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Thursday, 25 February 2021

Property disposal tax isn’t new -Maait

That property disposal tax everyone is up in arms about? It’s been around for some 70 years, Finance Minister Mohamed Maait said yesterday to dispel rumors that the government is imposing a new tax on real estate sales. The confusion came up amid renewed discussion of recently-passed amendments to the Real Estate Registry Act over the past couple of weeks.

So what’s this disposal tax about? The levy, which was introduced back in 1939, is imposed on sales of real estate properties and is set as a flat rate of 2.5% of the disposition or quick sale value of real estate assets. The rate has been stable at 2.5% since 1996, when it was brought down from 5%, Real Estate Registry head Gamal Yacout told Ala Mas’ouleety’s Ahmed Moussa (watch, runtime: 4:47).

It is the responsibility of the seller, not the buyer, to pay the tax within 30 days of completing the sale, Maait noted. Some sale and purchase agreements automatically integrate the tax into the value of the sale by deducting the tax from the amount paid by the buyer, former Real Estate Registry boss Sami Emam said earlier this week (watch, runtime: 9:15).

A handful of exemptions: All properties located in villages or its affiliated areas, real estate assets that were inherited before 25 July 2018, assets presented as in-kind shares in joint-stock companies, and properties given as authenticated gifts will not be subject to the levy, the ministry said.

Does this all sound familiar? It should: The Tax Authority was working in 2019 on setting up an electronic system to record real estate sales that would be subject to the tax, with an eye to triple the state’s real estate tax revenues. The system applies to sales and purchases by individuals and companies, and it runs through real estate registry and public utility offices. Real estate developers will be required to only provide their clients with official property deeds once they present proof of having paid the tax, and sales between individuals will be processed via the same system. Property owners would not have access to basic services such as power and water until they are able to present proof that they have paid the necessary taxes.

Meanwhile, objections to changes on how to register real estate pushed Prime Minister Moustafa Madbouly to set up a committee to streamline registry procedures. The changes, introduced through amendments to the Real Estate Registry Act, require property owners to go through their local ma’moreya and a judge to validate their sale and purchase agreements before taking the contracts to the Real Estate Registry.

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