Egypt's Real Estate Tax Countdown Begins

The finance ministry extended the deadline to pay the real estate tax from 15 Aug to 15 Oct to alleviate crowding at tax offices.

Owners of residential and commercial property in Egypt have until mid-August to pay the new property tax or prove that they are exempt. The tax, while passed in July 2013 had not been implemented until recently.

Owners can make enquiries about the amount of tax due to the Real Estate Tax Authority (RETA) over the Internet, and the authority will also send agents to the property concerned to collect the needed documents. Amira Hisham, who has an apartment in New Cairo, was interviewed this week by the RETA. She was told that as the market value of her flat is less than LE2 million, it will be exempted from the new tax, especially as it is the only property she owns.

Under the new law, a family can be exempted from the tax if it owns only one unit of real estate, but extra units in the names of children or wives are not exempted.

The LE2 million exemption refers to the family’s main residence alone. If an individual owns two units each valued at less than LE2 million, one will be exempted while the other will be subject to the tax.

To the relief of taxpayers, RETA head Samia Hussein said in an interview last week that the tax on a LE2 million flat would not exceed LE120 a year. However, the tax, first introduced in 2008 and amended in 2014, is still raising controversy.

Social networks were abuzz last month with questions about its constitutionality, with Minister of Finance Mohamed Maait stressing that the Supreme Constitutional Court had ruled in 2002 that non-income-generating real estate would be taxed.

Ahmed Mansour, the owner of a flat in the popular Cairo neighbourhood of Shubra, said that families could not afford the extra burden of the tax as already high prices were depleting their incomes.

Sherine Al-Shawarbi, a professor of economics at Cairo University, said that taxes of this kind were applied in most countries in order to provide income for local government and guarantee financial decentralisation. However, she said that factories and other production units should not be subject to the tax in order to encourage investment.

“The owners of these units are already subject to income tax, so it would be unfair to pay tax both on income and on the buildings themselves,” she said.

She said funds were needed to pay for public services by imposing taxes. However, the government should also be committed to improving public utilities and services, she added.

Taxes due are collected in two instalments, one in the first and the other in the second half of the calendar year.

The law permits a taxpayer to pay the tax in full in one instalment, however.

The law says that property values will be assessed every five years in order to calculate taxes due, but increases are limited to a maximum of 30 per cent on housing units and 45 per cent on others.

Committees will be formed in each governorate to assess market values of real estate, classifying it according to building standards, geographical position and utilities.

The government has announced that the treasury will bear the burden of those unable to pay the new tax.

Requests for waivers should be sent to the RETA, which will examine them in a committee headed by a State Council advisor.

The law imposes a fine of between LE1,000 and LE5,000 on those not paying the tax. False declarations will lead to fines of between LE200 and LE2,000.

Hussein said the government intends to direct half the revenues from the tax to healthcare, education and social insurance, while the other half will be split between municipalities and developing informal areas.

Total revenues are expected to reach LE3.5 billion. The RETA has set up a call centre to deal with questions from members of the public.