Rental income tax in Morocco According to the 2025 law

Rental income tax in Morocco

The tax environment for real estate in Morocco is a crucial issue for all investors. Whether resident or non-resident, the taxation of rental income is constantly evolving, making it essential to stay up-to-date on this subject. The updates introduced by the 2025 Finance Law have brought significant changes, including a final withholding tax rate and adjustments to the tax brackets. This article examines these changes in detail and their impact on real estate investors.

Changes introduced by the 2025 Finance Law
The 2023 Finance Law introduced several changes to the taxation of rental income, notably maintaining the current method of collection through withholding tax (RAS) applied to the gross amount of rental income. However, these rates were not final. Furthermore, the option for voluntary payment was eliminated, and the requirement for rental income holders to file a global income tax return was reinstated.

With the 2025 finance law, new changes have been put in place:

Introduction of a single flat-rate withholding tax of 20% for annual rents ≥ 120,000 DH.
Maintenance of the 40% allowance on rental income.
Modification of the tax threshold scale and withholding tax rates.
Simplification of the procedure for taxpayers opting for the flat-rate withholding tax.
Withholding tax and reporting requirements.

Tenants who are public or private legal entities, or natural persons whose professional income is determined according to the actual net profit or simplified net profit regime, are required to withhold tax at source on the gross amount of taxable rental income. The new rates applied are:

0% for gross annual rent ≤ 40,000 DH.

10% for gross annual rent < 120,000 DH.

15% for gross annual rent ≥ 120,000 DH.
Taxpayers may opt for a flat tax rate of 20% if they receive more than 120,000 DH in annual rent, allowing them to be exempt from filing a global income tax return.

Determination of Taxable Rental Income

The determination of taxable rental income is based on the total gross rental income, plus expenses normally borne by the landlord but charged to the tenants, and minus expenses incurred by the landlord on behalf of the tenants.

Examples of expenses deductible from rental income: condominium fees, caretaker’s salary, maintenance costs, and municipal service tax applicable to the rented property (this should be clearly itemized in the lease agreement).

The following are not deductible: certain expenses borne by the landlord, such as fire insurance premiums, major repairs that are not considered simple tenant repairs, and construction, reconstruction, or improvement work intended to enhance or enlarge the rented property.

The 40% tax allowance on rental income will be maintained.

The 2023 Finance Law reinstated a 40% allowance on income from the rental of built and unbuilt properties and structures of all kinds, excluding income from the rental of agricultural properties.

The 2025 Finance Law maintains the 40% allowance on income from the rental of built and unbuilt properties.

Credit for withholding tax
The withholding tax is creditable against the total Income Tax (IR) due for the year in which the rental income is received.

Taxpayers opting for the 20% flat-rate tax no longer need to include their rental income in their annual global income tax return.

Refund of tax withheld at source

When it is determined that the amount of income tax withheld at source exceeds the tax due on the taxpayer’s total annual income, an automatic refund of the income tax withheld at source on rental income is issued.

This refund is calculated based on the taxpayer’s total income tax return, thus preventing any over-taxation.

Declaration and payment of rental income tax

For the annual declaration of rental income, it must be filed online, and the corresponding tax payment must be made before March 1st of the year following the year in which the income was earned.

For example: Rental income earned in 2024 must be declared and the corresponding tax paid before March 1st, 2025.

Example of calculating rental income tax: A married individual, father of three dependent children, receives the following rental income:

Shop rented to a company for 6,000 DH per month. The tenant of this shop, a legal entity, withholds 10% of this rent and pays it directly to the government.

Apartment 1 rented to an individual for 5,000 DH per month.

Apartment 2 rented to an individual for 3,000 DH per month.

In this example, 10% of the store’s rent has already been withheld at source by the tenant, amounting to 7,200 DH. Since the tax due is 6,417 DH, the state must refund the difference of 783 DH to the taxpayer.

Recommendations and Best Practices
For property owners in Morocco, it is recommended to:

Stay informed about tax changes and understand their impact on their real estate investments.
Consult a tax professional or a lawyer specializing in real estate law for advice specific to their situation.
Maintain accurate records of all rental income and expenses related to the property.
File all required tax returns on time.
Regularly review the performance of their real estate investments and adjust their strategy as needed.
By following these recommendations, property owners can maximize their rental income potential while complying with tax requirements.