By Hossam Mounir
The crisis between banks and the Ministry of Finance over imposing real estate tax on assets devolved to banks continues, said Federation of Egyptian Banks (FEB) Board Member Amr Tantawy.
The devolution of these assets would come as payments of the defaulter clients’ debts.
Efforts made by Hisham Ramez, Governor of the Central Bank of Egypt (CBE), to reach a settlement for that dispute have not yet succeeded in bringing an end to the crisis.
The FEB has held several meetings with the Ministry of Finance to discuss the tax’s future, especially on the real estate assets the banks owned in return to their debts. The federation asked for Ramez’s mediation to find a solution with the ministry, which is yet to take place, Tantawy said.
The banks proposed several suggestions in this regard, including exempting them from paying the tax on real estate that devolved to them for a period of five years, the time the CBE gives banks to deal with these assets. They suggested also not paying the tax until they sell these assets, and not to make the buyer pay it when they sell these assets.
“The meetings between the two parties are ongoing to reach the best solution in that regard, but the two parties did not agree on a final solution until now,” Tantawy said.
Several banks asked the FEB to demand Ramez communicate with the Ministry of Finance to find a different mechanism to the one in the real estate tax law to apply it on bank owned assets.
The Egyptian Arab Land Bank, the National Bank of Egypt, and Banque Misr are some of the most prominent affected banks by the real estate tax. This is due to the huge real estate assets they own as a result of conducting settlements with a number of their major defaulter clients.
“The base of settling any disputes that may occur with banks over the real estate tax on the real estates devolved to or controlled by the banks, is applying Law 196/2008 and its amendments. The law states in Article 2 that the one that should pay the tax is the owner of the real estate, or the one who has the right to use it, whether he is a regular or legal person,” said Samia Hussein, Head of the Real Estate Taxation Authority (RTA).
Hussein added: “According to the drafts of the law, all the real estate buildings that are built in Egypt are taxable due to the real estate tax law. Therefore, the banks’ situation of owning real estate buildings as compensation from their clients for their rights, even it is a temporary situation until conducting the settlements with the clients or selling them, does not conflict with paying tax on these real estates, whether these real estate buildings make income or not.”