You’re French, you’re buying a riad in Marrakech, and one question keeps cropping up: «Will I have to pay tax twice?» ’ The answer lies largely in a single document: the tax treaty between France and Morocco, signed in 1970. It allocates the right to tax between the two countries and provides for the elimination of double taxation.
We are not tax specialists, and each individual’s circumstances warrant the advice of a professional. However, through our experience of assisting French property buyers year on year, we have learnt to ask the right questions. Here, clause by clause, is what the treaty actually means for a property owner.
In short : Rental income from property situated in Morocco is taxable only in Morocco (Article 9). Capital gains on the disposal of such property are taxable in Morocco (Article 24). France retains the right to take this income into account when calculating your tax rate (Article 25). The treaty does not cover property wealth tax: the French IFI applies in accordance with domestic law.
The France–Morocco Tax Treaty at a glance
The Convention «on the elimination of double taxation and the establishment of rules on mutual administrative assistance in tax matters» was signed in Paris on 29 May 1970 and came into force on 1 December 1971. It was amended by an addendum signed in Rabat on 18 August 1989. It covers income tax (including capital gains), certain registration and stamp duties, as well as administrative assistance between the two countries.
Before going into detail, bear in mind one simple principle: when it comes to property, the rule is generally the country in which the property is situated which is imposing.
Where are you resident for tax purposes?
It all depends on your tax residence, as defined in Article 2 of the convention:
- You are resident where you have your permanent residential home ;
- If you have a permanent home in both countries, you are deemed to be resident where the the focus of your professional activities ;
- otherwise, where you stay as long as possible.
For a working person living in France who owns a second home in Marrakech, their tax residence is generally still France. For a pensioner moving to Marrakech, the matter must be analysed carefully: it determines how their pensions are taxed. Our guide on the retirement in Morocco discusses this topic in detail.
Rent from your riad: subject to tax in Morocco
The Rule: Article 9
«Income from property […] is taxable only in the country where the property is situated. » Whether you let your riad on a short-term, annual or long-term basis, this income is subject to Moroccan tax. The details of the tax system in Morocco (regime, rates, tax returns) are set out in our article on tax on rental income in Morocco.
No double taxation, but an «effective rate»
Article 25-1 stipulates that a State may not include in its tax base income that is exclusively taxable in the other State, but that it reserves the right to calculate tax at the rate applicable to total income. In practical terms, if you are a French tax resident, your Moroccan rental income is not taxed a second time in France, but it may be taken into account when determining the tax rate applied to your other French income.
Declaring your property in Morocco… and in France
Being liable for tax in Morocco does not exempt a French resident from declaring their foreign income to the French tax authorities, in particular on the declaration of income received abroad (form no. 2047), for the purposes of calculating the effective tax rate. The reporting procedures and the possible application of social security contributions should be checked annually with a tax adviser. If you hold a bank account in Morocco, you are also required by French law to declare it.
What if you run a guesthouse?
Where the activity takes on a commercial form (a guest house offering services, an operating company), the rules relating to business profits and permanent establishments (Articles 3 and 10) may apply. The legal structure chosen (direct or through a company) changes the analysis: to be checked before purchase
Capital gain on resale
Article 24-1 of the Convention provides that «gains arising from the disposal of immovable property […] are taxable in the State in which such property is situated». French tax doctrine (BOFiP) confirms that, in the case of immovable property, the right to tax is attributed to the State in which the property is situated.
For a riad classified as Marrakech, the Moroccan tax on property profits therefore applies: 20 % of the net profit, with a minimum of 3 % of the sale price, unless an exemption applies. The full calculation is explained in our guide to Capital gains on property in Morocco. Please check with your adviser regarding any tax implications in France.
The IFI: the agreement does not protect you
This is a point that is often misunderstood. According to the BOFiP, the Franco-Moroccan agreement does not apply to wealth tax. The French rules on property wealth tax therefore apply «without restriction». If you are a French tax resident and liable for the IFI, your Moroccan riad forms part of your taxable property portfolio, in accordance with French domestic law.
Registration fees on purchase
Article 26-2 stipulates that deeds relating to the transfer of immovable property may only be subject to registration duty in the State where such property is situated. You therefore pay Moroccan registration fees (4 % for a built property), whilst there is no equivalent fee in France for the same purchase. For the rest of the procedures a French buyer needs to follow, see our guide buying a property in Morocco.
Pensioners: where are your pensions taxed?
The convention distinguishes between:
- pensions and life annuities (private): taxable only in the State of the beneficiary’s tax residence (Article 17); ;
- public sector pay : specific provisions of Article 18a, introduced by the 1989 amendment, which must be analysed on a case-by-case basis in relation to state pensions.
For a pensioner who is transferring their tax residence to Marrakech, the implications are therefore significant, and preparations must be made before departure.
What about the inheritance?
Summary
- Rental income from a riad with Marrakech — Where is it taxed? : Morocco (possible effective tax rate in France); Articles: 9 and 25-1
- Capital gains on the sale of a riad — Where are they taxed? : Morocco; Article: 24-1
- Registration fees on purchase — Where are they levied? : Morocco only; Article: 26-2
- IFI — Where is it taxed? : Not covered: French domestic law; Article: BOFiP
- Private pensions — Where are they taxed? : Country of tax residence; Article: 17
Frequently Asked Questions
Is the rent from my riad subject to tax in France?
No, according to Article 9, they are taxable only in Morocco. France may, however, take this into account when calculating the tax rate on your other income (effective tax rate, Article 25-1).
Do I need to declare my property in Morocco to the French authorities?
If you are a French tax resident, you must declare your foreign-sourced income – even if it is tax-exempt – and any bank accounts you hold abroad. You should check with your adviser each year to confirm the specific forms required.
Does the treaty prevent double taxation of capital gains?
It grants the right to tax capital gains to Morocco, the country in which the property is situated (Article 24). The tax reporting requirements in France should be checked with a tax adviser.
Is my riad included in the IFI calculation?
Yes, if you are a French tax resident and liable for the IFI: the treaty does not cover wealth tax, so French law applies.
I’m retiring at Marrakech: where will I be taxed?
Private pensions are taxable in the country where you are resident for tax purposes (Article 17). State pensions are subject to specific rules. You should make arrangements in advance if you intend to change your tax residence.
Let’s talk about your project
Before you buy, we help you ask the right questions and work with solicitors and advisers who are familiar with French buyers. You save time and ensure your project goes smoothly. Contact Klair & Arno and find all our reference points in our Guide to property taxation in Morocco.
