The Federation of Egyptian Banks (FEB) is preparing a memorandum that calls for banks holding foreclosed real estate properties to receive a tax exemption.
The FEB will submit the memorandum to Tarek Amer, governor of the Central Bank of Egypt (CBE), requesting that Amer address the new Minister of Finance, according to Adnan El-Sharqawi, Deputy Chairman of the Egyptian Arab Land Bank and an FEB board member.
The FEB and the CBE have held several meetings with the representatives from the Ministry of Finance, led by the former finance minister Hany Kadry Dimian. However, they have not been able to resolve the dispute over the enforcement of the real estate tax, according to El-Sharqawi.
El-Sharqawi added that the FEB hopes that Amr Garhi, the new finance minister, would be more amenable to the requests of banks, as he is a former banker with a long experience in the banking sector and the nature of compromises they make with defaulting customers.
“Banks are to pay real estate tax of 5% on all its real estate assets, including its headquarters, without objection on this matter,” El-Sharqawi said. However, he added, they refuse to pay this tax on real estate they obtained from defaulting customers, as these properties do not generate any revenue for banks.
He noted that if the Ministry of Finance insists on collecting this tax, it would adversely affect the settlement of non-performing debts in banks, where they may be forced to refuse any real estate assets in loan settlements.
He added that the defaulting customers who own these properties refuse to pay this tax as well, which hinders potential settlements.
El-Sharqawi noted that banks have made several proposals to resolve the problem to the former finance minister, including granting banks a five-year exemption from the real estate tax for properties which devolved to them. Five years is the period that the CBE granted banks to dispose those assets, or have banks pay the tax after selling these assets.
The National Bank of Egypt and the Egyptian Arab Land Bank will be the most prominent banks affected by the application of the real estate tax, because they possess a large number of real estate assets.