How Does the Morocco Income Tax System Work?

Morocco’s income tax system, known as the Impôt sur le Revenu (IR), applies to the earnings of individuals and certain business partnerships that have not elected to be taxed as corporations. The system is designed to capture income from a wide array of sources, including employment, business activities, and investments. The structure is progressive, meaning the tax rate increases as income rises.

Determining Tax Residency Status

An individual’s tax liability in Morocco is tied to their residency status. A person is considered a tax resident if they meet one of three conditions. The first is having a permanent home in Morocco, implying the availability of a dwelling on a continuous basis. The second is having a center of economic interests in the country, which is the place where primary investments and business activities are managed. The final criterion is spending more than 183 days in Morocco within any 365-day period.

Tax residents are subject to the IR on their worldwide income, which includes earnings from both Moroccan and foreign sources. Morocco provides a foreign tax credit to prevent double taxation, but this credit cannot exceed the Moroccan tax due on that income. In contrast, non-residents are taxed exclusively on their Moroccan-source income.

Taxable Income Categories

Moroccan tax law groups taxable earnings into several distinct categories to calculate an individual’s total taxable income. All forms of compensation are considered taxable.

Employment Income

This category includes all remuneration from employment, such as gross salaries, wages, allowances, bonuses, and benefits in kind like company housing or a car. Pensions and annuities also fall under this classification.

Professional and Business Income

This category includes income from commercial, industrial, or artisanal activities, as well as earnings from independent professions like doctors or lawyers. The taxable base is the income earned minus the business expenses incurred to generate it.

Property Income

Property income consists of earnings from the rental of real estate, including developed properties and undeveloped land. The gross rental income is subject to tax. A rate of 10% applies to annual gross rental income below 120,000 Moroccan Dirhams (MAD), and a 15% rate applies to income at or above this amount.

Investment Income

This classification covers income from movable capital, such as interest from bank accounts or bonds and dividends from shares. Capital gains from the sale of shares and bonds are also considered investment income and are taxed at a rate of 20%.

Agricultural Income

This category consists of profits from agricultural and farming activities. It includes income from cultivating land, raising livestock, and other related farming operations.

Income Tax Rates and Brackets

The tax brackets, or barème de l’IR, determine the marginal rate applied to different portions of an individual’s annual taxable income. The calculation begins with determining the total annual taxable income, after which the progressive rates are applied to the following brackets:

• Up to 40,000 MAD: 0%
• 40,001 to 60,000 MAD: 10%
• 60,001 to 80,000 MAD: 20%
• 80,001 to 100,000 MAD: 30%
• 100,001 to 180,000 MAD: 34%
• Over 180,001 MAD: 37%

Available Deductions and Exemptions

Taxpayers can reduce their gross taxable income through several deductions and exemptions before the progressive tax rates are applied. The most common deductions relate to professional expenses and social contributions.

Salaried employees can deduct mandatory contributions to social security funds like the Caisse Nationale de Sécurité Sociale (CNSS). Employees can also claim a standard deduction for professional expenses, which covers costs associated with their employment without requiring detailed proof. Other deductions include loan interest paid on the acquisition of a primary residence and an allowance of 500 MAD for each dependent, up to a family maximum of 3,000 MAD per year. Certain social allowances and benefits may also be exempt from income tax.

The Annual Tax Filing and Payment Process

The tax filing and payment process is governed by deadlines that depend on the taxpayer’s income source. Individuals whose only income is a salary from a single employer may not need to file, as the tax is withheld at the source by the employer.

Individuals with non-wage income, such as professional or rental income, must file an annual tax return. The deadline for filing is before March 1 of the following year, while the deadline for independent professionals is before May 1. The Moroccan tax administration, the Direction Générale des Impôts (DGI), uses an online portal, SIMPL-IR, as the standard method for submission. After filing, any tax due can be paid through the DGI’s platform or via a bank transfer.