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Sunday, 10 February 2019

Egypt to repeal real estate tax exemptions for private homes, provide preferential treatment for hotels, factories, oil and gas

EXCLUSIVE- The Great Real Estate Tax Debate of 2018 is about to roll forward into 2019. Readers may recall the loud, sweeping debate late last summer over how to fairly tax both commercial and personal real estate. At one point, the story was a fixture of the night time talk shows — and we even had dueling bills: one advanced by the Madbouly government and another (going under the pseudonym “The Returns Act”) that was being drafted by members of the House of Representatives.

What were people debating? Everything. The mechanism of collection. Who would get the lowest rate. Whether second and third residential properties would be taxed. The mechanism for property assessments. You name it. We have background on the debate late last summer and on the House’s counter proposal. Among the keys, as we noted in our primer on the House’s 2018-19 legislative season: Nobody last summer was talking about taxing occupied primary family dwellings. That may be about to change.

The Finance Ministry is preparing to restart the discussion, a senior government official told us at the end of last week. The ministry is studying changes to the formulas it uses to calculate real estate taxes paid by factories, hotels and the oil and gas industry. Also possible: Scrapping an exemption for private homes worth less than EGP 2 mn, a proposal that, if it goes forward, is likely to spur debate in public and in the House. The new bill would likely leave in place a tax on billboards and other forms of outdoor advertising.

The new legislation would replace the current real estate tax law, which has been amended piecemeal (see, for example, stories on how the tax would apply to the oil and gas and tourism industries). Those changes, a government source had previously told us, were meant as a stop-gap measures until the ministry finalized the new law.

Preferential treatment for factories, hotels, oil and gas sector: Properties in the oil and gas sector, factories, and hotels would be subjected to a new, in-the-works formula according to the land value of these properties. The new calculation should reduce the real estate taxes these properties are required to pay.

What’s next? A ministry committee is working on the bill, which could go to the House of Representatives before the end of the current legislative season, our source said.

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