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Tuesday, 11 February 2020

Egypt may exempt state-affiliated, strategic factories from property tax

EXCLUSIVE- Gov’t mulling whether to give property tax exemptions to state-affiliated factories and private-sector companies in a handful of “strategic” industries: After draft cabinet-approved amendments to the Real Estate Tax Act pass the House of Representatives, the government could move to exempt factories in which it holds shares from paying taxes on industrial land in a bid to boost profitability, government sources told Enterprise. Authorities might also do the same for “strategic industries,” such as oil and gas and steel, after the changes become law. Cabinet approved the changes last month. They would, if passed, exempt idle land from property tax and grant the government the power exempt land used in strategic industries and sectors. The move would set aside a recent agreement between the Finance Ministry and the Federation of Egyptian Industries that uses the size of land plots as part of the tax calculation.

State-affiliated companies would need to seek cabinet approval for exemptions, while private companies would apply to a Finance Ministry committee, both on a case-by-case basis, the sources said.

Idle factories and those facing financial difficulties would likely also get exemptions, with a presidential decree expected soon to waive part or all of the property taxes accrued during the period of inactivity, according to the sources. Those factories, many of which either shut down or struggled to recover post-2011, currently benefit from a debt relief initiative recently launched by the Central Bank of Egypt (CBE).

Oil and gas, hotels would be unaffected: The tax calculation agreement with the FEI, which is also in effect for the oil, gas, and mining and hotel industries, currently sees the latter group paying real estate taxes on installments, which will not change, say the sources. Oil and gas asset owners, meanwhile, are still adamant they should stick to the formula and are lobbying for their right to exemption, they added.

Maait says industry remains a priority area for gov’t: The Finance Ministry is studying several initiatives to boost local industry besides the proposed legislative changes, Minister Mohamed Maait told Enterprise. Maait declined to discuss those initiatives or the workings of the proposed changes, noting only that deciding which sectors will be identified as priority or strategic industries would depend on the executive regulations, which will be issued after the legal amendments are ratified by President Abdel Fattah El Sisi.

Taxation and debt relief are still key priorities for industry lobby groups: The Egyptian Federation of Investors Association is set to meet with Maait later today to discuss all matters tax reduction and debt relief for factories as amid the Real Estate Tax Act changes, reports Youm7. This came after the union petitioned the government to abolish all forms of real estate tax on factories.

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