FinMin taps AI for real estate pricing, revamps central clearing in second tax facilitation package

The Finance Ministry has finalized updates to the central clearing system and is preparing an AI-driven real estate valuation framework as part of the soon to be released second tax reform package, government sources told EnterpriseAM. The measures aim to unlock corporate liquidity and settle legacy disputes by streamlining how the state and taxpayers balance their books.

Why it matters: The package is a pillar of the Madbouly government’s strategy to lure foreign direct investment and boost tax revenues by 1-2% of GDP in the coming fiscal year. The goal is to hit these targets by widening the tax base and improving efficiency rather than hiking rates.

The updated system will allow for seamless credit and debit cross-settlements between a taxpayer’s entitlements and liabilities across all government entities, according to our sources. Crucially, the system will stop calculating delay interest starting from the date the debt was originally due to the taxpayer, significantly lowering settlement costs and providing immediate liquidity to firms, the sources added.

For the first time, the ministry will deploy AI to price real estate and activate a risk-based system to verify contract validity, our sources revealed. While the real estate transaction tax remains at 2.5%, it will be calculated based on the AI system’s indicative prices if a significant discrepancy is found in submitted contracts, aiming to curb manipulation and ensure fiscal fairness, the sources noted.

New legislation is also in the works to expand the flat tax regime for SMEs, with projects with a turnover under EGP 20 mn to benefit from the flat tax for the 2023 and 2024 tax years, our sources said.

The ministry is studying a hike in the total income tax exemption threshold for individuals to EGP 100k–120k next fiscal year, up from the current EGP 60k. This is notably higher than the EGP 80k threshold previously under consideration, the two sources told us.

What’s next? Six legislative amendments for the proposed changes have been finalized and will be submitted to parliament once the rounds of community dialogue are completed. But passing the amendments may take some time, our sources tell us, with the package expected to come into effect after the end of the tax season on 30 April in order to protect current revenue collection cycles while giving the tax community a window to digest and apply for the new incentives.

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