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Wednesday, 26 December 2018

FinMin looking to replace Real Estate Tax Act with new legislation streamlining appraisal process

EXCLUSIVE- Proposed amendments to real estate tax could be a ‘temporary measure’ ahead of full re-write of bill: A bill now before the House of Representatives packed with piecemeal amendments to the nation’s real estate tax could ultimately be just a stop-gap measure as the Finance Ministry mulls drafting a new real estate tax act from scratch, a senior government official tells us.

The problem: The existing law’s reliance on civil servants to appraise the tax value of real estate appraisals has left the door open to inconsistency and corruption. Debate over the amendments has so far been messy: The House had rewrote government-proposed amendments and had drafted a revised version that significantly watered down the originally proposed amendments, which covered everything from the new real estate tax formula to how rented properties would be taxed and avenues for appeal.

Taxing factories, tourism properties, oil and gas sector: A rewrite of the law could set the stage for executive regulations that include new appraisal formulas for the tourism and oil and gas industries as well as industrial land, according to our source. The ministries of oil and finance had reached an agreement back in September that would set “clear guidelines” for the tax treatment of properties in oil, gas, and mining. The Tourism Ministry had also reached a similar agreement the previous month with the Finance Ministry for hotels.

Digitizing appraisal process for homeowners: Another feature of a rewritten law would be the introduction of a digital system through which real estate will be appraised. The Finance Ministry has enlisted Ain Shams University to appraise the value of real estate in the country based on location and prepare an electronic database of prices. Owners of residential compounds would be individually responsible for entering the total area of their properties into an electronic system that would then calculate the taxes due for each property according to its appraised value. The ministry has yet to determine how owners of single-family dwellings outside compounds would fit into this scheme.

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