This article was originally published on November 29, 2019.
The Hiba (The Gift)
A gift, or hiba, is the transfer of ownership of property from a donor to a recipient without consideration. It may be executed before either a notary or an adoul. Under the General Tax Code, such transfers are exempt from income tax when made “between ascendants and descendants, between spouses, brothers and sisters, and between the person providing kafala (Islamic legal guardianship) under an order of the guardianship judge and the child in their care”
The registration fee for a hiba is 1.5% of the property’s value, while land registry fees amount to 1%. “When the donee wishes to sell the property, the taxable capital gain is calculated based on the property’s value at the time the donor acquired it, not on its value at the time of the gift” explains tax attorney Kamal Himmich.
Life Insurance
Life insurance allows an individual to guarantee the payment of either a lump sum, with interest, or an annuity to a designated beneficiary. “The amounts stipulated to be payable upon the death of the insured to a designated beneficiary or to the insured’s heirs are not part of the insured’s estate. The beneficiary, regardless of the form and date of their designation, is deemed to have sole entitlement to these amounts as of the date the contract is entered into” states Article 79 of the Insurance Code. The sums paid to beneficiaries are exempt from taxation.
Disposal of Property Rights
A donor who wishes to continue enjoying their property during their lifetime may divide their ownership rights between bare ownership and usufruct. Bare ownership refers to legal ownership of the property, while usufruct grants the right to use and derive income from it. For example, the owner of a rental apartment may transfer the bare ownership to their child through a gift while retaining the usufruct, allowing them to continue collecting rental income until their death.
Upon the owner’s death, the usufruct automatically merges with the bare ownership held by the heir. Registration and land registry fees are identical to those applicable to a hiba ;1.5% of the property’s value, plus a 1% land registry fee; but are calculated only on the value of the bare ownership. A tax schedule determines the value of the usufruct according to the usufructuary’s age. It ranges from 7/10th of the property’s full ownership value when the usufructuary is under the age of 20 to 1/10th when they are over 70.
The Will
A will, or wassiya, is the legal instrument through which a person determines how their assets will be distributed after death. In Morocco, wills are governed by the Family Code. A will may not dispose of more than one-third of a person’s estate. Nor may it “be made in favor of a single heir, unless the other heirs give their consent”
A will can be used to favor one heir during the distribution of the estate. It may also designate as an heir someone who would not otherwise inherit, a mechanism known as tanzil. The executor is appointed by the testator.
Real Estate Investment Company (SCI)
A real estate investment company (Société Civile Immobilière, or SCI) allows individuals to consolidate their real estate assets within a single legal structure responsible for managing them. One of its main advantages is that it avoids the constraints of joint ownership, under which selling a property requires the consent of all heirs, regardless of the size of their respective shares. “In the case of an SCI, the majority rule based on voting rights applies” explains tax attorney Kamal Himmich.
“The SCI also allows for tax deferral, which is suspended until the company’s shares are sold or the company sells the property that was contributed to it”
A SCI also makes it possible to allocate all voting rights to a single member while the remaining members retain only a financial stake in the company’s capital. It can also help preserve the value of assets that might otherwise be diminished under standard inheritance rules. “Contributions in kind are tax-exempt. The SCI also allows for tax deferral, which is suspended until the company’s shares are sold or the company sells the property that was contributed to it” Himmich explains.
“The SCI has often been called into question, particularly because of the lack of transparency in its management” notes notary Abdelmajid Bargach. Indeed, this type of company is governed only by the general provisions of the Dahir on Obligations and Contracts of August 12, 1913. Law 31-18, intended to establish a clearer legal framework for SCIs, entered into force on August 26, although its implementing regulations have yet to be published.
Written in French by Omar Kabbaj & Soufiane Chahid, edited in English by Amina Kadiri
