Tax Planning In Egypt

The Egyptian property tax system is relatively simple and is exempt from many taxes we pay back home. Here you can obtain a brief guideline of Egypt’s property tax system. In Egypt there is no stamp duty or capital gains tax payable on real estate and, if you are a British resident, you will also avoid inheritance tax on any Egyptian properties that you decide to pass on to your loved ones.

Tax on Rental Income

Any person, partnership or company must file a tax return detailing all rental or other income derived from real estate by March 31st of each year. For rental income the basic threshold for taxation is LE 5,000 per annum. Provided your rental income is less than this figure, you pay nothing and need not file a return.

For those with rental income greater than LE 5,000, 50% of the total amount is tax-free to cover maintenance and other expenses associated with owning the property in Egypt. The balance is taxable at a standard rate of up to 20% rate of personal and corporate income. For example, you rent out a flat for LE 8,000 per month, grossing LE 96,000 in rental income per year. Simply subtract the deduction against costs of 50%, leaving LE 48,000 as taxable income. The balance owed in taxes is LE 6,100.

Tax Payable From The Sale of Property

Under the current new laws, the sale of land and buildings is treated exactly the same and is simple. No deductions are made for the cost of sale. Simply take 2.5% of what is earned from the sale and report it as tax owed before April 1st. For example: Any person or corporation selling a piece of land for LE 100,000 must file a return with the Tax Authority by March 31st reporting that LE 2,500 is owed in taxes.

The only exceptions (under Article 42) are income from the sale of inherited land or other real estate is tax which are free, as is any income earned from the sale of land or other real estate you own through a shared capital company, provided you keep your shares in the company for at least five years after the sale. This last provision is designed to prevent the formation of “paper” companies to dodge tax liabilities from the sale of properties.

Note: Taxes on the sale of real estate bear no relation to property taxes or real estate registration fees. The Egyptian government is currently debating a reform of property registration fees and is proposing to impose international-standard property taxes

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