Back to the complete issue
Sunday, 3 July 2022

…As we have stories like these

Court strikes down case against Qatari + other Arab investors: An Egyptian court last week acquitted a number of Arab investors connected to Qatari Diar of tax evasion, according to a document seen by Enterprise.

What tax evasion case? Qatar’s Barwa Real Estate offloaded most of its assets — including its Egyptian subsidiary — to Qatari Diar in 2014 to settle its debts. The subsidiary at the time was named Barwa Egypt for Real Estate Development, but has since rebranded as East Gate Developments and sold stakes in the project to three other shareholders. The Egyptian Tax Authority slapped a EGP 6.5 bn tax evasion case on Barwa’s management, who the authority argued should be subject to income tax because they represent a resident company, as well as the capital gains tax. The tax, which imposes a 10% levy on any EGX transaction or sale of shares where investors make gains, was briefly introduced in 2015 before being suspended and reintroduced this year.

Why the court dismissed the case: The sale in 2014 was made before the capital gains tax came into effect, although the case was filed after the tax was introduced, the court ruled. It also said it did not find the claim that the company is a “resident company” to be valid, and that it is “not permissible for us to overread or expand on writings of the law and its penalties,” according to the ruling.

MEANWHILE- An administrative court also upheld a landmark ruling that sets an important precedent for real estate M&A. The ruling — which came out of another case against Qatari Diar’s East Gate Developments in 2019 — essentially stops the New Urban Communities Authority (NUCA) from classifying land ownership changes through real estate M&A as “indirect sales,” and so charging land transfer fees to companies that undergo M&A, Shahid Law Firm Managing Partner Girgis told Enterprise. The dispute was between Diar and the NUCA, which had attempted to slap an EGP 1.3 bn fine on East Gate over its purchase of a land plot for its City Gate Project.

No more appeals: The court’s decision to uphold the ruling is final, sources with knowledge of the matter told Enterprise.

This should go a long way to ease investor concerns as our investment drive goes on: Egypt has been pushing to lure investments into the country, particularly from allies in the GCC, who pledged over USD 22 bn in support of our finances. Qatar said in March it would invest USD 5 bn in Egypt to help shore up the economy — and Qatari officials have so far discussed investing USD 2-3 bn in the local market in talks with the Madbouly government, Finance Minister Mohamed Maait said earlier this week. Qatari Diar is one of the firms that has expressed interest in expanding its footprint here.

Shahid Law Firm defended the investors.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Etisalat Misr (tax ID: 235-071-579), the leading telecoms provider in Egypt; and Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt.