Death & Taxes

It’s a given that nobody likes paying taxes. Given how much of the Moroccan economy is cash based, it’s a wonder the government collects any taxes at all. We wouldn’t really give this much thought if it weren’t for the house. But the capital gains tax system here is much like it is in the U.S. If we sell our house in fewer than eight years we will owe capital gains tax of 20% on the profit. The profit is calculated by presenting the sale contract, the purchase contract and a stack of receipts for all the work done on the house. The purchase and sale price are straightforward, but getting receipts for the work done can be complicated, and we’re been told that not everything that’s deductible in the States is deductible here.

Take a trip to the souks. You set off to buy a beautiful lamp, and you begin haggling over the price. Whatever haggling technique you use, you end up settling on a price and paying in cash. Almost none of the souk shops take credit cards, and the little MasterCard or American Express stickers you occasionally see in windows are there to lure you in, rather than a promise of a working credit card machine. It’s assumed the purchase is in cash, and that nothing will be reported to the state. If you demand a receipt, the tax will be added on top of that. Nothing so surprising here, as sales tax is added on top of the price in the States as well.



Morocco, though, has two types of receipts, the receipt and the facture, which are quite different in their meaning and use. The lowly receipt is used between the buyer and seller only. If you go to the hardware store to buy a box of nails, they’ll give you a receipt, which lists items purchased and the price. A facture is a more legally binding type of receipt which has the name of both the buyer and seller on it, has a fancy stamp, and most importantly this facture involves a third party: the government. If you want to deduct the price of something from your taxes, you need a facture. It’s understood that by providing a facture, a seller must declare the income to the government. You can imagine that it’s not easy getting people to hand over factures. We’ve heard rumors that there’s a black market for factures, but we don’t know how it works, and it’s unsubstantiated at this point.

In the States, while sales tax is added to the price, income tax is the responsibility of the employee rather than the employer. During the closing on the house, we asked the translator about getting a facture for the real estate commission (in Morocco both the buyer and seller pay a 2.5% commission: the seller out of his proceeds, the buyer on top of the purchase price). We were a little surprised when he told us that the 2.5% didn’t include the tax, and if we wanted a facture, we would need to pay the Immobilier’s income taxes of 20%. We balked a little and told him we’d think about it as it could be done after the fact. Meanwhile, we handed over a bank check drawn up for the Immobilier.

Arguing that he was selling the house at no profit, the seller of the house had negotiated down his half of the commission. Frustrated by this, just after we’d handed over a check for our full portion of the commission, the realtor stood arguing with Hamoud in Arabic. Finally, and quite reluctantly, Hamoud told us he was being forced by the Immobilier to ask us for a cadeau to cover the lost commission from the seller. We laughed at the gall of a man who had already tried to get us to pay his income taxes, and politely declined.

When the Immobilier went to the bank he discovered that our check had a notation on it that required, “for deposit only.” To avoid pay taxes on it, he had wanted to cash the check; to deposit it would alert the government to his earnings. To avoid this, he again appealed to Hamoud, claiming he didn’t have a bank account in which to deposit the check and asked for us to have a new check issued without the “for deposit only” notation. Rather cheeky, we thought, only now we had closed on the house and had legally done all we were obliged to. We offered to pay him in cash, but less 20%, for the “favor,” and suddenly he remembered he had an account in which to deposit the check after all.

In Morocco, death might be certain, but taxes less so.