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Explained: Taxes, Duties, Stamps and the Reconstruction Committee

30-04-2024/in Analysis & Features, HLP /by Rand Shamaa

Law No. 13 of 2013 introduced a five percent fee on both direct and indirect taxes and fees under the title “National Contribution for Reconstruction.” This tax applies to those liable for real profit taxes and other tax and duty payers, while income tax on salaries and wages as well as electricity fees are exempted from this tax hike. In practice, the National Contribution for Reconstruction is a tax on taxes.

Law No. 13 imposed this increase retroactively on real profit taxpayers who had not settled their dues for the year 2012, while it applied to other taxpayers from the beginning of 2013. Law No. 13 established bank account number 6119 where the revenues from this tax increase are deposited. These are considered part of the general budget revenues under the heading of the “National Contribution for Reconstruction.”

Law No. 13 applied for a period of three years from the date of its enactment; it was extended through Decree No. 3 of 2016 and later by Law No. 46 of 2017. Law No. 46 increased the “National Contribution for Reconstruction” rate to 10 percent on both direct and indirect taxes and fees and did not specify an end date for this tax increase.

According to the executive instructions of Law No. 13 issued by the Ministry of Finance, the direct taxes and fees relevant to the land and property rights include: real estate and building plots income taxes, taxation of lands slated for construction, land registration fees, and irrigation fees. Indirect taxes and fees include notary fees, judicial fees and stamps. These tax increases are collected by the financial departments and authorised entities for both direct and indirect taxes and fees.

The General Director of the General Commission for Taxes and Fees at that time, Zubair Darwish, told the state-run Tishreen newspaper in July 2013 that Law No. 13 “establishes a national project based on the principle of solidarity and partnership, sharing the burdens caused by the crisis the country is experiencing, and it will not be a burden on citizens because it exempts taxes that directly affect the lives of citizens, including the salary and wage tax for both public and private sector employees.” He added that the resources collected under Law No. 13 “will be spent on supporting the reconstruction and repair of what has been destroyed, as well as supporting the resettlement of displaced families.”

To collect the increased tax on fees collected via stamps, the Ministry of Finance in 2013 issued two types of reconstruction stamps, one valued at SYP 10 and the other at SYP 50. It became mandatory to affix one or both of these stamps on any official transaction, without exception. Due to the compulsory nature of these stamps on official transactions, there has been a high demand for them, leading to shortages in the market and illegal price increases. No official transaction can be completed without these stamps, and in many cases, financial departments provide a receipt for the stamp payment to complete the transaction without actually affixing the stamp.

In November 2021, a financial department official in Damascus told state-run newspaper Al-Thawra there was a proposal to collect the duties of the stamp without affixing it, because the cost of printing the stamp is much higher than its value. The official explained that collecting the stamp value in cash from the citizen was a temporary emergency solution.

According to the Minister of Finance’s Decision No. 2045, dated October 25, 2023, the ministry began issuing an electronic sticker displaying all required fees and promised to put it into service starting from November 2023. That month, the Ministry of Finance issued decision No. 2091, adopting two new reconstruction stamps, one valued at SYP 100 and the other at SYP 200, both featuring the same image of a building under construction alongside a tower crane.

The number of stamps required varies depending on the type of transaction and the nature of the taxes and fees imposed on it. In cases where stamps are actually unavailable, employees collect varying amounts without providing a receipt for the actual value of the stamps purchased for those transactions.

Law No. 13 of 2013, its executive instructions, subsequent amending laws, and decrees and decisions from the Ministry of Finance, do not refer to any official body for managing the funds collected from the tax increase and the stamps.

However, it is worth noting that a committee called the Reconstruction Committee was formed by a decision of the Prime Minister, No. 13387 on September 23, 2012, chaired by the Deputy Prime Minister for Services – Minister of Local Administration and Environment. The committee’s responsibilities include disbursing compensation for uninsured private property damage in the governorates, advancing payments and compensation to military personnel, approving cost estimates prepared by ministries, governorates, and relevant public bodies for the rehabilitation and maintenance of public buildings, taking necessary actions for the rehabilitation and maintenance of damaged infrastructure and public facilities according to a prioritised implementation and expenditure schedule, and funding the construction of temporary housing units in the provinces through public construction companies.

Information about this committee is scarce. The last post about the committee on the Ministry of Local Administration website dates back to March 2019, stating that the committee had planned to remove debris from demolished houses in the city of Palmyra and transport the waste to designated dumps outside the city. The latest news from the Prime Minister’s website dates to August 2019, discussing the committee’s approval of an emergency reconstruction plan for the public authorities for 2019 worth SYP 25 billion.

The total financial appropriations implemented by the Reconstruction Committee since 2012 to date amounted to SYP 380 billion, according to a report published on the Ministry of Finance website on November 12, 2023, titled “Parliament refers the 2024 budget project to the Budget and Accounts Committee.” The committee has completed 11,909 projects, repaired 99,800 homes, rehabilitated 32 hospitals and 175 health centres, repaired 10 grain silos, 36 bakeries, 8 cow sheds, and 3 poultry farms, among other projects. There are no published decisions or decrees indicating the funding sources for the Reconstruction Committee, but it is likely that they come from the National Contribution for Reconstruction taxes.

Explained: Real Estate Development in Aleppo’s Al-Haydariyeh Informal Settlement

29-08-2023/in Analysis & Features, HLP /by Rand Shamaa

Al-Haydariyeh is among the largest informal settlements in Aleppo and was declared a real estate development zone in 2011. The area saw widespread devastation during the war, forcing its residents into displacement. And though the Aleppo City Council hoped Al-Haydariyeh real estate development project could serve as a model for reconstruction in other east Aleppo neighbourhoods, the project still needs to be completed.

The Al-Haydariyeh settlement began to develop in the early 1970s to the northeast of Aleppo, outside its official zoning plan. Initially, the land at Al-Haydariyeh was private, undivided and collectively owned; it was used for pastures and agriculture, while construction was prohibited. Some landowners have ownership documents in the form of a “green agricultural tabu” (a record dating back to the Ottoman era). Others have court judgments confirming the legitimacy of their purchases of undivided shares.

Some people built unlicensed homes on these lands, and some sold their land shares to contractors who built unlicensed houses that they sold to migrants from northern and eastern Syria. Over time, various informal neighbourhoods emerged in Al-Haydariyeh, often named after the resident ethnic communities, including Kurds, Turkmen, Assyrians and Arabs.

In the late 1970s, the state appropriated a large area of Al-Haydariyeh to construct social housing projects, a park, and a school. It issued its final expropriation order, No. 2280, in December 1982. However, some building contractors and members of the security forces seized parts of the confiscated land. They divided the land into smaller plots and sold them as sites prepared for unlicensed construction. As a result, some neighbourhoods emerged, named after the entities that took over the land, such as the “Intelligence Neighbourhood” and the “Theft Neighbourhood.”

The Aleppo municipality later expropriated the remaining land in Al-Haydariyeh. It allocated it for social housing programmes, which are implemented by public institutions affiliated with the Ministry of Public Works and Housing. The city council zoned this area via Decision No. 2426 in 1990. It is divided into 325 plots prepared for construction, each measuring 120 square metres. These plots were set aside for residents who had been given notices to demolish their unlicensed homes in the neighbouring Al-Masharqeh neighbourhood. Residents who were allocated these plots paid for them in instalments over 15 years. This section of land became known as the “40 Notices” district, named for the demolition notices. Most buildings here were licensed and consisted of two storeys, while a minority, which violated regulations, consisted of three. The district was provided with a water and sanitation network funded by its residents. Still, implementation was very ineffecient and poor, leaving some residents reliant on purchasing water tanks. All houses were connected to the electricity network and had usage meters, although unauthorized electricity tapping was common.

Since 2002, the Aleppo municipality began issuing eviction warnings to the “Theft Neighbourhood” residents. It promised to provide them with alternative housing (which they would be expected to pay for) as part of youth housing projects, a segment of Syria’s social housing programmes. Announcements were also made about launching these programmes in other parts of Aleppo.

In 2004, the Aleppo City Council annexed Al-Haydariyeh into the zoning plan issued that same year. The following year, the council commissioned the Faculty of Architectural Engineering engineering unit at the University of Aleppo to prepare a detailed zoning plan for the district, which, at that time, was estimated by the council to have around 32,000 inhabitants. The engineering unit completed the plan in 2006, amending the zoning plan for the “40 Notices” district and removing the park and small squares within it. However, this second plan was not ratified and remained unimplemented.

In 2010, the Aleppo Governorate Council subjected Al-Haydariyeh district to Real Estate Development and Investment Law No. 15 of 2008, marking it as the first district in Aleppo to which this law was applied. The Council of Ministers approved the decision a year later, establishing two real estate development zones in Aleppo. These zones aimed to redevelop areas containing mass unlicensed construction located in Al-Haydariyeh and nearby Tal al-Zarazir.

According to Law No. 15 of 2008 (which was later repealed by Law No. 2 of 2023, also amending Investment Law No. 18 of 2021), a real estate development zone can include properties within or outside a given zoning plan. These properties could be secured either from state assets, from assets of the administrative unit, from assets owned by development companies, or from private properties. The executive instructions for Law No. 15, issued by the Prime Minister under Decision No. 5410 in 2009, said that informal settlements could be treated as real estate development zones, regardless of their size, based on a justification memo and with approval from the Presidency of the Council of Ministers.

Announcing Al-Haydariyeh as a real estate development zone allowed the city council to seize properties and assets in the district. This gave the implementing authorities all the necessary powers and rights to take over and demolish those properties. A real estate development programme was then approved for Al-Haydariyeh, covering an area of 118 hectares. Of this, 42.12 percent was allocated for residential plots, green spaces and public areas, while 12.27 percent was allocated for public services.

This development aimed to construct 10,000 housing units through a partnership between the Aleppo City Council and real estate developers. The council divided the real estate development project in Al-Haydariyeh into three zones or phases, A, B and C, to facilitate the work for real estate development companies. The first phase spanned an area of 28.8 hectares, encompassing 2,700 residential apartments. The General Company for Engineering Studies (GCES) completed the studies and plans for the project’s general infrastructure. Meanwhile, the Military Housing Establishment (MHE) implemented significant portions of the infrastructure for the first and second phases of the project, such as the road network and the sanitation system.

Like other parts of east Aleppo, Al-Haydariyeh was under rebel control in 2012-2016. During this period, it suffered heavy bombardment and a suffocating siege by regime forces. With the Russian military intervention in 2015, the area endured aerial and artillery assaults, causing extensive damage. This pushed the opposition to surrender and accept forced displacement from the site in 2016. Since then, only a limited number of residents have returned to Al-Haydariyeh.

The Aleppo municipality started a demolition campaign in Al-Haydariyeh in 2018 in collaboration with the Ministry of Defense, citing the presence of mines in some buildings. In 2019, the city council started applying Urban Planning and Construction Law No. 23 of 2015 to Al-Haydariyeh, designating it as an area containing mass unlicensed construction. The site was then expropriated under the Expropriation Law No. 20 of 1983. Law No. 23 allows for the issuance of regulatory plans for a specific area, irrespective of the existence of public or private implementing agencies, without a specific timeframe for completion, no minimum ownership by administrative entities, and no specified minimum area requirement.

In 2020, the Aleppo City Council demolished and cleared homes within the executive plan for the Al-Haydariyeh development project. With that, the area was ready to be presented for investment in partnership with the General Authority for Real Estate Development and Investment. For projects within informal settlements like Al-Haydariyeh, the real estate developer is assumed responsible for providing alternative, paid housing for the area’s occupants or compensating them financially. In turn, the administrative entity must evacuate the occupants after handing them alternative housing and deliver the project site free of encroachments to the real estate developer.

One of the main concerns surrounding the land and property rights of former Al-Haydariyeh residents is that the real estate development project includes a social survey of the area’s inhabitants. However, given that all residents were displaced, it remains unclear how this survey will be conducted. A social survey typically solidifies compensation rights for residents present during the survey. Some local sources have suggested that people close to the authorities recently returned and resettled in the district based on security clearances. The Aleppo City Council has not listed any names of rights holders in the neighbourhood.

Explained: Decree Grants Tax Exemptions to People Impacted by February 6 Quake

21-03-2023/in Analysis & Features, HLP /by Rand Shamaa

More than a month after the February 06 earthquake, President Bashar Al-Assad issued a decree granting tax exemptions for people impacted by the disaster. Some of the measures listed in Legislative Decree No. 3 of 2023 are related to real estate that was partially or fully damaged in the earthquake, exempting owners from some current taxes and fees and temporarily from future taxes. The decree also eases the process for obtaining loans to restore damaged properties.

At the same time, the decree did not include financial compensation to repair damaged properties, rental allowances for those who lost their homes, and promises of alternative housing. In short, the decree added nothing new regarding housing, land, and property rights for earthquake-affected communities, instead approaching the disaster from a technical and financial angle.

In this sense, Decree No. 3 of 2023 is similar in content to the previous Decree No. 13 of 2022. The 2022 measure granted wide-reaching facilities and tax exemptions for properties in old city centres within Aleppo, Homs and Deir-ez-Zor governorates, including historic souks.

Decree No. 3 of 2023 only extends to people impacted by the February 06 earthquake, and stresses that it does not apply to any other natural disasters. Furthermore, the decree’s scope is limited to the governorates most affected by the quake: Aleppo, Lattakia, Hama and Idlib. Beneficiaries include real estate owners or occupants whose facilities, shops, homes or buildings suffered full or partial collapse or were cracked and need reinforcement.

For each earthquake-affected governorate, the Minister of Local Administration and Environment is tasked with forming a committee of “relevant entities” to identify the residents impacted by the February 06 disaster. Based on each committee’s findings, governors issue decisions officially identifying their governorate’s impacted residents.

These identified residents will then be exempted from all taxes, financial fees, local fees and costs, service payments, permit fees and any additional costs imposed for partial or full reconstruction work or rehabilitation of facilities, shops, homes and buildings. In short, the decree granted exemptions for such payments – most importantly fees for reconstruction and rehabilitation permits – until the end of 2024. Anyone who wishes to conduct such work is no longer required to pay such fees during that time.

Rehabilitation of a building means it can be repaired without the need for demolition or removal. On the other hand, reconstruction means that the building was damaged beyond rehabilitation and needs to be rebuilt or either fully or partially restored.

The state imposes obligatory taxes on all citizens in order to secure treasury funds, without providing any direct services in exchange. Financial fees, on the other hand, are payments made to benefit the public treasury in exchange for certain services; these include real estate fees. Local fees and costs are those imposed by local councils in exchange for provision of services, such as sanitation. Only those who benefit from the relevant public services pay financial and local fees.

Finally, service fees are those imposed by public entities or institutions for certain services, such as rubble removal, water and sewage networks. Additional or supplemental charges on service fees can be imposed during reconstruction or rehabilitation work in exchange for supervision from the Engineers Syndicate and employees of the Directorate of Cadastral Affairs’ Surveying Department.

Article 2 of the decree exempts people impacted by the quake from paying real estate income and building plot taxes, which are annual taxes for real estate and other facilities of all categories, whether fully built or still under construction, and whether for residential, commercial or industrial purposes. In addition, Article 2 exempted earthquake-impacted property owners from the local fees and costs mentioned in Financial Law of Administrative Units No. 37 of 2021.

Article 6 of the recent decree also cancelled the checking of paying for due taxes and fees prior to March 12, 2023, the date when the decree was issued. Next, Article 7 cancelled the checking of paying for due real estate and building plot income taxes in the earthquake-damaged areas. Cancelling these checking of paying for due taxes and fees means suspending as-yet-unpaid old requests for tax and fee payments on collapsing buildings. As a consequence, the decree suspended payments of some old taxes and fees incurred on damaged properties before its implementation date.

According to Article 11, the exemptions only extend to people whose facilities, shops, homes or buildings suffered full or partial destruction or were cracked and need reinforcement. This means that safe, undamaged properties are not exempt, even if they are located in earthquake-damaged area, with the exception of real estate and construction plot taxes, which are suspended for all real estate in damaged areas according to Article 7.

Paragraph B of Article 11 clarified that the tax exemptions and suspensions do not include real estate sales taxes that are subject to Law No. 15 of 2021. Consequently, this means that sales of real estate in earthquake-damaged zones remain subject to real estate sales taxes, though it is unclear why they are not exempt.

The decree also stated that people impacted by the quake would be granted easements in paying off any loans incurred and obtaining new loans from public banks. Under Article 14, public banks may grant interest-free loans with a SYP200-million ceiling to people hoping to either partially or rebuild following the quake, or those hoping to rehabilitate their properties.

According to the decree, the loan payback period is ten years, so long as the first payment is made within three years of the date the loan was granted. The state treasury bears any interest and commissions arising from granting the loans.

First Development Zone in Syria

20-09-2022/in HLP, News /by Rand Shamaa

On September 11, the Higher Investment Council decided to create the first development zone in Syria within Al-Layramoun (also known as Balleramoun) Industrial Zone in the northern part of Aleppo city. However, until the executive instructions for the decision are issued, there is still some ambiguity over how officials will implement the zone, including if the zone will be only aimed at the reconstruction and rehabilitation of public facilities or if it will also target private properties that have been damaged in the war.

Al-Layramoun Industrial Zone

Al-Layramoun Industrial Zone was established in the 1980s on land expropriated from a village of the same name. The zone was subject to the provisions of Prime Ministerial Decree No. 1858 of 1986, and the area was later annexed to Aleppo city under Decree No. 495 of 2007, which amended the city’s administrative boundary lines.

Between 2005 and 2012, a number of craft plots were added to the industrial zone, allocated for woodworking, sewing, knitting, embroidery, and for metal furniture making. Then, in 2018, the area was placed under the provisions of Prime Ministerial Decree No. 66 of that year, which relates to implementing and investing in industrial and craft zones.

Under Decree No. 1858 of 1986 and its amendments, an industrial zone is any publicly owned land that is allocated for founding industrial and artisanal businesses in accordance with a general zoning plan that meets the needs of the concerned parties.

According to the decree, here are three categories of plots that can be in an industrial zone: the first is for industrial, craft, and professional work; the second is for small- and medium-size industrial facilities; and the third is for medium and large non-pollutant industries. The second and third categories include public utilities and facilities that remain under state ownership, while plots in the first category may be allocated and sold to private industrialists and craftspeople, including those whose facilities were previously expropriated by the state. In all cases, however, the land and public facilities in the industrial zones belong to the state. According to Decree No. 66, these consist of state lands or land expropriated by the state. The state has not relinquished its ownership even in cases of allocating or selling certain plots

How has the war damaged this area?

When opposition forces seized the northern rural part of Aleppo in late 2012, Al-Layramoun became a frontline zone between the rebels and the regime. It suffered heavy airstrikes, artillery fire, and clashes on the ground. In 2017, the vice president of Aleppo’s Chamber of Industry told the Swissinfo news agency that 85 percent of facilities in Al-Layramoun were completely destroyed in the fighting. The news agency described the area as a “graveyard of factories, with silence and destruction looming over it.”

Around 1,800 small- and medium-sized enterprises were active in Al-Layramoun before 2011, while today there are only 160, the Chamber of Industry vice president told local state-run newspaper Al-Jamahir last week.

After regime forces regained control of the area in late 2016, the Ministry of Local Administration’s reconstruction committee allocated SYP 200 million to remove rubble, clear the roads, and equip infrastructure in the zone. In late 2018, SYP 100 million was also allocated to rehabilitate the damaged telephone network. No other financial obligations were made to reconstruct or rehabilitate the industrial zone.

In June 2022, the Aleppo governor formed a committee to rehabilitate infrastructure in Al-Layramoun and remove any obstacles and challenges to the area’s reconstruction. The goal of the committee was to restore all public services, including electricity, water, phone networks, telecoms, sewage, roads, and lighting. However, the committee has yet to announce the status of such work.

The development zone

During its meeting chaired by the Prime Minister on September 11, Syria’s Higher Investment Council authorised the creation of a development zone in the Al-Layramoun Industrial Zone area. The council tasked the relevant authorities with implementing the project.

A development zone is one of several types of special economic zones in Syria. Under Investment Law No. 18 of 2021, such zones are fully open for investment from the private sector and for partnership with the public sector. Development zones fall under the category of administrative development zones, and can exist either be invested in for general development or real estate development purposes, or for reconstruction purposes if the area has been damaged in the war.

According to Law No. 18 of 2021, a development zone may be established by decree from the Higher Investment Council, which defines the zone’s administrative borders, the zone’s activities, and when the zone must be completed. A ten-member committee, which is chaired by the Minister of Local Administration and includes a committee director, supervises a development zone. This committee prepares a general zoning plan that determines any financial and time commitments of implementation. Committee members also study requests to allocate real estate plots to investors inside state-owned land and to assign individuals the task of detailing and outlining the zone’s organizational scheme.