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Highlights on Corporate Revenue Tax at Algeria

In the same way that we know for our national taxation systems, Algeria taxes through IBS the revenues obtained by corporations. The tax is levied on the results of all accrued operations of any kind carried on by the corporation, including assets sales. It can be also obtained from comparisson between the corporations global net value at the beginning and end of the accounting year. The application is similar to European generally used methods. That is, accounts PBT corrected on the basis of tax criteria differences.

  • RELIEF FOR CORPORATION TAX

Warning: It is required the reinvestment of the whole relief in the following four years.

– Definitive

We highlight the relief to goods and services export operations (excluding ground, maritime, aerial transports, insurances and banking) and dividendos between corporations belonging to the same group (understanding they are taxed as a corporation group).

– Temporary

There are several, but we remark those interesting foreign investors. Anyway, as far as partnership would involve the creation of a algerian corporation, there could be others not included here that might be considered, depending on the place the investment takes place, i.e.

– Three years exemption to beneficiaries of the Development Investments Benefits granted by the CNI-ANDI. That could be increased for two more years when 100 or more direct jobs are generated (general regime).

– The ANDI´s “regime derogatoire” (derogatory regime), for special investments supported by the Government, exonerates taxes for a ten years period.

– Tourism business created by algerian or foreign investors –not including tourism or travel agencies. They can enjoy a ten years exemption period.

– Tourism or travel agencies or tourism dedicated joint-ventures, they can enjoy a three years tax vacancy on their foreign currency income.

– 50% reduction on IBS during five years for any business start up at the Southern regions (wilayas) (does not apply to hidrocarbures and mining operations).

– 20%  reduction on IBS during five years for small and mid-size business installed at the Southern and Highland regions.

– Job creation: Business that create and mantain jobs, can deduct during four years up to a 50% of labour cost. Limited to 5% of taxable amount and 1.000.000 DA (10.000 €).

 

  • LIMITS TO EXPENSES DEDUCTION:

Interests, finantial expenses in general, payments for licences, trades marks, technical assistance or foreign currency payments will only be deductable under the terms of the Transference agreement authorised by the Finantial Authority.

Expenses related to company´s creation are deductibles, but limited to 1% of the total net income of the year they are payed.

  • TAX RATE

– General Regime:

– Production of goods, construction and tourism: 19%
– Commerce and services: 25%

– Special Regimes:

– Credit, depot, securities, maritime transport by foreign companies under reciprocity: 10%
– Services by non-resident companies lacking an permanent establishment at Algeria, royalties due to patens, licencies, trade marks or Know-how transfer: 24%
– Income from non-nominative shares: 40%

  • STAGED PAYMENTS AND TAX PERIOD

Through the accounting year three payments are filed, march 20th , june 20th and november 20th . They are exacted on the tax payed last year or the last closed nearest to the payment day on a 30% basis. Start-ups pay 30% over 5% of the capital value.

Year liquidation is applied from january 1st to April 30th of the following year. From the Total quota payments on account are deducted in order to pay the difference. When there was an excess on previous payment, they will be settled against next partial payment.

  • TAX WITHOLD:

Must be applied in following cases:

– Foreign companies income
– Income from liquid capital

  • TRANSFER PRICES

In all cases that:

– An algerian corporation is, or was, directly or indirectly involved on another corporation´s (resident or non) management, control or capital, as same persons participate directly or indirectly in the management, control or capital;
– Or both corporations in their commercial or finantial relationship are linked through conditions that are different from the terms generally convened by independent companies.

The revenues that could have been obtained by the algerian corporation, but it lacked due to the terms agreed, will be included in the taxable basis (of the algerian corporation).

All income indirectly transferred out of Algeria through the following means, will be included:

– Increase or reduction of purchase or selling prices.
– Royalties or licences excesive or without a clear correlation.
– Loans with none or too low interest rate.
– Abandon of loan contract established interests.
– Non-proportional advantages in relation to the services obtain.
– Any other means.

On that purpose, the Tax Agency is entitled to verify the Accounts, issuing a demand that must be answered including all documents required in a ten days term.

When evidences of a transfer price appear, the agents are entitled to demand (in writing, establishing the discrepancy points, the goods object of inquiry and the country or region) all kind of company`s or non-resident related companies information, including:

– Method used to calculate the transfer price linked to industrial, commercial or finantial operations;
– Agreed counterparts;
– Activities developed by the group´s corporations based abroad Algeria.

Be careful that, due to the highly nationalist algerian politics, foreign corporations or with foreign partnership are object of particular attention. They are prone to be inspected and their relationship with foreign partners and managers will be carefully watched, so all kind of documents and explantions will be required in order to justify that agreed prices are real market prices.

Manuel J. Serra