Corporate entities are taxed on activities performed in Algeria via the following two regimes:
Standard tax regime
The standard tax regime is applicable for all tax resident companies, which are taxed in Algeria on their worldwide income. The standard tax regime includes the following taxes:
- Impôt sur le Bénéfice des Sociétés (IBS) at the rate of:
- 19% for manufacturing activities.
- 23% for building activities, public works, and hydraulics, as well as tourist and thermal activities, excluding travel agencies.
- 26% for all other activities not mentioned above.
For mixed activities, companies should keep management accounts to determine the portion of each activity performed. Failing this, the highest rate (i.e. 26%) will be applicable for all of the taxable profits.
Nil corporate annual tax returns include the payment of a minimum corporate tax amounting to 10,000 Algerian dinars (DZD).
- Tax on business activity (TAP) at the rate of 1% for manufacturing activities, without any reduction. However, this tax is fixed at 2% for all other activities, with a reduction of 25% for building and public works and hydraulic activities, and computed based on the invoiced turnover. However, the TAP rate is increased to 3% in respect of the turnover from the hydrocarbon pipeline transport activity.
- Value-added tax (VAT) at the rate of 19% or 9% (except any specific exemption). See VAT in the Other taxes section for more information.
- Branch tax set at the rate of 15% calculated on net profits after IBS. See the Branch income section for more information.
In the absence of a double tax treaty (DTT), the basic principle that governs taxation of non-resident entities is that such entities are taxable in Algeria on their Algerian-source income whatever the way and wherever the location the work is carried out, provided only that the same are rendered or used in Algeria.
As a consequence, an entity will be liable for IBS via the WHT regime (see below) in Algeria through the execution of a related contract (services contract) to be performed in Algeria. From an Algerian point of view, such a contract is not an investment and is, by nature, temporary. Note that it is possible to execute several contracts under the same permanent establishment (PE).
In the presence of a DTT, a foreign company will be taxed in Algeria if it has a PE only.
Withholding tax (WHT) regime
Non-resident entities performing service contracts in Algeria are subject to the WHT regime. The 24% WHT, which encompasses the IBS, the TAP, and the VAT, is required to be levied on services only. The calculation base is the gross amount of the services invoiced.
Please note that, since 2017, contracts that had been taxed under the 24% WHT are also subject to the Algerian VAT when its basis of calculation benefited from a reduction in the rate or rebates as provided for by the local tax legislation or the DTTs (i.e. software licence contracts, international lease agreements, etc.).
Local income taxes
There are no local or provincial taxes on income in Algeria. The TAP is being distributed for each district/location where there is a principal or secondary establishment.