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Thursday, 4 October 2018

Amendments to the Real Estate Tax Act have leaked

Proposed amendments to the Real Estate Tax Act have leaked: Proposed amendments to the Real Estate Tax Act were leaked yesterday morning by Akhbar Al Youm. The proposed changes are extensive, covering everything from the new real estate tax formula to how rented properties will be taxed, how properties are to be appraised, and avenues for appeals. The amendments were discussed at a meeting of the Madbouly Cabinet yesterday, with sources telling us that it would be presented to the House of Representatives sometime next week.

The new formula sets the annual tax on a property at 10% of its annual rental value, after excluding maintenance expenses from the total — which are set at 30% for residential properties and 32% for non-residential properties. The first EGP 24,000 in rental value is tax exempt. The rental value will be equal to 1.8% of a property’s market value, which will be determined by the Tax Authority during appraisals.

Appraisals: The government property census, which will be used to determine the market value of assets on which their annual rental value will be calculated, will now take place once every seven years, instead of five. The last census was conducted in 2013. A new census was to have been carried out this year under the old law, but was pushed back. Local committees of the Tax Authority will be in charge of appraising properties. A higher committee, which will include the head of the Tax Authority and representatives from the Housing Ministry, will have final say on the appraisals.

Unused industrial land won’t be taxed: It appears that demands from business associations that unused land not be subject to the real estate tax have been answered. Article 9B of the law was amended to say that only land in use will be subject to a real estate tax. The amendment had been the biggest sticking point in the bill for manufacturers.

Who owns what? Managers of tourism properties and residential compounds are to inform the Tax Authority of who owns what at properties under their jurisdiction. Utilities providers must also provide the authority with relevant information on property owners.

Punishment: Penalties for tax evasion would also be amended if the bill passes, with those who do not file “proper and accurate” real estate tax returns being subject to fines of up to EGP 5,000 and 10% of the tax amount.

Some state holding companies exempt: The amendments also exempt state electricity, water, and gas holding companies from paying real estate taxes.

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