Finance Law 2026 establishes a new withholding tax obligation on rental payments in Morocco, affecting both foreign and domestic property owners. Starting July 1, 2026, corporate tenants and specified entities must withhold 5% from gross rental amounts paid to landlords. This measure applies to commercial and residential leases, targeting landlords subject to corporate income tax (IS) or personal income tax under the net real income regime.
Rental Tax Withholding
Rental Tax Withholding
Rental Tax Withholding
Rental Tax Withholding
Rental Tax Withholding
Rental Tax Withholding
Rental Tax Withholding
Rental Tax Withholding
Rental Tax Withholding
Rental Tax Withholding
The legislation marks a significant procedural shift in Morocco’s real estate taxation framework. Property owners who currently declare rental income annually will now experience monthly tax withholding throughout the lease term. The withheld amounts remain creditable against final tax liability, with refund mechanisms available for excess withholding.
Legislative Framework and Effective Date
Finance Law 2026 introduces the withholding tax mechanism through amendments to Articles 73 and 156 of the General Tax Code (Code Général des Impôts). The measure takes effect for rental payments made from July 1, 2026 onward, regardless of when the underlying lease agreement was executed.
The withholding obligation applies to rental payments for:
Built real estate: Apartments, office buildings, commercial spaces, warehouses, and any constructed property
Unbuilt real estate: Land parcels, vacant lots, agricultural land when leased
Constructions of any nature: Temporary structures, industrial installations, parking facilities
The 5% rate applies to the gross rental amount specified in the lease contract, before deduction of any charges or expenses. Landlords cannot reduce the withholding base by deducting property maintenance costs, management fees, or other operational expenses.
Landlords Subject to Withholding
The withholding tax affects landlords falling into these categories:
Corporate landlords: Companies subject to corporate income tax (régime de l’IS), including Moroccan subsidiaries of foreign groups, holding companies owning rental properties, and real estate investment companies
Individual landlords under net real income regime: Natural persons who declare rental income under the regime of net real income (régime du résultat net réel – RNR)
Individual landlords under simplified net income regime: Natural persons who declare rental income under the regime of simplified net income (régime du résultat net simplifié – RNS)
Landlords under the fixed-rate regime (régime du forfait) or the standard deduction regime (abattement forfaitaire) remain outside the withholding system. These landlords continue declaring rental income annually without monthly withholding.
Entities Required to Withhold
The law designates specific categories of tenants and payers who must perform the withholding:
Banks and credit institutions: All entities regulated under Law 103-12 on credit institutions
Insurance and reinsurance companies: Licensed entities under the insurance code
Large enterprises: Companies meeting size thresholds defined by the tax administration (typically turnover exceeding MAD 50 million)
Public entities and local authorities: Government ministries, public establishments, municipalities, regional councils
The withholding obligation applies when these entities pay rent in their capacity as tenants. Individual tenants or small businesses not meeting the specified criteria do not withhold tax, and landlords receiving payments from such tenants declare and pay tax through the standard annual return.
Need assistance with rental income tax compliance? Cabinet Lafrouji Avocats advises landlords on withholding tax obligations and annual reconciliation procedures. Contact us at +212 (5) 22 47 55 29.
Tax Credit and Annual Reconciliation Mechanism
The withheld amounts function as advance payments toward the landlord’s final tax liability. Landlords include withheld tax in their annual income tax return, offsetting the withholding against total tax due.
The reconciliation process operates as follows:
Monthly withholding: Tenant withholds 5% from each rental payment and remits to the tax administration
Landlord’s annual declaration: Property owner files annual IS or IR return declaring total rental income
Tax credit application: Withheld amounts appear as tax credits, reducing final tax liability
Refund for excess withholding: When total withholding exceeds final tax due, the landlord requests a refund from the Direction Générale des Impôts
For foreign landlords subject to Morocco-source taxation, the withholding represents a definitive tax obligation when bilateral tax treaties apply reduced rates. Under the Morocco-France tax treaty, rental income from Moroccan property is taxable in Morocco, with the French tax administration providing a foreign tax credit for Moroccan tax paid.
Compliance Obligations for Withholding Entities
Tenants required to withhold must fulfill monthly reporting and payment obligations:
Monthly withholding declaration: File a declaration identifying the landlord, rental amount, and withheld tax
Payment to tax authorities: Remit withheld amounts before the 20th of the month following payment
Annual beneficiary statement: Provide landlords with a statement (relevé des bénéficiaires) detailing total annual withholding
The tax administration will issue a standardized form for the beneficiary statement, similar to existing withholding reporting formats. Landlords require this document to claim withholding credits on their annual tax return.
Failure to withhold, late remittance, or incomplete reporting triggers penalties under Article 184 of the General Tax Code. Penalties include a 10% surcharge on unpaid withholding amounts plus late payment interest calculated at 5% annually.
Foreign Landlord-Specific Considerations
Foreign individuals and entities owning rental property in Morocco face specific compliance requirements under the new withholding regime.
Tax residency determination: The landlord’s tax residency status affects whether Morocco taxes worldwide income or only Moroccan-source rental income. Non-residents pay Moroccan tax solely on rental income from Moroccan property.
Treaty benefits: Tax treaties between Morocco and the landlord’s country of residence may reduce withholding rates. The standard 5% withholding applies unless the landlord provides a tax residency certificate and requests treaty rate application.
Currency considerations: Foreign landlords who financed property purchases in foreign currency retain repatriation rights under Office des Changes regulations. The withheld tax does not affect repatriation rights, but landlords must maintain documentation proving currency origin for rental proceeds and capital gains upon eventual sale.
Declaration filing: Non-resident landlords must appoint a Moroccan tax representative (représentant fiscal) to file annual declarations and interact with the tax administration. The representative handles withholding reconciliation and refund requests.
Real Estate Investment Structure Implications
The withholding tax affects various property ownership structures used by foreign investors:
Direct individual ownership: Foreign individuals owning property in their personal name face withholding on rental receipts. The withheld tax credits against annual IR liability calculated under the net real income regime, which allows deduction of actual expenses (property tax, maintenance, depreciation, financing costs).
Moroccan holding company ownership: Foreign investors who established Moroccan holding companies (typically SARL or SA) to own rental properties experience withholding on rental payments to the company. The company declares rental income in its annual IS return, applying the withheld tax as a credit. This structure permits deduction of management costs, legal fees, and property-level debt interest.
OPCI structures: Real estate collective investment organizations (Organismes de Placement Collectif Immobilier) benefit from specific tax treatment. The Finance Law provisions do not clearly specify whether OPCI are subject to withholding, creating uncertainty for investors in these vehicles. Legal clarification from the tax administration is anticipated.
Cash Flow and Liquidity Planning
The monthly withholding creates cash flow implications that landlords should anticipate:
Reduced net rental receipts: Landlords receive 95% of contractual rent monthly instead of the full amount, affecting liquidity for property owners who rely on rental income for mortgage payments or operating expenses.
Timing of refunds: When annual withholding exceeds final tax liability, landlords wait for refund processing by the Direction Générale des Impôts. Refund timelines typically extend 3-6 months after filing the annual return, creating a temporary cash shortfall.
Quarterly estimated payments: Landlords who previously made quarterly estimated tax payments under the IS or IR regime may need to adjust estimates downward to account for monthly withholding, avoiding excessive advance payments.
Foreign landlords who finance Moroccan properties with overseas debt or who have foreign-currency obligations should model the cash flow impact carefully. The reduction in monthly net proceeds may create foreign exchange exposure if rental income serves to hedge currency obligations.
Documentation and Record-Keeping Requirements
Landlords must maintain comprehensive documentation to support withholding reconciliation and potential tax audits:
Lease agreements: Original contracts specifying rental amounts, payment terms, and tenant identification
Monthly payment evidence: Bank transfer confirmations showing amounts received net of withholding
Annual beneficiary statements: Forms provided by tenants documenting total withholding per year
Expense receipts: Invoices for property maintenance, management fees, insurance premiums, and property tax payments supporting deductions claimed in annual returns
Foreign currency documentation: For foreign landlords, certificates of change (certificats de change) proving rental proceeds originated from Moroccan-source income, required for eventual repatriation
The Direction Générale des Impôts may request these documents during tax audits or withholding verification procedures. Landlords should retain records for the statutory limitation period of four years following the relevant tax year.
Strategic Planning Recommendations
Foreign property owners can implement several strategies to optimize tax outcomes under the new withholding regime:
Expense maximization under net real income regime: Landlords declaring under the net real income regime should document all deductible expenses to reduce final tax liability. The 5% withholding represents an advance payment, and comprehensive expense documentation permits refund claims when withholding exceeds tax due on net income.
Lease renewal timing: Landlords negotiating lease renewals in 2026 should clarify whether the stated rent is gross or net of withholding. Some tenants may seek to shift the withholding burden to landlords by negotiating net rent terms.
Intercompany arrangements: Foreign groups with Moroccan subsidiaries that lease property from related entities should review transfer pricing documentation. The withholding does not eliminate the need for arm’s-length rental pricing, and tax authorities may scrutinize related-party leases during audits.
Morocco-source tax treaty planning: Landlords from treaty countries should verify whether the Morocco-France or Morocco-USA tax treaties provide more favorable treatment. Some treaties permit taxation exclusively in the landlord’s residence country for certain property types, though Morocco generally reserves taxation rights for real property located in Morocco.
Legal Assistance for Rental Income Tax Compliance
The introduction of withholding tax on rental payments requires landlords to adapt compliance procedures and monitor cash flow implications. Foreign property owners face additional complexity related to tax residency, treaty benefits, and currency repatriation rights.
Cabinet Lafrouji Avocats provides specialized legal services for landlords affected by the new withholding tax:
- Withholding compliance review: Analysis of lease agreements and tenant withholding obligations, verification of correct withholding application
- Annual return preparation: Preparation of IS or IR declarations integrating withheld tax credits, reconciliation of monthly withholding with annual liability
- Refund claim procedures: Assistance with refund requests when withholding exceeds final tax due, follow-up with Direction Générale des Impôts on pending refunds
- Tax residency and treaty analysis: Evaluation of tax treaty benefits for foreign landlords, preparation of tax residency certificates and treaty claim documentation
- Structure optimization: Review of property ownership structures to minimize tax exposure, advice on OPCI, holding companies, and direct ownership alternatives
Our team has extensive experience advising foreign investors on Moroccan real estate taxation and regulatory compliance.
Contact us for a compliance assessment:
Cabinet Lafrouji Avocats
64 rue Taha Houssein
20000 Casablanca – Maroc
Telephone: +212 (5) 22 47 55 29
Email: contact@lafroujiavocats.com
Legal Notice: This article provides general information on Moroccan rental income withholding tax and does not constitute legal advice. Property owners should consult qualified legal counsel to assess their specific tax obligations and compliance requirements.
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