The recent implementation of the Financial Law of Administrative Units No. 37 of 2021, as well as its executive instructions, has increased fees for construction and renovation licences. This is because under Law No. 37, these fees are now calculated based on the current values of real estate properties, which are in turn determined in accordance with Real Estate Sales Law No. 15 of 2021. At the same time, administrative units have expanded their definition of the improvement fees.
Under Law No. 37, fees for construction licences are among the taxes that administrative units collect directly. They consist of several different fees, including: SYP 3,000 for registering a licence; a payment equivalent to one percent of the current value of the property’s entire surface area for all storeys; a payment of four percent of the current value of the property’s total balcony surface area; an SYP 2,000 zoning expenses fee; and a one-time fee for occupying any adjoining side-walk space with the required construction materials during the licence period.
The increase in licence fees since Law No. 37 is evident: During the first half of 2022, only 30 construction permits were granted in the Tartous governorate, amounting to a total SYP 1.5 billion in fees, according to the semi-official newspaper Al-Watan. According to Al-Watan, the fees for these properties would not have exceeded SYP 50 million before the implementation of Law No. 37.
And in Damascus, the local Engineers Union branch, which is responsible for issuing construction permits in the capital, carried out the licensing process for only two buildings in the first half of 2022. This scarcity was “due to the high fees,” according to official statements by the syndicate branch president.
Law No. 37 authorises administrative units to charge so-called “improvement fees,” which property owners must pay in exchange for public benefit works carried out by the public or private sectors and that result in an improvement in the property’s value. These fees are collected from owners of built or unbuilt properties located either within or outside zoning plans.
Under Law No. 37, the owner of a property that has undergone such an improvement must pay a fee equal to half the value of the improvement done to their property. This fee may reach as high as 20 percent of the property’s value.
The public benefit projects that may bring out improvement fees under Law No. 37 include: Opening roads, bridges, waterways, floodways and covering rivers; implementing laws related to urban planning; tourism and hospitality construction projects; and amending the usufruct terms and construction codes.
Decision No. 505
In newly zoned real estate areas, such as Marota City and Basilia City in Damascus, the processes for licensing construction and collecting improvement fees overlap, making it complicated to discern between the two. This is because of two factors. First, most of the plots allocated for construction in those zoned real estate areas are still in the midst of the licensing process. Second, Law No. 37 considers the zoning process to be one of the projects subject to improvement fees. These factors may explain why the construction licence fee for one plot in Marota City is SYP 1.5 billion.
This overlap can bee seen in Decision No. 505, issued by the Damascus governorate’s executive office in May 2022. The Decision defined what it called “the bases for calculating new improvement fees for construction permits and settlement of unlicensed construction”. Decision No. 505 was issued based on the provisions of Local Administration Law No. 107 of 2012 and the Financial Law of Administrative Units.
The May 2022 Decision set the rates for improvement fees as follows: 20 percent of the property’s current value in zoned real estate areas and residential towers; 15 percent in new residential areas; and 10 percent in suburbs, old neighbourhoods and informal settlements. There were no further details about how to classify each of those areas.
In calculating improvement fees, Decision No. 505 also utilised the current value of real estate properties, as adopted by the Damascus’s directorate of finance and in accordance with the Real Estate Sales Law.
Finally, Decision No. 505 expanded improvement fees beyond public benefit projects to also include individual and private improvement works. For example, the Decision set improvement fees for installation of external and internal elevators, for converting basements into warehouses and for enclosing exposed balconies.