Ch05 Real Estate Tax

Dr. Mohammed Gubran Al-shamahi

1-1
 1 Real Estate Tax

Learning Objectives

1 Identify the principal types of Real Estate Tax.

2 Compute the Direct Taxes on the real estate in Yemen.

1-2
LEARNING
OBJECTIVE
1 Identify the principal types of Real Estate Tax.

Based on the Yemeni tax law, Article 52, Real Estate

Rent can be defined as “the total of annual incomes from
rental properties for various purposes”
This indicates that the owned real estate for personal and
business use is not included in the real estate tax.

The tax on real estate is characterized as:

 Yearly tax on real state, and

 Direct tax levy on the income of the real estate owners

1-3 LO 1
 Two types of Real Estate Tax

Real estate tax classified into two; Tax on real estate rent

Tax on real estate rent

Tax on transfer the property of real estate

1-4 LO 1
 Tax base on real estate rent

Based on the Yemeni tax law, The tax base of real estate rent
includes incomes arising from:

 All types of built buildings rented to others with its own parks,
whether these real estate are shops, restaurants, labs, factories,
corporations, or residential buildings;

 All lands allocated for commercial or industrial use.

1-5 LO 1
 Tax on transfer the property of real estate

Based on the Yemeni tax law, The tax on transfer the

property of real estate arising from:

 Registry fees payable for transferring property of land or buildings in

Yemeni tax law is at rate of 1% on the value of the real estate`s ownership
title, paid by seller of real estate.

 This kind of tax does not includes the transferring real estate by inheritance
from family, gifts lands or buildings and the sold agricultural.

1-6 LO 1
 DO IT! 1 Basic Concepts of Real Estate Tax

Indicate whether the following statements are true or false.

1. Real Estate Rent can be defined as “the total of annual incomes

from rental properties for various purposes”

2. The owned real estate for personal and business use is included in
the real estate tax.

3. Tax on real estate is characterized as monthly tax.

4. Tax on real estate is characterized as: Direct tax levy on the income
of the real estate owners

Solution: 1. True 2. False 3. False 4. True

1-7 LO 1
LEARNING Compute the Direct Taxes on the real estate in Yemen.
OBJECTIVE
2

Determine the tax base on real estate rent

In Yemeni tax low, the actual income of real estate rent based on the
actual and correct contract of rent as follow;

 Levied on real estate rent that owned by people at the rate of

one month's rent per year.

 Levied on real estate rent that owned by entities at the rate of

20% from the net income per year.

 The person in charge of submitting the tax declaration on the

real estate rent is the owner of the property or his lawyer.

 Submit the actual and correct contract of rent.

 Registry fees payable for transferring property of land or

buildings in Yemeni tax law is at rate of 1% on the value of the
real estate`s ownership title, paid by seller of real estate.
1-8 LO 2
 DO IT! 2 Illustration 1.

Hamza (a natural person) in Al-Hodeida city, he owns a property

consisting of six apartments without furniture;
1- The rent apartment is 30,000 riyals monthly.
2- Three apartments have been rented for a year, starting from the
beginning of 2010, and two apartments have also been rented on
1/5/2010, and the sixth apartment was rented on 1/8/2010.
3- He provided documents to prove that Maintenance expenses are
40,000 riyals annually.
4- Salaries of building keeper are 15,000 riyals per year
5- The cost of the building is 16,500,000 riyals, and it is being
depreciated at a rate of 5% by the tax authority.

1-9 LO 2
 DO IT! 2 Illustration 1.

Required :- Compute the tax on the property rent for 2010.

Solution :- Hamza is a natural person, therefore tax on real estate
compute as follow;
1- Tax on the rent of 3apartments Cost of rent Apartments
= × =
for a year per month Numbers
30,000 × 3 = 90,000

2- Tax on the rent of 2apartments Cost of rent Apartments Rented months

= × × =
for 8 months per month Numbers ÷ 12 months
30,000 × 2 × 8 ÷ 12 = 40,000

3- Tax on the rent of 1 apartment Cost of rent Apartments Rented months

= × × =
for 5 months per month Numbers ÷ 12 months
30,000 × 1 × 5 ÷ 12 = 12,500

Total tax = 90,000 + 40,000 + 12,500 = 142,500

1-10 LO 2
 DO IT! 2 Illustration 1.

Required :- Compute the tax on the property rent for 2010.

Solution :- Hamza is a natural person, therefore tax on real estate
compute as follow;
1- Tax on the rent of 3apartments Cost of rent Apartments
= × =
for a year per month Numbers
30,000 × 3 = 90,000

2- Tax on the rent of 2apartments Cost of rent Apartments Rented months

= × × =
for 8 months per month Numbers ÷ 12 months
30,000 × 2 × 8 ÷ 12 = 40,000

3- Tax on the rent of 1 apartment Cost of rent Apartments Rented months

= × × =
for 5 months per month Numbers ÷ 12 months
30,000 × 1 × 5 ÷ 12 = 12,500

Total tax = 90,000 + 40,000 + 12,500 = 142,500

1-11 LO 2
 DO IT! 2 Illustration 1.

Required :- Compute the tax on the property rent for 2010.

Solution :- Hamza is a natural person, therefore tax on real estate
compute as follow;
1- Tax on the rent of 3apartments Cost of rent Apartments
= × =
for a year per month Numbers
30,000 × 3 = 90,000

2- Tax on the rent of 2apartments Cost of rent Apartments Rented months

= × × =
for 8 months per month Numbers ÷ 12 months
30,000 × 2 × 8 ÷ 12 = 40,000

3- Tax on the rent of 1 apartment Cost of rent Apartments Rented months

= × × =
for 5 months per month Numbers ÷ 12 months
30,000 × 1 × 5 ÷ 12 = 12,500

Total tax = 90,000 + 40,000 + 12,500 = 142,500

1-12 LO 2
 DO IT! 2 Illustration 1.

Required :- Compute the tax on the property rent for 2010.

Solution :- Hamza is a natural person, therefore tax on real estate
compute as follow;
1- Tax on the rent of 3apartments Cost of rent Apartments
= × =
for a year per month Numbers
30,000 × 3 = 90,000

2- Tax on the rent of 2apartments Cost of rent Apartments Rented months

= × × =
for 8 months per month Numbers ÷ 12 months
30,000 × 2 × 8 ÷ 12 = 40,000

3- Tax on the rent of 1 apartment Cost of rent Apartments Rented months

= × × =
for 5 months per month Numbers ÷ 12 months
30,000 × 1 × 5 ÷ 12 = 12,500

Tax payable = 90,000 + 40,000 + 12,500 = 142,500

1-13 LO 2
 DO IT! 3 Illustration 2.

Yemeni company owns five properties, each property consisting of ten

apartments without furniture;
1- All apartments have been rented from the beginning of 2012
2- Rent of the apartment is 80,000 riyals monthly.
3- Maintenance expenses are 95,000 riyals annually, proved by the
documents that provided by company.
4- Utilities expense for buildings is 180,000 riyals annually.
5- Building keeper salary is 240,000 riyals per year
6- The cost of the each building is 10,000,000 riyals, and it is being
depreciated at a rate of 5% by the tax authority.
1-14 LO 2
 DO IT! 3 Illustration 2.
Required :- Compute the tax on this property rent for 2012.
Solution :- Yemeni company is an entity, therefore tax on real estate
of this company is subject Direct Taxes on an Entity’s
Profits as follow;
Real estate revenue 48,000,000 riyals

deduction

Real estate expenses

wages expense of buildings keeper 240,000

Maintenance expense 95,000

Utilities expenses 180,000
Depreciation expense 500,000
Total expenses (1,015,000)
Taxable income (taxable property rent) 46,985,000 riyals

Tax payable = 46,985,000 × 20% = 9,397,000 riyals.

1-15 LO 2
 DO IT! 4 Illustration 3.

Hamza sold his own land to Yemeni company, 2,200 meters with price
of 30,000 riyal for each meter.

Required :- Compute the tax on property transferring.

Solution :-

Tax on property transferring =

2,200 × 30,000 × 1% = 660,000 riyals

1-16 LO 2