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Amendments to the Real Estate Tax A

Amendments to the Real Estate Tax Appeals Committee
In August 2014, an important amendment to the Real Estate Tax Law was issued.[1] Recently, the Minister of Finance issued a decision concerning the procedures for implementing the tax. Decision No. 412 for the Year 2015[2] amends some articles from Decision No. 75 for the Year 2015 which stipulates the formation of appeal committees for rental valuations (the "Decision"). These committees allow proprietors to appeal the rental valuation made by officials, which is the basis for calculating the real estate tax. The latest Decision added a new committee that specializes in accepting appeals exclusively from officers and members of the armed forces.
Background
The Real Estate Tax Law has been subject to several amendments since 2008, all of which sought to overcome the obstacles impeding the law’s implementation. These included the amendments of the years 2010, 2011, and 2012 all postponing the period in which the Law would be put into effect. Finally, a comprehensive amendment was issued in 2014. That amendment has been thoroughly explored in our October 2014 issue of Egypt Legal Update. The most important aspects of the 2014 amendments included the following:
  • Exempting units that serve as the main private residence from paying the tax, as long as the value of its annual rent remains below EGP 24,000. This exemption applies to only one of the proprietor’s housing units.
  • Exempting units utilized for commercial, industrial, administrative, or professional purposes from paying the tax, as long as the value of its annual rent remains below EGP 1,200.
  • Designating Tax Evaluation Committees that are primarily responsible for calculating properties’ annual rental value, according to which real estate taxes are determined once every five years.
  • Designating Appeals Committees that receive, assess, and decide on appeals submitted by the proprietors who are required to pay the tax according to the Tax Evaluation Committees’ valuation. It also determines the composition of such committees.
  • The Law applies to all properties built in the country, unlike the previous Law (Issued in 1954), which only applied to property located within city boundaries and as such did not include many outlying urban communities and new industrial areas.
Appeals Committees
The Appeals Committees are committees under the supervision of the Ministry of Finance that allow a proprietor to appeal the rental value designated by the Ministry through its Tax Valuation Committees. The 2014 amendment of the Real Estate Tax Law detailed the role played by these committees. Approximately six months after issuing the amendments, the Minister of Finance issued a number of decisions mandating the formation of the Appeals Committees. The first decision was issued in February 2015 (Decision No. 75 for the Year 2015)[3] and was later amended twice; once by Decision No. 285 for the Year 2015[4] and the other by Decision number 412 for the year 2015. The Decision stipulated that the Appeals Committees should decide on appeals contesting the calculation of the rental value. The decisions issued by this Committee are then ratified by the Minister of Finance. The decision required the Committee to decide on appeals within 30 days from the date on which the documents required to file the appeal are completed. It should be noted that it may have been preferable to calculate this period starting from the date the appeal has been submitted, in order to minimize bureaucracy. The Decision also stipulated that 55 committees should be formed in the different governorates, and required that these committees be located within the real estate directorate of the governorate within which the contested property falls. Decision 285, however, amended this requirement by allowing the committees to convene outside the directorate if necessary, in an attempt to cut back on complicated procedures. In addition, the Decision covered various other issues including the committees’ working hours, the necessary quorum for validly issuing decisions, and the necessity of it maintaining the general principles of litigation procedures (including jurisdiction, and serving parties to the appeal, discussing all defenses, and explaining the rationale behind decisions). It also established an office and a technical secretariat for each committee and determined their specialization. The last amendment, as stipulated in the Minister of Finance’s decision number 412 for the year 2015, only introduced one new committee that will function as a “special” Appeals Committees. The new Committee is to decide on appeals submitted by members and officers of the armed forces regarding the estimation of the rental value which will be used to calculate real estate taxes due. It also specified that the location of the committee shall be the armed forces’ financial affairs building.
Conclusion
The Real Estate Tax Law is considered one of the most critical laws for the Government, which anticipates significant revenue that would help it reduce its budget deficit. As has been explained in the October issue of Egypt Legal Update, the Government had anticipated revenues from this Law to reach up to EGP 3.5 billion in the fiscal year 2014/2015. However, the last several months have demonstrated a state of confusion that undermines the law. This is evident from the Minister of Finance’s statements last April, which predicted that revenues from this law are expected to be around EGP 1.2 billion, instead of the projected EGP 3.5 billion. Ambiguity and uncertainty are also evident in the number of amendments that have been issued in close proximity to each other. For instance, the Real Estate Law has been amended three times since it has been issued in 2008. Moreover, the Appeals Committees’ composition has been amended twice in the last three months. Moreover, the latest amendment raises several important questions. For instance, are properties owned by members of the armed forces going to fall beyond the jurisdiction of the other committees that oversee the appeals? Similarly, is the new committee going to be responsible for overseeing appeals regarding property that the armed forces constructed but that was then sold to civilians or is that going to fall within the scope of the regular Appeal Committees? In other words, is the standard for identifying an Appeal Committee’s jurisdiction contingent upon the status/occupation of the appellant or the property’s affiliation with the armed forces?   [1] Presidential Decree No.117/2014 amending the Real Estate Tax Law; Official Gazette, Issue No. 33 (bis) (a), 17 August 2014. [2] Minister of Finance's Decision No. 412/2015 amending Decision No. 75/2015 on the Formation and Composition of the Appeals Committee for Rental Valuation for the Purpose of Determining Real Estate Tax; Egyptian Gazette, Issue 196 (cont.), 27 August 2015. [3] Minister of Finance's Decision No. 75/2015 on the Formation and Composition of the Appeals Committee for Rental Valuation for the Purpose of Determining Real Estate Tax; Egyptian Gazette, Issue No. 27 (cont.) (a), 4 February 2015. [4] Minister of Finance's Decision No. 285/2015 amending Decision No. 75/2015 on the Formation and Composition of the Appeals Committee for Rental Valuation for the Purpose of Determining Real Estate Tax; Egyptian Gazette, Issue No. 119 (cont.) (a), 25 May 2015.
In August 2014, an important amendment to the Real Estate Tax Law was issued.[1] Recently, the Minister of Finance issued a decision concerning the procedures for implementing the tax. Decision No. 412 for the Year 2015[2] amends some articles from Decision No. 75 for the Year 2015 which stipulates the formation of appeal committees for rental valuations (the "Decision"). These committees allow proprietors to appeal the rental valuation made by officials, which is the basis for calculating the real estate tax. The latest Decision added a new committee that specializes in accepting appeals exclusively from officers and members of the armed forces.
Background
The Real Estate Tax Law has been subject to several amendments since 2008, all of which sought to overcome the obstacles impeding the law’s implementation. These included the amendments of the years 2010, 2011, and 2012 all postponing the period in which the Law would be put into effect. Finally, a comprehensive amendment was issued in 2014. That amendment has been thoroughly explored in our October 2014 issue of Egypt Legal Update. The most important aspects of the 2014 amendments included the following:
  • Exempting units that serve as the main private residence from paying the tax, as long as the value of its annual rent remains below EGP 24,000. This exemption applies to only one of the proprietor’s housing units.
  • Exempting units utilized for commercial, industrial, administrative, or professional purposes from paying the tax, as long as the value of its annual rent remains below EGP 1,200.
  • Designating Tax Evaluation Committees that are primarily responsible for calculating properties’ annual rental value, according to which real estate taxes are determined once every five years.
  • Designating Appeals Committees that receive, assess, and decide on appeals submitted by the proprietors who are required to pay the tax according to the Tax Evaluation Committees’ valuation. It also determines the composition of such committees.
  • The Law applies to all properties built in the country, unlike the previous Law (Issued in 1954), which only applied to property located within city boundaries and as such did not include many outlying urban communities and new industrial areas.
Appeals Committees
The Appeals Committees are committees under the supervision of the Ministry of Finance that allow a proprietor to appeal the rental value designated by the Ministry through its Tax Valuation Committees. The 2014 amendment of the Real Estate Tax Law detailed the role played by these committees. Approximately six months after issuing the amendments, the Minister of Finance issued a number of decisions mandating the formation of the Appeals Committees. The first decision was issued in February 2015 (Decision No. 75 for the Year 2015)[3] and was later amended twice; once by Decision No. 285 for the Year 2015[4] and the other by Decision number 412 for the year 2015. The Decision stipulated that the Appeals Committees should decide on appeals contesting the calculation of the rental value. The decisions issued by this Committee are then ratified by the Minister of Finance. The decision required the Committee to decide on appeals within 30 days from the date on which the documents required to file the appeal are completed. It should be noted that it may have been preferable to calculate this period starting from the date the appeal has been submitted, in order to minimize bureaucracy. The Decision also stipulated that 55 committees should be formed in the different governorates, and required that these committees be located within the real estate directorate of the governorate within which the contested property falls. Decision 285, however, amended this requirement by allowing the committees to convene outside the directorate if necessary, in an attempt to cut back on complicated procedures. In addition, the Decision covered various other issues including the committees’ working hours, the necessary quorum for validly issuing decisions, and the necessity of it maintaining the general principles of litigation procedures (including jurisdiction, and serving parties to the appeal, discussing all defenses, and explaining the rationale behind decisions). It also established an office and a technical secretariat for each committee and determined their specialization. The last amendment, as stipulated in the Minister of Finance’s decision number 412 for the year 2015, only introduced one new committee that will function as a “special” Appeals Committees. The new Committee is to decide on appeals submitted by members and officers of the armed forces regarding the estimation of the rental value which will be used to calculate real estate taxes due. It also specified that the location of the committee shall be the armed forces’ financial affairs building.
Conclusion
The Real Estate Tax Law is considered one of the most critical laws for the Government, which anticipates significant revenue that would help it reduce its budget deficit. As has been explained in the October issue of Egypt Legal Update, the Government had anticipated revenues from this Law to reach up to EGP 3.5 billion in the fiscal year 2014/2015. However, the last several months have demonstrated a state of confusion that undermines the law. This is evident from the Minister of Finance’s statements last April, which predicted that revenues from this law are expected to be around EGP 1.2 billion, instead of the projected EGP 3.5 billion. Ambiguity and uncertainty are also evident in the number of amendments that have been issued in close proximity to each other. For instance, the Real Estate Law has been amended three times since it has been issued in 2008. Moreover, the Appeals Committees’ composition has been amended twice in the last three months. Moreover, the latest amendment raises several important questions. For instance, are properties owned by members of the armed forces going to fall beyond the jurisdiction of the other committees that oversee the appeals? Similarly, is the new committee going to be responsible for overseeing appeals regarding property that the armed forces constructed but that was then sold to civilians or is that going to fall within the scope of the regular Appeal Committees? In other words, is the standard for identifying an Appeal Committee’s jurisdiction contingent upon the status/occupation of the appellant or the property’s affiliation with the armed forces?   [1] Presidential Decree No.117/2014 amending the Real Estate Tax Law; Official Gazette, Issue No. 33 (bis) (a), 17 August 2014. [2] Minister of Finance's Decision No. 412/2015 amending Decision No. 75/2015 on the Formation and Composition of the Appeals Committee for Rental Valuation for the Purpose of Determining Real Estate Tax; Egyptian Gazette, Issue 196 (cont.), 27 August 2015. [3] Minister of Finance's Decision No. 75/2015 on the Formation and Composition of the Appeals Committee for Rental Valuation for the Purpose of Determining Real Estate Tax; Egyptian Gazette, Issue No. 27 (cont.) (a), 4 February 2015. [4] Minister of Finance's Decision No. 285/2015 amending Decision No. 75/2015 on the Formation and Composition of the Appeals Committee for Rental Valuation for the Purpose of Determining Real Estate Tax; Egyptian Gazette, Issue No. 119 (cont.) (a), 25 May 2015.