Property Taxes in Egypt
Dalia, Friday, 8 November 2013
This article is part of a series of 8 articles about buying property in Egypt. The other articles in the series cover the following topics:
Property taxes are usually charged on a periodic basis, more often than not at a certain time of the year. A common type of property tax is an annual charge on the ownership of real estate, where the tax base is the estimated value of the property. Egyptian property purchase is free from many of the taxes normally paid elsewhere. The following outline clarifies Egypt’s property tax laws in an effort to help explain and inform. It might also come in handy to know that the first known system of taxation was in Ancient Egypt around 3000-2800 BC.
Real Estate Tax
Prior to the year 2008, property owners were not obligated to pay any tax on their real estate. Yet according to the real estate tax law No. 196 issued in June for the year 2008, the property owner must pay an annual real estate tax.
This tax is imposed on Egyptian real properties. It is to be paid by the owner of the property whether the property is in point of fact leased out or not. The tax is imposed on the rental value of the property, which is assessed every 5 years by the tax authority. Real estate tax is levied at a flat rate of 10%. The amount owed from the real estate tax is imposed after deducting a certain percentage of maintenance expenses. According to the following, the owner of the property is to deduct 30% of the rental value for maintaining the property’s cleanliness, fixing any problems that may rise, etc. This 30% is allowed for residential properties. On the other hand, if the property is used for non-residential purposes, as stores, cafes, multi-purpose centers, then the owner can deduct 32% of the rental value for maintaining the property.
Tax from the Sale of Property
When it comes to selling land or buildings in Egypt – or both – the sale is taxed in a similar way other sales are taxed. The tax is levied at 2.5% of the money earned from the sale. This tax must be filed as tax owed. The seller must file the tax at any time from January 1st all the way to March 31st, and no later than that. For example, if an individual or a corporation sells a piece of land for 100,000 EGP, then the tax return must be filed no later than March 31st stating that 2,500 EGP is owed in taxes.
There are exceptions from this sales tax (under Article 42). These exceptions are income received from the sale of inherited land or any other type of real estate which is tax free. For example, if an individual sells a piece of land or real estate owned through a shared capital company, then that sale is tax free. However, there is a prerequisite on that sale which stipulates that the seller must keep his/her shares in the aforementioned company for at least five years after the sale.
Tax on Rental Received
The tax laws in Egypt operate on a self-declare taxation system. The rental income which is derived from furnished properties is put in the same taxation bracket as the general income tax. The rental income tax is 70% of the gross rent, with the remaining 30% acting as deductions allowed as income-generating expenses.
As with the property sales tax, any individual, partnership or corporation must file a tax return by March 31st. this tax return must include all details of the rent income or other means of income derived from real estate. For rental income the basic bare minimum for taxation is LE 5,000 annually. However, if your rental income is less than this amount, you are exempt from filing tax returns and declaring your received income.
For rental income sums larger than 5,000 EGP, 50% of the total amount is tax-free to help aid with maintenance and other expenses. The remainder amount will be payable at a rate of up to 20% of personal and corporate income. In the following example, an individual rents out an apartment for 8,000 EGP each month. This means that there is a total of 96,000 EGP in rental income yearly. What the owner of the apartment will do is subtract from the total income the 50% allowable deduction rate for maintenance. That will leave 48,000 EGP as taxable income. Then, the owner will file a tax return stating the balance owed in taxes. This amount is determined solely on the property value.
Stamp Duties/Capital Gains Tax / Inheritance Tax
In Egypt, most classes of documents, contracts, checks, receipts, bills, letters of guaranty, various banking transactions, transfer of unlisted securities, leases and many other instruments require payment of stamp duties. However, there is no capital gains tax, stamp duty tax, or inheritance tax payable on real estate. Also, if you have family overseas, they can inherit your investment property in Egypt. However, it is advisable to draw out an Egyptian will to make sure the transfer of ownership goes smoothly and without any impediments or complications. This is one of the reasons which make investing in Egypt so appealing.
This article is part of a series of 8 articles about buying property in Egypt. The other articles in the series cover the following topics:
Property taxes are usually charged on a periodic basis, more often than not at a certain time of the year. A common type of property tax is an annual charge on the ownership of real estate, where the tax base is the estimated value of the property. Egyptian property purchase is free from many of the taxes normally paid elsewhere. The following outline clarifies Egypt’s property tax laws in an effort to help explain and inform. It might also come in handy to know that the first known system of taxation was in Ancient Egypt around 3000-2800 BC.
Real Estate Tax
Prior to the year 2008, property owners were not obligated to pay any tax on their real estate. Yet according to the real estate tax law No. 196 issued in June for the year 2008, the property owner must pay an annual real estate tax.
This tax is imposed on Egyptian real properties. It is to be paid by the owner of the property whether the property is in point of fact leased out or not. The tax is imposed on the rental value of the property, which is assessed every 5 years by the tax authority. Real estate tax is levied at a flat rate of 10%. The amount owed from the real estate tax is imposed after deducting a certain percentage of maintenance expenses. According to the following, the owner of the property is to deduct 30% of the rental value for maintaining the property’s cleanliness, fixing any problems that may rise, etc. This 30% is allowed for residential properties. On the other hand, if the property is used for non-residential purposes, as stores, cafes, multi-purpose centers, then the owner can deduct 32% of the rental value for maintaining the property.
Tax from the Sale of Property
When it comes to selling land or buildings in Egypt – or both – the sale is taxed in a similar way other sales are taxed. The tax is levied at 2.5% of the money earned from the sale. This tax must be filed as tax owed. The seller must file the tax at any time from January 1st all the way to March 31st, and no later than that. For example, if an individual or a corporation sells a piece of land for 100,000 EGP, then the tax return must be filed no later than March 31st stating that 2,500 EGP is owed in taxes.
There are exceptions from this sales tax (under Article 42). These exceptions are income received from the sale of inherited land or any other type of real estate which is tax free. For example, if an individual sells a piece of land or real estate owned through a shared capital company, then that sale is tax free. However, there is a prerequisite on that sale which stipulates that the seller must keep his/her shares in the aforementioned company for at least five years after the sale.
Tax on Rental Received
The tax laws in Egypt operate on a self-declare taxation system. The rental income which is derived from furnished properties is put in the same taxation bracket as the general income tax. The rental income tax is 70% of the gross rent, with the remaining 30% acting as deductions allowed as income-generating expenses.
As with the property sales tax, any individual, partnership or corporation must file a tax return by March 31st. this tax return must include all details of the rent income or other means of income derived from real estate. For rental income the basic bare minimum for taxation is LE 5,000 annually. However, if your rental income is less than this amount, you are exempt from filing tax returns and declaring your received income.
For rental income sums larger than 5,000 EGP, 50% of the total amount is tax-free to help aid with maintenance and other expenses. The remainder amount will be payable at a rate of up to 20% of personal and corporate income. In the following example, an individual rents out an apartment for 8,000 EGP each month. This means that there is a total of 96,000 EGP in rental income yearly. What the owner of the apartment will do is subtract from the total income the 50% allowable deduction rate for maintenance. That will leave 48,000 EGP as taxable income. Then, the owner will file a tax return stating the balance owed in taxes. This amount is determined solely on the property value.
Stamp Duties/Capital Gains Tax / Inheritance Tax
In Egypt, most classes of documents, contracts, checks, receipts, bills, letters of guaranty, various banking transactions, transfer of unlisted securities, leases and many other instruments require payment of stamp duties. However, there is no capital gains tax, stamp duty tax, or inheritance tax payable on real estate. Also, if you have family overseas, they can inherit your investment property in Egypt. However, it is advisable to draw out an Egyptian will to make sure the transfer of ownership goes smoothly and without any impediments or complications. This is one of the reasons which make investing in Egypt so appealing.
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