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Wednesday, 10 October 2018

Tax Authority to sign agreements soon with ministries of transport, civil aviation on real estate tax calculation

Tax Authority to sign agreements soon with ministries of transport, civil aviation on real estate tax calculation: The Tax Authority is close to finalizing agreements with the ministries of transport and civil aviation on the tax treatment of real estate in their respective industries, Real Estate Tax Authority head Samia Hussein told the press yesterday, Al Mal reports. Hussein said the agreements would be signed soon, but did not give a specific date or provide additional details. The Finance Ministry had signed protocols with the ministries of oil and tourism last month that set guidelines for the calculation of real estate taxes for properties in oil, gas, and mining, as well as hotels. Speaking of which, Hussein said that the tax formula for hotels — which under new guidelines will be based on their nominal investment value and star rating — maybe reconsidered and potentially reduced for hotels with low occupancy rates.

Background: Changes to the tax treatment of properties in a variety of industries comes as part of the broader overhaul of the Real Estate Tax Act. The Madbouly government wants to change everything from how rental values are calculated for tax purposes, how property values are appraised, penalties for evasion, and avenues for appeals. We’re also expecting comprehensive changes to the country’s tax code to be presented to the House of Representatives during the current legislative term, which are expected to restructure the Tax Authority, include new policies to curb tax evasion, introduce a framework for electronic payments, and include provisions that will impact sales and real estate taxes. Changes to taxation laws mean to boost tax receipts, which the government has angled as a key part of its plan to ease pressure on the budget.

Expect changes to tax rates on real estate, but not to the income tax or value-added tax rates. Finance Minister Mohamed Maait has not signaled he plans to depart from his predecessor’s clear policy on tax rate stability in those two portfolios.

On a related note, sources claim to Al Mal that the government has no plans to raise taxes on entertainment venues. The claim came after we reported on Monday that Finance Ministry officials have met with members of the Federation of Egyptian Industries’ (FEI) Cinema Industry Chamber to discuss potential tax hikes on entry fees for cinemas, theaters, nightclubs, and other entertainment venues, as well as set a EGP 20 minimum entry fee. As we noted in our initial report: “This proposal has been circulating since 2016 and has been kicked down the road multiple times. That having been said, the treasury has made it clear that boosting tax receipts will be a key component of its drive to ease pressure on the budget as fuel prices see higher outlays for the subsidy program.”

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