that there is something I have not considered as I am actually keen to purchase in Saidia.
Ive met people who own in Spain who pay no income Tax as they dont declare the rentals.
Many LLs in the UK I know have never even looked into Tax on thier UK properties let alone foreign ones. They leave such things to Guardian / Which reading type investors - they seem to prop - up everyone else's shortfalls so fastidious and unpractical they are.
Perhaps, but I would have thought it's in everyone's best interest to know what the worst case scenario is. Also, it strikes me that with Morocco being such a poor country that their own government will be looking to ensure that the foreign investors are paying all the taxes they are liable for in the country.
I do however stand corrected on my above post - it would seem that the tax on rental income applies to those flats rented out and the urban tax to those not rented out. The 15% applies to all. Not quite as bad as I initially feared.
