In brief: Rental income in Morocco (from built or unbuilt property) benefits from a 40% flat-rate allowance on the gross amount. It is subject either to the progressive IR scale or to final withholding rates: 10% if the gross annual rental income is below 120,000 MAD, 15% if equal to or above 120,000 MAD, or 20% at the taxpayer’s option (Art. 73-II of the Tax Code). The choice between the progressive scale and the final withholding rate is critical for tax optimisation.
Definition of rental income — Art. 61-I
Article 61-I of the Tax Code defines rental income as income derived from:
- The rental of built properties: apartments, houses, commercial premises, offices, warehouses
- The rental of unbuilt land: bare land, car parks, agricultural land let out
- The rental of furnished properties: buildings equipped with furniture and fittings
- Eviction compensation paid to the tenant by the landlord
- Free provision of a property to a third party (the rental value is then added back to the owner’s rental income)
Income from the rental of property rights, usufruct, usage rights or enjoyment of real property is also treated as rental income.
It is important to distinguish rental income from professional income: when rental is carried out as a regular professional activity (organised seasonal rental, managed tourist residences), the income may fall under the professional income category.
Tax base: the 40% flat-rate allowance — Art. 64
The net taxable rental income is determined after applying a 40% flat-rate allowance on the gross income:
Net rental income = Gross rental income x (1 − 40%) = Gross income x 60%
This allowance is deemed to cover all expenses borne by the owner: maintenance work, repairs, co-ownership charges, insurance, communal services tax, etc. No deduction of actual expenses is permitted in addition to this flat-rate allowance.
Gross rental income comprises:
- The total amount of rents received during the calendar year
- Rent supplements: key money, compensation, landlord charges passed on to the tenant
- The rental value of properties provided free of charge, assessed by comparison with similar properties
Tax rates on rental income — Art. 73-II
Since the reform introduced by the 2023 Finance Act and supplemented by the 2025 Finance Act, rental income may be taxed in two ways:
Option 1: final withholding rates
| Gross annual rental income | Final withholding rate | Reference |
|---|---|---|
| < MAD 120,000 | 10% | Art. 73-II |
| ≥ MAD 120,000 | 15% | Art. 73-II |
| On option | 20% | Art. 73-II (FA 2025) |
The final withholding rate applies to the net rental income (after the 40% allowance). The withholding is final, meaning the rental income is not included in the taxpayer’s global income for the purpose of calculating IR under the progressive scale.
Option 2: progressive IR scale
The taxpayer may choose to subject their rental income to the progressive IR scale. In this case, the net rental income is added to other income categories (salary, professional, etc.) to form the total taxable income.
Progressive scale vs final withholding rate: how to choose?
The optimal choice depends on the total amount of the taxpayer’s income and the proportion that rental income represents.
When the progressive scale is more advantageous
The progressive scale is often more favourable when rental income is the sole or main income of the taxpayer. Indeed, the first brackets of the scale (0%, 10%, 20%) are lower than the final withholding rates applied on the entirety of the net rental income.
For example, a taxpayer whose only income is a net rental income of 60,000 MAD would pay an IR under the progressive scale significantly lower than the 10% final withholding rate, thanks to the exempt bracket (up to 30,000 MAD) and the 10% bracket.
When the final withholding rate is more advantageous
The final withholding rate becomes attractive when the taxpayer already has high income in other categories (salaries, professional income). In that case, rental income, if included in global income, would be taxed in the upper brackets of the scale (34% or 37%), well above the 10% or 15% final withholding rate.
Worked example: MAD 150,000/year rent
Consider a taxpayer receiving gross annual rent of MAD 150,000 who also has a net taxable salary of MAD 200,000.
Calculation with final withholding rate
| Step | Amount |
|---|---|
| Gross rental income | MAD 150,000 |
| 40% allowance | − MAD 60,000 |
| Net rental income | MAD 90,000 |
| Final withholding rate (≥ 120,000 gross → 15%) | 90,000 x 15% |
| Rental IR due | MAD 13,500 |
The IR on salary is calculated separately under the progressive scale.
Calculation with progressive scale (inclusion in global income)
| Step | Amount |
|---|---|
| Net taxable salary income | MAD 200,000 |
| Net rental income | MAD 90,000 |
| Total taxable income | MAD 290,000 |
With a total income of MAD 290,000, the bulk of the rental income would be taxed in the 34% and 37% brackets of the scale. The additional IR cost would be significantly higher than the MAD 13,500 from the final withholding rate.
Conclusion: in this case, the 15% final withholding rate is clearly more advantageous.
Conversely, if the same taxpayer had no other income, the progressive scale IR on MAD 90,000 would yield a tax of approximately MAD 5,900 (after deducting the exempt and reduced-rate brackets), well below the MAD 13,500 from the final withholding rate.
Filing obligations
A taxpayer receiving rental income must:
- File the annual global income return (form ADP010) by March 1 of the following year
- Report the gross rental income received, the identity of the tenants and the nature of the properties let
- Expressly opt for the final withholding rate or the progressive scale when filing
- File via the SIMPL portal
- Retain leases and rent receipts for a minimum of 4 years in case of a tax audit
In the case of free provision, the owner must declare the estimated rental value as rental income.
Reference texts: General Tax Code 2026 — Art. 61-I, Art. 64, Art. 73-II — Circular Note No. 717
Frequently asked questions
Does the 40% allowance really cover all expenses?
Yes, the 40% flat-rate allowance is deemed to cover all owner expenses: maintenance, repairs, insurance, communal services tax, co-ownership charges, etc. No additional deduction of actual expenses is permitted. If your actual expenses exceed 40% of the gross income, the flat-rate allowance remains applicable with no possibility of increase.
Must I declare a property provided free of charge?
Yes. When a property is made available free of charge to a third party (except direct ascendants and descendants in certain cases), the owner must declare the rental value as taxable rental income. This value is estimated by comparison with rents charged for similar properties in the same area.
Does the 10% final withholding rate apply to gross or net income?
The final withholding rate applies to the net rental income, i.e. after the 40% allowance. The MAD 120,000 threshold that determines the applicable rate (10% or 15%) is, however, assessed on the gross annual rental income.
Can rental income and salary income be combined for deductions?
When the taxpayer opts for the progressive scale, net rental income is added to salary income and other income to form the global income. Global income deductions (mortgage interest on the principal residence, supplementary pension contributions, charitable donations) then apply to the whole, which can be an advantage if the taxpayer is entitled to significant deductions.
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Need to optimise the taxation of your rental income? Contact our tax law experts to determine the most advantageous tax regime for your situation.
