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An overhaul of the property transfer tax on the table? The Finance Ministry is mulling amendments to the application mechanism of the property transfer tax, with the aim of easing the tax burden on individuals who frequently sell properties, by introducing a flat 2.5% tax rate and applying it only to the first three or four property transactions, a senior government official told EnterpriseAM.
The current situation: The current system classifies the taxpayer as a “real estate trader” engaging in a commercial activity, starting from the second real estate transfer transaction, subjecting them to a commercial tax of 16% on immediate sales and 18% on deferred sales.
The objective: The potential amendment is expected to resolve a large number of real estate transfer tax disputes and claims and boost tax revenues. The state collected EGP 3.5 bn from property transfer taxes in the last fiscal year — a figure considered low compared to the size of the real estate market. This reflects the large number of citizens avoiding tax settlement due to the high tax rates applied to multiple property sales without clear commercial intent.
Government expectations: Implementing the new tax system — combined with expanding the scope of the tax — could generate bns of EGP in additional revenue to the state coffers, according to our source.
As things stand: The current law imposes a 2.5% tax on the total value of any sale of built property or land designated for construction — excluding villages. This applies regardless of whether the transaction involves an entire property, a part of it, or a single unit, and whether or not the property is built on land owned by the taxpayer. The tax also applies whether the contract is officially registered or not. The law exempts properties transferred as in-kind shares in the capital of joint-stock companies, provided that the shareholder does not sell the corresponding shares for five years.
When can we expect these amendments to see the light? The amendments are still being studied, with authorities assessing their financial and legislative impact. Once the studies are completed and approved, the amendments will go through the legislative cycle, likely next year.
REMEMBER- The government is looking to secure an additional EGP 195.2 bn in tax revenues — equivalent to 0.98% of GDP — in FY 2025-26 through a bundle of tax reforms.
