The Ministries of Tourism and Finance have failed to resolve the dispute over real estate tax for hotels in Alexandria and Cairo, according to an Egyptian Chamber of Hotels official.
The official said that it was agreed that real estate tax would be calculated according to the market value of the facility in the majority of the tourist areas. The chamber, however, rejected evaluating the tax according to this standard in both Cairo and Alexandria.
Calculating real estate taxes is based on the replacement value, by calculating the average of the room rate multiplied by the number of rooms without equipment. The market value standard is based on the value of land according to the market price.
The Tourism Development Authority (TDA), the Ministry of Tourism’s economic arm, estimated the cost of the rooms at: EGP 150,000 in a three-star hotel; EGP 200,000 in four-star hotel; and EGP 250,000 in a five-star hotel. The Ministry of Finance, however, asked the authority for a new evaluation, confirming that the room rate exceeds the current evaluation.
The Ministries of Finance and Tourism have agreed to hold a new meeting within the next month to settle the calculation criterion dispute, according the official.
The Ministry of Finance previously refused the Ministry of Tourism’s request for using substitution value standard as the basis for calculations.
Calculating the real estate tax according to the market value for Cairo hotels, especially those overlooking the Nile, will raise tax from EGP 600,000 to EGP 6m annually, hindering the hotels’ work, added the official.
According to the Ministry of Tourism, Cairo has 30,000 hotel rooms, while Alexandria has 3,500 rooms.
“On deciding the real estate tax for hotels and resorts on beaches, it was agreed that calculation of buildings percentages should only be done out of the total area of the project,” the official said. They added that the building percentages in Cairo and Alexandria hotels include all lands, plus a large percentage of these hotels are historic places.
The official estimated the total taxes from the tourism sector to range from EGP 1bn and EGP 1.2bn annually. “We were hoping for it to be postponed until the sector reforms at least by the end of the year,” he said.
The Egyptian Chamber of Hotels demanded that the Ministry of Finance exclude historic hotels from the tax, depending on the market price.
Chairman of the Egyptian Federation of Chambers of Tourism, Elhamy El-Zayat, stated that burdening the sector with more taxes in this period prevents it from recovery and moving forward. El-Zayat added that “the federation is not against taxation, but the circumstances the sector is going through for four years should be taken into consideration”.