A Deduction That Appeared in Your July 2026 Rent
July 2026 marked a practical change for every foreign landlord holding commercial real estate in Morocco leased to a bank, an insurance company, a public entity, or a large Moroccan company. The rent arrived 5% below the contractual amount — accompanied, if the tenant is compliant, by a withholding tax attestation.
This is not an error. Finance Law n° 50-25, effective 1 July 2026, extended the corporate income tax (IS) and personal income tax (IR) withholding mechanism to rental income paid on commercial property to legal entities subject to IS. The deduction at source, long applied to certain categories of income, now covers commercial rents paid by major Moroccan tenants.
This article explains the legal basis, the phased rollout, and — critically — what a foreign landlord needs to do immediately to protect their position.
The Legal Basis: Finance Law 2026 Extends Withholding to Commercial Rents
The Finance Law 2026 (Loi n° 50-25) extended withholding tax to rental income from built and unbuilt properties paid to legal entities subject to IS. Key parameters:
Rate: 5% applied to the gross rent amount excluding VAT.
Nature: Non-liberatory. The withholding is not a final tax — it is an advance payment on the IS or IR ultimately due by the landlord. It is creditable against the final IS liability, and any excess is refundable upon formal request to the DGI.
Who bears the obligation: The tenant (the rent payer), not the landlord. The tenant deducts 5% from each rental payment and remits it directly to the DGI. For each payment made with a withholding, the tenant must issue a withholding tax attestation (attestation de retenue à la source). Without this document, the landlord cannot credit or reclaim the amount withheld.
This regime is distinct from the existing withholding on residential rents paid to individuals — a separate mechanism with different rules that is not affected by the 2026 change.
Who Must Deduct: The Phased Rollout Calendar
The obligation is being introduced progressively by category of tenant:
- From 1 July 2026: public entities, credit institutions, insurance and reinsurance companies, and companies with annual turnover excluding VAT of at least MAD 500 million
- From 1 January 2027: companies with annual turnover of at least MAD 350 million
- From 1 January 2028: companies with annual turnover of at least MAD 200 million
The immediate priority for a foreign landlord is to identify which of their tenants fall within the July 2026 scope. A bank, an insurance company, a state-owned enterprise, or a large listed Moroccan group almost certainly does. A mid-sized regional company probably does not — yet.
For each tenant in scope, confirm: (1) that the tenant is aware of their withholding obligation; (2) that they will issue attestations systematically with each payment; and (3) the process for receiving those attestations.
What This Means Specifically for a Foreign Landlord
Three questions arise specifically for a non-resident foreign company owning commercial property in Morocco without a permanent establishment.
Does the 5% WHT apply even without a PE in Morocco? Yes. The withholding obligation falls on the Moroccan tenant regardless of the landlord’s tax status or domicile. The tenant deducts at source from every qualifying payment, whether the landlord is French, Spanish, Emirati, or American.
How does the foreign non-resident landlord use the credit? Via a declaration of Moroccan-source income filed with the DGI. If the landlord has no Moroccan IS liability against which to offset the withheld amount — which is typical for a non-resident entity with no PE — the excess withholding is refundable. Claiming the refund requires opening a file with the DGI, filing a formal refund request, and providing the attestations as supporting documentation.
What document is non-negotiable? The withholding attestation issued by the tenant for each payment. Without it, no credit and no refund request is possible. This document needs to be systematically collected and archived.
As a foreign landlord receiving your first July 2026 rent with a 5% deduction, Lafrouji Avocats can help you assess your credit and refund options, review your lease terms, and engage with the DGI on your behalf.
Contact us: contact@lafroujiavocats.com — +212 (5) 22 47 55 29
Double Taxation Treaties: Can the Withholding Be Avoided?
Morocco has signed more than 60 double taxation treaties, most following the OECD model convention. Under the OECD model, income from immovable property is taxable in the state where the property is situated — in this case, Morocco — regardless of where the landlord is resident.
The consequence is that the 5% WHT is generally not eliminated by treaty. A French landlord, a German investment fund, or a Belgian holding company owning Moroccan commercial real estate will remain subject to the withholding under their respective treaties with Morocco.
What the treaty does provide is relief from double taxation in the home jurisdiction. The landlord’s country of residence is obligated, under the treaty, to grant a tax credit for the Moroccan tax paid on the rental income. For a French landlord, this means the 5% Moroccan withholding reduces the French tax liability on the same income — but does not eliminate the Moroccan charge.
To claim the credit in the home jurisdiction, the landlord must be able to document the tax paid in Morocco. This brings us back to the attestations: without them, there is nothing to show to the French, Belgian, or Swiss tax authority when claiming the offsetting credit.
Specific treaty provisions may also affect the treatment of the underlying rental income in the landlord’s home jurisdiction. The France-Morocco convention of 29 May 1970 and the Spain-Morocco convention are the most relevant for European landlords. Each should be reviewed in light of the specific structure of the investment.
Four Practical Steps for Foreign Landlords to Take Now
First, identify which tenants are in scope. Any tenant that is a credit institution, insurance company, public entity, or large company (turnover ≥ MAD 500M ex-VAT) is subject from July 2026. Send a written confirmation request to each such tenant confirming the amount that will be withheld and the process for issuing attestations.
Second, review your lease contracts. Does the lease specify that rent is payable “net of any withholding tax”? Or is it silent? This distinction has economic consequences: a “net-of-withholding” clause means the tenant tops up the payment to ensure the landlord receives the full contractual amount; a silent lease means the landlord absorbs the 5% economically. Most leases signed before 2026 are silent on this point.
Third, establish a DGI file for your Moroccan-source income if you do not already have one. The annual declaration of Moroccan-source income is the mechanism through which the credit is applied or the refund is claimed. Absent this file, withheld amounts cannot be recovered.
Fourth, consult a Moroccan lawyer on the applicable treaty and the specific refund procedure for your situation. Non-resident entities claiming IS refunds from the DGI encounter a procedural path that is more complex than it appears on paper and benefits significantly from local representation.
How Lafrouji Avocats Supports Foreign Property Owners
Lafrouji Avocats advises foreign landlords on the impact of Morocco’s 2026 withholding mechanism on their rental portfolios, the review of applicable double taxation treaties, the preparation of DGI filings for credit application or refund claims, and the review of lease contracts for withholding-related clauses.
64 rue Taha Houssein, 20000 Casablanca
+212 (5) 22 47 55 29
contact@lafroujiavocats.com
