Why tax must be part of your ROI calculation
Most investors compute a gross or net yield but forget to provision for income tax (IR, Impot sur le Revenu). Depending on your rental income level, IR can reduce your annual cash flow by thousands of MAD and lower your cash-on-cash ROI by 1 to 4 percentage points. A project that looked profitable on a gross yield basis can look mediocre once tax is properly modelled.
In Morocco, residential rental income (unfurnished) is classified as "revenus fonciers" and subject to IR. The mechanism involves two steps: a standard 40% expense deduction on gross income, then application of a progressive rate schedule to the net amount. This guide walks through both steps with a worked example so you can estimate your effective tax burden and include it in your ROI simulation.
The 40% flat deduction: how it works
For unfurnished residential lettings, Moroccan tax law grants a 40% flat deduction on gross rental income to cover all expenses (maintenance, insurance, management fees). You do not need to itemise or justify individual expenses, the deduction is automatic. The taxable net base becomes: Gross rent × 60%.
If your real expenses genuinely exceed 40% of gross income (major renovation, heavy management costs), you can elect the "professional income" regime and deduct actual expenses. This requires formal accounting and professional registration. The vast majority of individual landlords use the flat regime, which is simpler and usually sufficient for a single property or small portfolio.
Once the 40% deduction is applied, the net taxable rental income is added to any other personal income you have and taxed under the progressive IR schedule. If rental income is your only income, only the schedule below applies. Test the impact of this charge in our ROI calculator by adding it to your monthly running costs.
The 30,000 MAD exemption threshold
Gross rental income below 30,000 MAD per year (approximately 2,500 MAD/month) is fully exempt from IR in Morocco for individual owners of unfurnished residential properties. Below this threshold no IR is due on this income, but the annual return is still required: the DGI states that rental income of 40,000 MAD or less must be declared too. This is a meaningful advantage for small investors or low-rent properties.
If you own multiple properties, gross rents from all properties are aggregated. Two studios each generating 2,000 MAD/month (24,000 MAD/year each) appear individually below the threshold, but combined at 48,000 MAD/year they exceed it, both become taxable. Plan your portfolio with this aggregation rule in mind from the outset.
The threshold applies to gross income before the 40% deduction. It is set by the annual Finance Law and may be adjusted yearly. Always verify the current threshold with the Direction Generale des Impots for the relevant tax year.
The 2026 IR schedule: tax brackets and rates
2026 IR schedule (applied to annual net taxable income after the 40% deduction):
- 0%: MAD 0 to 40,000
- 10%: MAD 40,001 to 60,000
- 20%: MAD 60,001 to 80,000
- 30%: MAD 80,001 to 100,000
- 34%: MAD 100,001 to 180,000
- 37%: above MAD 180,000
These rates apply to net taxable income (gross rent after the 40% deduction), not to the gross rent collected.
The schedule is progressive: each bracket is taxed only at its own rate. If your net taxable income is 65,000 MAD, you pay 0% on the first 40,000 MAD, 10% on the next 20,000 MAD, and 20% on the remaining 5,000 MAD, a total of 3,000 MAD. You do not pay 20% on the full 65,000 MAD.
The effective rate (total tax / gross rent) is always lower than the marginal rate. For most landlords with a single mid-range property, the effective rate stays between 1% and 6% of gross rent. It rises more steeply for portfolios generating over 150,000 MAD/year in gross rental income.
Step-by-step worked example: Casablanca 8,000 MAD/month
Take a flat let at 8,000 MAD/month (96,000 MAD/year gross). This exceeds the 30,000 MAD exemption threshold. Step 1 (taxable base: 96,000 × 60% = 57,600 MAD. Step 2) apply the IR schedule: 0% on 40,000 MAD = MAD 0. 10% on 17,600 MAD (= 57,600 - 40,000) = MAD 1,760. Total annual IR = MAD 1,760, roughly MAD 147/month.
Effective rate on gross rent: 1,760 / 96,000 = 1.83%. At this income level the tax burden is modest. Now consider a landlord with a portfolio generating 200,000 MAD/year in gross rent. Taxable base: 200,000 × 60% = 120,000 MAD. IR: 0 + 2,000 + 4,000 + 6,000 + 6,800 = MAD 18,800/year (~MAD 1,567/month). Effective rate: 9.4% of gross.
Add this monthly provision to your simulation in our rental ROI calculator alongside your other running costs. For the 8,000 MAD/month example, MAD 147/month reduces cash flow slightly but is very manageable. At higher income levels the impact becomes significant and must be built into your projections from day one.
Furnished lettings and Airbnb: different tax treatment
Furnished lettings (including Airbnb) may be classified as professional income if the activity is carried out habitually and regularly. In that case, they exit the "revenus fonciers" regime and fall under professional income rules, with different deduction possibilities. The boundary between "occasional furnished" and "habitual furnished" is assessed by the tax authority based on volume and frequency.
The professional regime allows actual expenses to be deducted (platform fees, cleaning, insurance, furniture depreciation, etc.), which can be advantageous for high-occupancy properties. It requires formal accounting, professional registration and more frequent filings. For intensive Airbnb operators, the gain can be meaningful.
Our Airbnb vs long-term rental guide compares both models in terms of gross income, costs and management effort. For the precise tax treatment of your specific situation, consult a local accountant or your tax centre. Whatever the strategy, declaring rental income is mandatory and non-declaration penalties can be significant.
Legal tax optimisation strategies
Under the flat 40% regime, the deduction is fixed, you cannot exceed it. If you finance the purchase with a mortgage, the interest portion of the monthly payment is part of your real costs. Under the professional (actual expenses) regime, mortgage interest is deductible, which can lower the taxable base, a reason to compare both regimes carefully before deciding.
Another strategy: time major renovation works to coincide with years of high rental income. A large renovation in a high-income year creates a deductible charge (under the actual expenses regime) that partially offsets the higher income. This requires proactive tax planning, ideally with an accountant.
If you invest as an individual and you also have a salary, combining salary and rental income can push you into higher IR brackets. In that case the tax impact is stronger than in the basic simulations. Use our ROI calculator to model different charge levels and measure the net impact of each scenario.
FAQ + resources on Morocco rental income tax 2026
- My rent is 2,800 MAD/month, do I pay IR? Yes, 2,800 × 12 = 33,600 MAD/year gross, above the 30,000 MAD threshold. But the taxable base is 33,600 × 60% = 20,160 MAD, taxed at 0% (below the 40,000 MAD bracket). IR = MAD 0. You must declare but pay no tax.
- Can I deduct agency fees? Under the flat 40% regime, all costs are assumed to be covered by the deduction, no additional deduction is possible. Under the actual expenses (professional) regime, yes.
- When to declare? The annual IR return is generally due by 1 March of the following year. Check the exact dates on the DGI website, and follow our step-by-step rental income filing guide for the full procedure.
- Do the rates change year on year? Yes, the annual Finance Law can adjust rates and thresholds. Check DGI each year.
Useful references
Use our Morocco rental profitability calculator
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