New Real Estate Tax Due Starting Current January;

Cooperation Among Ministries To Evaluate Real Estate Taxes On Hotels, Factories And Petroleum Establishments, Harbours And Airports;

Instructions To Cancel of Agrarian Land Taxation imposed on Houses Built On Agricultural Land To Avoid Double Daxation

The Ministry of Finance has sent six million real estate exemption notifications to owners of nine million residential units. The owners of these units previously used to pay taxes under the classification of building royalty taxes, but after activating Real Estate Tax Law (No. 196/2008), they are exempt, said Dr. Youssef Boutros Ghali, the Minister of Finance.

The new tax, provided by Real Estate Tax Law (No. 196/2008), is due starting January 2011 as the year following the commencement of real estate tax imposition procedures according to the new law, the minister added

To facilitate real estate tax implementation and in order not to burden the touristic establishments with any new load, a study is conducted in collaboration with the ministry of tourism to set up a simple mechanism to streamline the evaluation of touristic real estate units, including hotel buildings for the purposes of the real estate tax.

The new mechanism will set clear criteria for assessing the value of the different real estate units used in touristic activities. It will also protect the interests of the touristic sector and the public treasury at the same time. 

The ministry of finance is coordinating efforts with the relevant ministries and bodies in order to set up a simplified mechanism to assess the value of real estate units with a special nature such as factories, petroleum establishments, harbours and airports, etc., to secure balanced and easy evaluation.

Real estate law is one link in a chain of tax reforms which the government has adopted in the recent years in an effort to boost the economic activities and to create a new atmosphere conducive to building trust between financers and the tax authority, the minister explained. The new law adheres to principles of equality and just distribution of taxes among financers through unifying the provisions of real estate tax in one law instead of a whole set of them. The previous system induced confusion in assessing the due taxes. The minister said the tax authority is keen on reinforcing trust among financers of the tax authority and on creating a more transparent atmosphere concerning tax imposition.

The new law includes many advantages and facilities as it maintains the legal status acquired before passing the law. It does not change the status of owners of old buildings which are rented according to old laws organising the relation between lessor and lessee; the provisions of the new law are only applicable after that old legal relation has expired.

The new law exempts LE 6000 per annum per building used for residential purposes however the number of units, Dr. Ghali added. In the old law exemption was set at LE 18 per annum as rent value for all the units owned by the financer. The new law, in addition, excises around one third of the rent value from the taxable amount, set as the expenses of maintenance of the building, which was not allowed for in the old law.

Concerning the on-going assessment tasks, the minister said the counting and assessment committees are almost through with their work. He explained the evaluation processes are based on sound academic principles. The features affecting collective evaluation are determined and then mathematical formulae for assessing market values are set; this is compared to market value per area in the different governorates in order to measure how compatible the results are to the outcome of the formulae set by specialists. Counting and assessing also depend on the latest technologies using computer systems and GIS maps covering all areas of the republic.

The principles of assessment have led to the fact that most residential units in the different governorates are exempted from taxes on buildings since they have a market value less than half a million Egyptian pounds, as explained by Real Estate Tax Authority Chairman Tarek Farrag. He further clarifies that the outcome of counting and assessment tasks emphasised this fact; the units enjoying exemption are 84.6% of the buildings in Sheikh Zayed and 6^th October Cities. All residential units in the different villages of Egypt are exempt, except for mansions and palaces.

The minister of finance gave instruction to the tax committees to cancel previous agrarian land taxes on the buildings constructed on agricultural land to avoid double taxation and to relieve the burdens of the citizens, in addition to the already enjoyed real estate tax exemption for these buildings according to law 196 of 2008, according to chairman Farrag.

Mr Farrag added that according to the provisions of the new real estate tax, the due real estate taxes of the buildings used for industrial, commercial or service activities are deducted from the revenue taxes of these establishments to avoid imposing further burdens on these activities and to guarantee no transference of the tax burden to the final consumer.

He further emphasises that the state will carry over the burden of taxation of the individuals unable to pay off such taxes because of urgent social circumstance impeding the ability to pay the tax.

(Source: Ministry of Finance)