Property Tax Payment in Egypt

user Youssry Saleh & Partners calender 7 Dec 2023 views 332 Views
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Pursuant to the Egyptian Property Tax Law, the real estate tax is imposed on all constructed properties situated on Egyptian land, excluding those exempted from taxation.

This includes properties that are either rented or occupied by the owner responsible for tax payment, regardless of whether they are fully completed and occupied, fully completed but unoccupied, or partially occupied. Therefore, all existing constructed properties, including villas, buildings, houseboats, and chalets, are subject to real estate tax, irrespective of their location.

The responsibility for paying property tax lies with the natural or juristic person who owns, benefits from, or exploits the property. While tenants are not directly liable for paying the tax, they shall be jointly liable with the taxpayer to the extent of their rent obligations.

It is worth noting that state ownership or the right to exploit property can be established through various documents, including contracts, court rulings, real estate registry records, or any other relevant documentation, regardless of whether these documents are publicized or not.

Definition

Property tax, also known as real estate tax, is a direct tax levied on the ownership of immovable property, such as land, buildings, and units within buildings. It is a significant source of revenue for Egyptian local governments, contributing to the funding of essential public services like infrastructure, education, and healthcare.

It is worth noting that the term real estate tax has a more common terminology in Egypt which is “Awayed (i.e. dues)”.

The Concerned Law(s)

The primary law governing property tax in Egypt is Law No. 196 of 2008, titled “The Real Estate Tax Law” and the amendments thereof. The amendments thereof so far are: Law No. 1 of the year 2010, Law No. 118 of the year 2011, Law No. 1 of the year 2012, Law No. 103 of the year 2012, Law 117 of the year 2014, Decree No. 68 of the year 2015 regarding exempting some units affiliated with the armed forces from the tax on built real estate, Law No. 4 of the year 2019, and Law No. 23 of the year 2020.

This law and its amendments outline the various aspects of property tax, including the taxpayer base, tax base, exemptions, deductions, calculation methods, and payment procedures.

Who Shall Be Subject to This Tax (the Taxpayer)

Property tax is imposed on the individual or entity registered as the legal owner of the real estate property. This includes individuals, companies, partnerships, and other legal entities that own property in Egypt.

Pursuant to Article 2 of the abovementioned Law which stipulates: “The person charged with paying the tax is the natural or juristic person who has the right of owning the property, or who has the right of exploiting it, even if the deed of his right is not publicized, the legal representative of the incapacitated juristic person or the incapacitated natural person shall be charged with the payment of the taxation on behalf of whom he represents.”

In the aforementioned regard, the determination of the legal representative of the incapacitated juristic person is done in accordance with what is stipulated by the law, the bylaws of incorporation, or the decisions approved by the competent authority. The legal representative of the natural person who does not possess a full legal capacity is determined by the natural or legal guardian, custodian, or person determined by the competent court.

Tax Base (What Is Taxable)

The tax base for property tax is the rental value of the property. The rental value is determined by the Real Estate Taxation Authority (RETA) based on various factors, including the property’s location, type, size, and condition.

Tax Exemptions

According to Articles 11, 18 of the abovementioned Law, certain categories of properties are exempt from property tax, including:

  • State-owned properties;
  • Built properties earmarked for a general benefit such as schools, universities, educational institutions, hospitals, clinics, medical facilities, and charitable organizations and non-profit institutions;
  • Constructed properties that are privately owned/held by the state, provided, however, that these buildings shall be subject to tax from the first of the month following the date of their disposal to individuals or juristic persons;
  • Headquarters owned by political parties and professional unions, provided that they are used for their designated purposes;
  • Buildings designated for holding religious rituals or buildings where religion is taught;
  • Constructed real estate that has been expropriated for public benefit from the date of actual seizure by the expropriated entities;
  • Cemetery/graveyard’s yards and buildings.
  • The property allocated for residential purposes and whose market value is less than 2 million Egyptian pounds (note: the second property owned by the same person and allocated for residential purposes is subject to real estate tax);
  • The real estate unit that the taxpayer uses as a main private residence for himself and his family and whose net annual rental value is less than 24,000 pounds (twenty-four thousand pounds), provided that anything in excess of that is subject to tax;
  • Every unit in a property used for commercial, industrial, administrative, or professional purposes whose net annual rental value is less than 1,200 pounds (one thousand two hundred pounds), provided that the excess is subject to tax;
  • Real estate owned by foreign government agencies on the condition of reciprocity. If the tax has no counterpart in any foreign country, the Minister may, after taking the opinion of the Minister of Foreign Affairs, exempt the real estate owned by it from the tax; and
  • Certain units owned by the Armed Forces.

In addition to the aforementioned, it is permissible, by a decision of the Council of Ministers, based on the proposal of the Minister of Finance, in coordination with the competent minister, to exempt real estate actually used in productive and service activities determined by the Council of Ministers from the tax on built real estate, provided that the decision includes the percentage of exemption and its duration for each production or service activity.

Furthermore, according to Article 19 of the same Law, the tax is relieved in the following cases:

(A) If the property becomes exempt in accordance with Article (18) of this law.

(b) If the property is completely or partially destroyed to a degree that prevents the use of all or part of the property.

(c) If the vacant land independent of built real estate becomes unused.

Noting that the tax may be relived on all or part of the property, depending on the circumstances.

The abovementioned relief is implemented upon a request submitted by the taxpayer starting from the beginning of the month in which the request was submitted until the date on which the reason for relief disappears, and this is after the applicant deposits an insurance amount corresponding to fifty pounds, and evidence of payment of the last due installment of the tax at the time of submitting the application, the insurance amount will be refunded to the applicant if his application is accepted.

It is worth noting that Buildings under construction are not subject to property tax payment as per Article 12, 13 of the EPTL and Article 7 of the ER.

How the Tax Shall Be Calculated

The property tax is calculated by applying the tax rate of 10% to the rental value of the property. The resulting tax amount is payable in two equal installments, the first due by the end of June and the second by the end of December.

According to Article 12 of the Egyptian Property Tax Law: “The tax rate shall be (10%) of the annual rental value of the taxable properties, after excluding (30%) of this value for the places used for residential purposes, and (32%) for the percentage used for non-residential purposes, in return for all expenses incurred. The person responsible for paying the tax, including maintenance expenses…”

Pursuant to Article 23 of the same Law: “The tax due in accordance with this law is paid in two equal installments, the first of which is due until the end of June, and the second is due until the end of December of the same year, and the taxpayer may pay the entire tax on the date of payment of the first installment. The tax whose assessment is delayed beyond the time it is due for any reason shall be paid in installments over a period equal to the period of delay.”

Tax Declarations and Deadlines

As per Article 14 of the Egyptian property Tax Law, taxpayers must submit a declaration form to the Real Estate Tax Office in which the property is located on the following dates:

(A) In the case of a five-year inventory: The declaration is submitted in the second half of the year preceding the inventory for each of the properties that he owns or benefits.

(b) In cases of annual inventory: The declaration shall be submitted no later than the end of December of each year for all of the following:

  • New real estate
  • For parts that were added to previously listed properties
  • Properties that have undergone modifications in parts or some of their parts that result in changes in their features or on how they are used, and these modifications have a significant effect on their rental value
  • Real estate and vacant lands independent therefrom, for which the reason for relief has disappeared.

Upon a decision of the Minister of Finance, the period for submitting the declarations stipulated in the previous points (a, b) may be extended for a period not exceeding three months.

In reference to the abovementioned declaration, the latter must be submitted in exchange for a receipt indicating that, or by registered letter with acknowledgment of receipt, or electronically through the website during the second half of the year preceding the enumeration in the case of a five-year enumeration, and no later than the end of December of each year in cases of an annual enumeration.

The declaration must include the following data:

(A) The name of the person responsible for paying the tax on built real estate and his/her capacity in relation to the real estate for which the declaration is submitted in accordance with the provisions of Article (2) of the law.

(b) The name of the governorate within whose jurisdiction the built property is located, and the name of the administrative division, such as the name of the city, bandar, section, center, or district, the street and its branches, and the property number specified by regulation or by real estate taxes, whether previous or current.

(c) The number of floors of the built property, the number of units in each floor, the divisive contents of each unit, its area, and its value according to the ownership contracts or building permit, or according to the existing location.

(d) The name of the occupant, the actual rent and the type of exploitation.

(e) The address and national number of the person submitting the declaration.

(f) Documents specifying the price of the property, if any.

(g) The chosen mailing address.

(h) For units used for purposes other than housing, the declaration must include, in addition to the above, the name of the owner or the name of the establishment, the tax file number, the tax registration number, the commercial registry number, and the activity license number.

In all cases, the person charged with paying the tax on built real estate is not exempt from submitting the declaration if the Inventory and Estimation Committee has previously registered his real estate in the books or if it was exempt from tax in accordance with the reasons stated in Article (18) of the EPTL as per Article 12 of the Executive Regulation.

Additional Considerations

  • Property owners are responsible for paying the property tax, even if the property is leased to tenants. Tenants shall be jointly liable for paying the tax, with the taxpayer, within the limits of the rent owed by them and after notifying them of this by a registered letter with acknowledgment of receipt. The tax collection vouchers and its accessories that are delivered to them shall be considered a receipt from the person responsible for paying the tax within the limits of what has been collected, and as a receipt from the person responsible for collecting the rent within the limits of what the tenant paid.
  • Property tax payments can be made through various channels, including banks, post offices, and online payment platforms.
  • Taxpayers can appeal the rental value assessment within 60 days of the publication of the assessment notices.

Property tax plays a crucial role in Egypt’s fiscal system, providing a steady stream of revenue for local governments to support the provision of essential public services. By understanding the various aspects of property tax, property owners can ensure timely and accurate payment of their tax obligations, contributing to the overall economic well-being of the country.