By Eid Said, Tax Consultant at Al Kamel Law Office, and a former First Undersecretary of State at the Egyptian Central Auditing Organization
The Real Estate Tax was imposed in Egypt at the end of a ruling by Viceroy Mohamed Aly and limited to buildings in Cairo and Alexandria. That was until the issuance of Law No. 56 in 1954 that was eventually canceled by Tax on Buildings Law No. 196 for 2008, which introduced new provisions concerning assessing rent and imposing taxes on buildings. That encountered widespread criticism and forced the state to repeatedly delay implementation until Law No. 4 for 2018 was finally issued. It states that the first assessment of due tax is payable as of July 1, 2013, and on each January after that. Valuations remain valid until the end of 2021.
Key provisions of Law No. 4 are:
Real estate subject to tax: The tax applies to buildings or what the state legally defines as a “building” in Egypt. That structure can be above or under the ground or on water. The letter of the law states that the building can be occupied for a fee or for free. Utilized vacant land, leased construction on rooftops, or building frontages and buildings on agricultural land free from the agriculture land tax are considered “buildings.”
Tax-free and tax-exempt buildings: Exempt from the real estate tax is state-owned buildings, religious services, and religious teaching buildings. Also exempt are buildings of legally registered organizations, buildings of educational institutions, hospitals, dispensaries, orphanages, and nonprofit charities.
Additionally exempt are premises of political parties and professional syndicates, legally-established youth, and sports centers. There are also properties of foreign governmental bodies under the mutual reciprocity rule, and nonprofit social centers. Also exempt are the Armed Forces clubs, hotels, weapons centers, and buildings therein.
The law also exempts residential units whose net annual rent value is less than EGP 24,000. The excess amount is subject to the real estate tax. The same goes for commercial, industrial, and administrative buildings. They will be exempt if their rent value is under EGP 12,000. The excess amount is taxed.
The tax shall be lifted in cases where the exemption no longer exists, as in the case of full or partial devastations and as per the above conditions at the taxpayer’s request.
Tax value: The tax represents 10 percent of the annual rental value of taxed properties after deducting 30 percent for residential units and 32 percent for units used for other purposes. It is collected in two installments. One is at the end of June. The other is in December.
Assessment and challenging rental value: Committees formed through a Ministerial Decree, or the Deputy thereof assesses the rental value of a unit. Owners can challenge that value within 60 days of notification. That decision can be rechallenged before the State Council’s Administrative Court within 60 days of acknowledging the first decision.
Delay Fines: A “Delay Fine” is due on unpaid tax according to the discount and credit rate published by the Central Bank on January 1, preceding said due date plus 2 percent.
Challenging or resorting to the court shall not suspend the dues.
Despite being issued in 2008, Law No. 196 was not enforced until July 1, 2013. Critics said the law breached Articles 33 and 35 of the constitution since imposing a tax on a building that does not generate income means the tax is imposed on ownership. They also said another unconstitutional provision was the tax on vacant land that does not generate income, noting that the erosion of capital would result from implementing such a law would contradict present and past constitutions.