Guide to Property Taxes in Egypt
Tax Rate on Rental Income |
|||
| Monthly Income | US$1,500 | US$6,000 | US$12,000 |
| Tax Rate | 9.50% | 11.20% | 12.50% |
Nonresidents are generally subject to Egyptian income tax on income derived from Egyptian sources, including income from real estate situated in Egypt.
Rental Income Tax
Rental income earned by an individual from Egyptian real estate is generally subject to Egypt's progressive personal income tax rates.
For qualifying real-estate rental income, 50% of gross rental revenue is deducted as a deemed allowance for costs and expenses. Consequently, only the remaining 50% is generally taken into account as net rental income for income-tax purposes. Real estate tax paid on the property may also be deductible under the applicable rules.
The resulting taxable rental income is subject to the progressive individual income tax rates.
Income Tax Rates |
|
| Taxable Income (EGP) | Tax Rate |
| Up to 40,000 | 0% |
| EGP 40,000 – EGP 55,000 | 10% |
| EGP 55,000 – EGP 70,000 | 15% |
| EGP 70,000 – EGP 200,000 | 20% |
| EGP 200,000 – EGP 400,000 | 22.50% |
| EGP 400,000 – EGP 1,200,000 | 25% |
| Over EGP 1,200,000 | 27.50% |
| Source: Global Property Guide, KPMG, PWC | |
The effective rate in this article with three different income levels is substantially below Egypt's headline 27.5% maximum individual rate because only 50% of gross rental income enters the rental tax base.
Capital Gains Tax and Property Sales
The sale of Egyptian real estate by an individual should be distinguished from the capital-gains rules applicable to shares and securities.
For an individual who is not carrying on a professional real-estate trading activity, a disposal of qualifying built property or land for construction is generally subject to Real Estate Disposal Tax at 2.5% of the gross disposal value, rather than tax being calculated simply on the net capital gain.
Accordingly, acquisition cost and improvement expenditure do not generally reduce the base of this 2.5% disposal tax in the same manner as they would under a conventional capital-gains tax.
Different income-tax treatment may apply where the individual is carrying on real-estate trading or development as a business, and statutory exemptions can apply to specified transactions.
Corporate Tax
Companies are generally subject to Egyptian corporate income tax at 22.5% of net taxable profits.
Rental income earned through a company is generally included in taxable corporate profits, with qualifying business expenses deductible in determining the taxable amount. Taxable gains arising from the disposal of real estate by a company are likewise generally included in the company's taxable income and subject to the applicable corporate income tax rules.
Buying and Selling Taxes/Costs
| Transaction Costs | ||
| Who Pays? | ||
| Property Transfer Tax | 2.50% | seller |
| Notary Fees | 0.50% | buyer |
| Legal Fees | 1.00% - 2.00% | buyer |
| Real Estate Agent Fee | 2.00% - 3.00% | seller |
| Costs Paid by Buyer | 4.00% - 5.00% | |
| Costs Paid by Seller | 2.00% - 3.00% | |
| Roundtrip Cost | 6.00% - 8.00% | |
| Source: Global Property Guide, KPMG, PWC | ||
Property Holding Tax
Egypt imposes an annual Real Estate Tax on qualifying buildings and real estate. The tax is generally payable by the property's owner or other person legally responsible for the property.
The tax is based on the property's assessed annual rental value, as determined by the Real Estate Tax Authority, rather than directly on its purchase price or current market value. Properties are periodically reassessed, generally every five years.
The tax rate is 10% of the net assessed annual rental value after a statutory deduction for expenses and maintenance of:
- 30% for residential properties, resulting in tax being calculated on 70% of the assessed annual rental value.
- 32% for non-residential properties, resulting in tax being calculated on 68% of the assessed annual rental value.
A residential unit used as the taxpayer's principal family residence benefits from an exemption where its net assessed annual rental value does not exceed EGP 24,000. This exemption applies to one principal residence per family and should not be treated as a general exemption for investment or rental properties.
Consequently, a residential property held purely as an investment and rented to tenants is generally subject to the 10% real estate tax on its net assessed rental value after the 30% statutory maintenance deduction, without the principal-residence exemption.
