Property in Morocco and tax...

S

slave1

Registered User
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243
Okay, here's the lie of the land

Purchasing an apartment in Saidia, Morocco.
Currently no double tax between Ireland and Morocco, however is on the cards.
Purchase price of €184k, STG1k legal fees, another €10k in other legal fees the Moroccan end.
Apartment comes fully furnished right down to the knife and fork.
Releasing equity in current home to finance purchase.
Envisage having on site rental management company to let the apartment throughout the year with a few weeks for myself.
Property to be ready in early 2009.

20% payable upon contract, September 2006
20% payable upon start of construction, January 2007
60% payable upon completion, January 2009

Can I claim the interest as a deductable expense even though the mortgage is on my own property? I have clearly stated in mortgage that the loan is for this investment property.
From a risk mgt perspective I prefer an Irish rather than a Morocco mortgage even though I could get one.
What's the story on all the "pre-letting" expenses, e.g. the interest on the mortgage up until 2009.
Tax free income for the first 5 years in Morrocco, will this be tax free in Ireland, i.e. are any of you aware of an existing tax treaty agreement where Ireland honours the tax exempt status in the other country.
No CGT in Morocco after 10 years, same Q. will Ireland recognise?

I think I've outlined everything, if anyone needs any futher info. please ask.

Tks in advance
 
slave1 said:
Purchase price of €184k, STG1k legal fees, another €10k in other legal fees the Moroccan end.
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This is about €11,500 then in legal fees ... 6.25% of the purchase price ... maybe it's just me but that looks very hefty ?? (is it just legals or does it maybe include the Moroccan equivalent of stamp duty)

I would assume the answer to your all your tax questions (in the current absence of a double tax agreement) would be not the answer you want to hear (i.e. you'll be liable for irish tax irrepsective of what goes on/is taxed in Morocco) - but others would be more expert on this.
 
The whole deal looks very expensive to me.

No double taxation agreement means you'll have pay tax in Morocco and then again on the whole amount at your marginal rate back in Ireland. I'd be surprised if more than 25% of the rent ended up in your pocket.

Ditto on the CGT if there is no double taxation agreement in place by the time you sell. (CGT is 20% here, though I'm not sure if Revenue would class this as CGT or income taxed at 42%)

The stage payments also look very high considering how long it'll be till the estimated completion date is.

Can't really comment on the actual price as it could be a 5 bed monster with pool or 1 bed apartment in the desert.
 
slave1 said:
Can I claim the interest as a deductable expense even though the mortgage is on my own property? I have clearly stated in mortgage that the loan is for this investment property.
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YES. It's what the mortgage is used for that is important, not what it is mortgaged against.


slave1 said:
What's the story on all the "pre-letting" expenses, e.g. the interest on the mortgage up until 2009.
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Interest on the mortgage up to the time you let out the property can not be offset against your future rental profit. The only pre-letting expense allowable against your first rental profits would be Legal and auctioneering fees incurred when letting out the property.

I think you are going to be hit quite hard with Tax and local fees. If you're relying on rental income to finance this purchase then you should make sure that you are clear about much money you can expect after tax and local fees.
 
Hi and thanks all for responses.

This is about €11,500 then in legal fees ... 6.25% of the purchase price ... maybe it's just me but that looks very hefty ?? (is it just legals or does it maybe include the Moroccan equivalent of stamp duty)
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Bit of a mis-type, about €10k in fees, [FONT=Arial, Helvetica, sans-serif] Stamp Duty: 2.5%, Legal Fees: 1.1%, Notary Fee: 0.5%, Land Registry: 1.5% to 2.0%[/FONT], these are all Morocco based and payable in local ccy.
The STG£1k is to cover translations etc by English based Spain/Morocco property legal group, this is off my own bat.

The whole deal looks very expensive to me.
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It's all relative I suppose, what do I get? A 2 bed, 2 bath, 1200 square foot apartment with garden, hot/cold air con, 3 communal swimming pools - one heated -, guarded fenced area of 250 apts, local marina, hospital, sports centre, 3 golf courses, fully furnished inc. kitchen white goods, clean sandy beach, climate that will be rentable even in Winter - 16 to 18 degrees in Jan, only low 30's in Summer. No Morocco income tax for 5 years, 10% CGT if I sell within 5 years, 5% if I sell within 6-10, zero thereafter. 5 year exemption from bin taxes etc, communal fee of approx €65 a month. Ryanair will be opening up Morocco by 2009. It's only half an hour past Spain.

I'd be surprised if more than 25% of the rent ended up in your pocket.
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If I can contribute to the repayments then I'll be happy, I can afford this with no rental income and I think you have to budget this way or you're exposing yourself to adverse risk

YES. It's what the mortgage is used for that is important, not what it is mortgaged against.
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This is what I was thinking, would appreciate any factual backup to this if anyone is aware.

There's a lot of good news if the double tax is agreed by 2009, anyone any insight to how long these things take, is there a similar one with any similar country??
 
Afterthought, well not an afterthought yet, as the property will be fully furnished should I request the contract to split out the fittings and fixtures portion for tax writing down allowance.
Also, how would flight costs for inspection etc be as a deductable expense....
 
slave1 said:
Afterthought, well not an afterthought yet, as the property will be fully furnished should I request the contract to split out the fittings and fixtures portion for tax writing down allowance.
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I wouldn't imagine you would have to go to the extent of getting contracts split. I think a written breakdown of the cost of the fixture and fittings by the selling developer/agent would be sufficient. Once it's for a reasonable amount you shouldn't have any difficulties.


slave1 said:
Also, how would flight costs for inspection etc be as a deductable expense....
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If you buy the property as an individual then flight cost etc. are not allowed against your rental profits(AFAIK).
 
Ryanair have increased their flights to Morocco recently and the Moroccan goverment are opening their skies - currently limited - in 2007, by 2009 I anticipate that there will be significant increased flights to Morocco apart from the current 3 airports serviced by Ryanair.
Currently you can get there by changing at a Ryanair hub but when the tourist and second home market increases - Azur programme - a change will be likely with more direct flights.
Press release...
[broken link removed]
 
I wouldn't base on investment decision on an assumption that a Ryanair service will commence or continue. Ryanair will (as their track record shows) cut a route without mercy if it fails to bring in the money.
 
slave1 said:
Ryanair have increased their flights to Morocco recently and the Moroccan goverment are opening their skies - currently limited - in 2007, by 2009 I anticipate that there will be significant increased flights to Morocco apart from the current 3 airports serviced by Ryanair.
Currently you can get there by changing at a Ryanair hub but when the tourist and second home market increases - Azur programme - a change will be likely with more direct flights.
Press release...
[broken link removed]
Click to expand...



Slave is it the Mediterrania Saidia development by SPanish developers Fadesa you are buying on?
 
is it the Mediterrania Saidia development by SPanish developers Fadesa you are buying on?
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Saidia, yes, not Fadesa though, Property Logic
PM me if you want me to refer you to the folks I'm buying through
 
slave1 said:
It's all relative I suppose, what do I get? A 2 bed, 2 bath, 1200 square foot apartment with garden, hot/cold air con, 3 communal swimming pools - one heated -, guarded fenced area of 250 apts, local marina, hospital, sports centre, 3 golf courses, fully furnished inc. kitchen white goods, clean sandy beach,
Click to expand...

This is quite expensive, i invested in the atlantic coast, i have a 2 bed 2 bath penthouse 900sqft with a roof top terrace of the same size with all the same amenities, and furnished, (but without a fridge for some reason) for 120,000

I can give you the name of the company if you pm me.
 
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