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Africa Tax Landscape

Algeria

30 Dec 2022

Algeria's tax landscape overview highlights the country's tax landscape together with other regulatory considerations of setting up an entity in Algeria.

Doing business in country

Overview of tax system (residence versus source)

The Algerian tax system is a declarative system. It concerns legal entities as well as natural persons established in Algeria or those whose income is of Algerian origin, including Permanent Establishments.


The Algerian Tax System includes the following taxes:
- IBS : (Tax on Corporate Profits) (CIT);
- IRG (Impôt sur le Revenu Global) for individuals.
- TAP (Tax on Professional Activity)
- VAT (Value Added Tax)
- WHT
- Property tax and sanitation tax
- Tax on wealth
- TPP: Tax on Petroleum Products
- Registration Fees
- Stamp duty

Indirect taxes:
- Domestic Consumption Tax (It concerns the activity of manufacturing tobacco and beer as well as some imported products.
- Traffic duties: Applicable on alcohol, perfumes, wines and liquors.
- Guarantee and Testing Duty: Applicable on gold, silver and platinum products.

Type of companies that can be set up (e.g., Close corporation, Partnership etc.,)
  • Sole Proprietorship, Partnership, Limited Liability Partnership(LLP)
  • Private Limited Liability Company(Ltd)
  • Public Liability Company(PLC)
  • Private/Public Company Limited by Guarantee(Ltd/Gte)
  • Unlimited Liability Company(ULtd) Incorporated Trustee - (Not for Profit Organisation)
Requirements for locals to own shares/stake in the company

Amount of Share Capital: A private company limited by shares (LTD.) must have a minimum issued share capital of 100,000, while a publicly quoted company (PLC) must have 2,000,000 minimum issued share capital. 

Corporate income tax

Viable option from a tax perspective (branch versus subsidiary)

The branch is an extension of the parent company and can be implemented as a Permanent Establishment. A permanent establishment, from a legal point of view, is a fixed place of business through which an entity carries on all or part of its business in another State.


This concept is essentially related to the period during which the fixed business facility remains operational. Example: construction sites can only be considered as permanent establishments for a period that can exceed six (6) months. This period is calculated from the date of the start of the activity until the date when the work is achieved or the project is abandoned.


The registration is made by the domiciliation on the work or service contract at the level of the tax administration. The tax regime will be fixed according to the duration of the existence of the PE. As soon as the company decides to register in Algeria a subsidiary, it must create an entity according to the legal forms provided for by the Commercial Code.

Process of registering and setting up a branch or subsidiary

Registration of companies is done by Corporate Affairs Commission [CAC], and tax is done by Federal Inland Revenue Services (FIRS) for subsidiaries (resident company) in Nigeria. For branches that are Non-Resident in Nigeria, they are to register for tax with Federal Inland Revenue Services (FIRS).

Process of opening a bank account

After the Tax Registration of the Company or the PE the following documents are requested to open bank accounts:


Regarding the PE:

• Work or Service contract signed
• Services Order
• Rental lease (Adresse in Algeria)
• Artiles of association;
• Trade register;
• Tax Identification Attestation
• Delegation of signing authority
• Request to open a bank account (CEDAC and INR account for the PE)
Regarding Subsidiary:
• Rental lease (Adresse in Algeria)
• Artiles of association;
• Trade register;
• Tax Identification Attestation
• Delegation of signing authority
• Request to open bank account

Lodging of tax returns with the local Revenue Authority

The monthly declaration relating to the turnover must be filed to the tax authorities up to the 20th of each month. The annual tax declaration relating to the CIT must be submitted by April 30th of year n+1.

Corporate tax rate for branches and subsidiaries
  • Manufacturing Activities: 19%
  • Construction, tourist and spa activities, excluding travel agencies: 23%
  • Service provider: 26%
Tax rules on repatriation of after-tax profits for branch and subsidiary

Branch (PE): The amount of services is subject to a withholding tax of 30% in the discharge of taxes.


If the PE is taxed under the real profit tax regime, the Branch Tax is applied at the rate of 15% on after-tax profits unless the rate of the tax treaty if any.
Subsidiaries: The tax on dividends is applied before the operation of the transfer. The rate is 15% except for the reduced rate provided for by the tax treaty.

Withholding taxes applicable

Yes, the WHT applies to service contracts made by foreign companies.
The rate is 30%. A 30% reduction is applicable to computer software contracts.

Capital gains tax implications

Yes. The rate of capital gains tax is 15%.

Value-Added Tax (VAT)

VAT rate applied
  • Exemption: 0%
  • Reduce rate: 9%
  • Normal rate: 19%
Imposition of VAT

The following are subject to value-added tax:


Sales operations, real estate works and services other than those subject to special taxes, of an industrial, commercial or artisanal nature and carried out in Algeria on a regular or occasional basis.

System of submitting VAT returns (manual versus automated)

Automated as of 2020.

What are the export requirements that must be adhered to?

Export services are exempted from VAT, while Non-oil export is zero-rated.

VAT registration requirements

All legal persons established in Algeria are subject to VAT.
Permanent Establishments which are not subject to the WHT tax system are also subject to VAT.

VAT on electronic services

All electronic sales transactions are subject to VAT. Rate: 19%

VAT registration requirements for the registration of a Group/Branch

The same with CIT registration.

VAT refunds for non-residents

No.

Recordkeeping requirements

The mandatory accounting registers are General Journal, Inventory Book, and Pay Book. Regarding the social registers: Paid Leave Register, Personnel Register, Foreign Workers Register, Technical Checks Register for Industrial Installations and Equipment, Health and Safety and occupational medicine and the register of accidents at work.                                                       

Employees Tax

Tax year for Individuals

Payroll tax is paid monthly.

Is employees’ tax is collected from employers via payroll?

Yes.

Collection of Unemployment Insurance Fund (UIF) and Skills Development Levy (SDL)

Not applicable.

Should employers register and file returns with both the Revenue Authorities?

In Nigeria, Employers are to register with all relevant tax authorities of the Federal & States where their employees are performing duty.

When is the monthly submission and payment of the EMP201 tax return due for each month following the collection?

Not applicable.

Submission of the employee's tax reconciliation return?

Not applicable.

Method of calculating individuals tax

Yes.

Labour law registration requirements for employers

Yes, just after the recruitment of the first employee.

System of submitting employees' tax returns (manual versus automated)

Manual.

Transfer pricing

Transfer pricing documentation guidelines or regulations

Yes.

Transfer pricing documentation materiality limits or thresholds in relation to transactions or revenue

No.

Statutory deadline for submitting transfer pricing documentation

Yes, as well as the annual tax return, up to April 30th.

Penalties imposed for non-submission and/or incomplete documentation.

Yes.

International tax

Tax nexus (Permanent Establishment)

Yes.

Effective Management

It depends because certain head office costs may not be acceptable as tax deductible.

Controlled Foreign Company

Yes.

Exchange control

Exchange control is the responsibility of the Bank of Algeria, exercised through the law on currency and credit, banking regulations, instructions and notes to banks.

Payment control of imports and exports and the obligations of foreign trade operators and approved intermediaries are governed by Regulation No. 07-01- of February 3, 2007, relating to the rules applicable to current transactions with foreign countries and to currency accounts, instructions and notes from the Bank of Algeria. Any payment abroad is subject to prior authorization from the tax authorities.

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