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Over the past few years the Egyptian regulatory environment governing property ownership, foreign currency and taxes has changed fundamentally with the aim of encouraging foreign investment.
Property Ownership:
There are no legal restrictions on foreign ownership on a freehold basis of resort housing units at Soma Bay. The purchase and sale of these units is unrestricted. Legal title to the property is evidenced through the execution of a preliminary sale/purchase contract, which may be registered in due course with the Real Estate Registry once the property is built.
Foreign Currency Regulations:
There are no restrictions in Egypt to the entry and/or re-export of capital. Rental income generated from the ownership of resort housing units is also not subject to any currency controls or restrictions. Official foreign currency reserves held by the Central Bank of Egypt have increased from USD 16.5 billion at the start of 2005 to reach over USD 26 billion by mid 2007.
Fiscal Environment:
Soma BreeZe apartment owners will be subject to the following fiscal environment:
Sales Taxes: Rental revenues generated from apartment units placed under the Soma BreeZe Apartment Rental Program will be subject to a 10% sales tax. This level of sales tax applies to all hotel operations in Egypt.
Income Tax: The Net Operating Profit distributed to apartment owners resulting from the rental pool, after deduction of depreciation on the unit shall be subject to a graduated income tax which will be deducted at source, based on the following currently applicable schedule:
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Rental Income Per Annum
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Income Tax Rate
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LE 5,000
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0%
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Above LE 5,000 to LE 20,000
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10%
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Above LE 20,000 to LE 40,000
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15%
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Above LE 40,000
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20%
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Capital Gain/Transaction Tax: Egyptian tax legislation provides for a 2 1/2% tax on the proceeds of all real estate property transactions, conditional on the property being located within city limits. Soma Bay is located outside of the city limits of the nearest town under currently applicable regulations. The real estate transaction tax is consequently not expected to apply to Soma Breeze apartment units.
Real Estate Tax: A new real estate tax law has been submitted to Parliament, incorporating a new annual tax on all real estate property. The basis for calculation of this new property tax is based on a theoretical rental value for the property. If and when passed the impact of this new real estate tax on Soma BreeZe units is expected to be relatively modest, not exceeding Euros 2000 per annum per apartment unit.
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