The Finance Ministry is planning to raise the tax threshold for rented units to an annual rental value of EGP 4.1k, up from the current EGP 1.2k, a senior government source told EnterpriseAM. Under the current rules, any rental value above this will be taxed 10%, following a 30% deduction for residential units and a 32% reduction for non-residential units of the total value to account for estimated maintenance costs.

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This is good news for landlords of old rent units over the seven-year phase-out of thelaw, with the monthly rent for residential units in lower-income areas now having risen 10x to a minimum of EGP 250 — below the EGP 341.6 monthly tax threshold set by the new amendments. The more than 3x increase in the tax threshold will also help cover — in full or in part — the 10x increase in middle-income areas, 20x increase in premium areas, and 5x increase for non-residential units — subject to a five-year transition — rented by individuals. Rents will continue to rise 15% each year throughout the transitional period, whether for residential or non-residential purposes, after which tenants will need to vacate.

The new change is expected to come into effect in September, which should help shield old rent landlords from rental tax increases stemming from higher rents, our source told us. The increase in the exemption is proof that the state is focused on rectifying clear market imbalances, rather than simply increasing the taxable revenues from the old rents, the source added.

Old rent landlords — and landlords of all properties — will soon also be exempt from rental taxes if their properties are valued at less than EGP 4 mn, when incoming amendments to the Property Tax Law are put in place. The decision to double the current EGP 2 mn threshold was taken because it’s currently “outdated due to inflation and rising property prices,” Deputy Finance Minister for Tax Policy Sherif Al Kilani has previously told EnterpriseAM.

However, the state could see an uptick in taxable income on the back of old rent tenants vacating their homes, with any sale or change of ownership subject to a 2.5% real estate transactional tax, we were told.

In total, there are some 3 mn old rent units — all of which will gradually be brought into taxable rental brackets or sold. This includes 575k units that are used for non-residential purposes and more than 400k units that are currently closed due to tenants travelling or owning alternative residences, Egyptian Society for Political Economy, Statistics and Legislation member Walid Gaballah told us.

DATA POINT- Old rents below current market rates had led to annual lost state revenues of around EGP 8 bn, according to government data reviewed by EnterpriseAM.

But not everyone agrees on how much changes to the Old Rent Law will raise for the treasury, with the Egyptian Association of Tax Experts expecting taxable revenues from the move to help increase total revenues by “at least EGP 15 bn” in the first year of the new law. The state, for its part, is less optimistic, pencilling in a much smaller EGP 10 bn increase in taxable real estate revenues to EGP 18 bn for the current fiscal year — which started a month before President Abdel Fattah El Sisi signed the bill into law.

SPEAKING OF OLD RENT- Applications for alternative housing will open soon: Tenants eligible under the recently amended law can apply for alternative housing units starting 1 October through a new online platform or at post offices nationwide, according to a Housing Ministry statement. Applications will be open for three months and handled by the Social Housing and Mortgage Finance Fund, which will log, categorize, and prioritize applicants to determine the number of units needed before the transition is up.

Who can apply? Eligible applicants include original tenants, their spouses if the lease was extended before the law took effect, and those to whom leases were legally extended, for both residential and non-residential units. Applicants must provide property details, select a preferred allocation system — subsidized rent, rent-to-own, or ownership via mortgage finance — and specify their preferred geographic location.

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