Algeria

Corporate - Income determination

Last reviewed - 01 June 2020

Taxable income is determined using the accounting profits and adding back non-deductible expenses and deducting the allowable non-taxable incomes.

Inventory valuation

The inventory valuation method for tax purposes must match the accounting method as defined by the Algerian Financial Standards (SCF).

Capital gains

Capital gains realised on the sale of assets are taxed as ordinary income when realised by a company subject to IBS. For certain assets, 30% relief is given where the assets have been held for up to three years, and 65% relief is given where the movable assets have been held longer. Capital gains on the disposal of assets can be exempted if the company commits to re-invest them within a three-year period.

Dividend income

Dividends to non-resident shareholders are subject to WHT at source of 15%, which may be reduced or neutralised by an applicable DTT. Starting with fiscal year (FY) 2018, dividends to resident shareholders are subject to a WHT at source of 15% (previously, 10%). If the dividends are received by a parent entity resident in Algeria, they are not included in the taxable profits for CIT purposes.

Interest income

Interests paid are subject to 10% WHT and are included in the income of the beneficiary and subject to IBS if the beneficiary is a legal entity. Interests paid to a non-resident are generally subject to a 10% WHT. The rate may be reduced under an applicable DTT.

Rental income

Rental income is subject to IBS when received by a taxable corporate entity in Algeria. Rental income paid to non-residents is subject to 24% WHT, except for international lease agreements, where a reduction of 60% on the taxable basis is applicable, making the effective tax rate 9.60%. However, since January 2017, international lease agreements having benefited from the 60% taxable base reduction are subject to the Algerian VAT, which must be self-assessed by the local payer.

Royalty income

Subject to DTT provisions, royalties are subject to 24% WHT. A reduction of 30% on the taxable basis is applicable for software, making the effective tax rate 16.8%. Since January 2017, the royalties on software having benefited from the 30% (and 80% previously) taxable base reduction are subject to the Algerian VAT, which must be self-assessed by the local payer.

Furthermore, the 24% WHT rate could change in presence of a DTT.

Unrealised gains/losses

Realised gains and losses are subject to IBS. However, unrealised gains and losses are not subject to IBS. There are specific provisions relating to the free re-evaluation of assets.

Foreign currency exchange gains/losses

Foreign realised currency exchange gains/losses are subject to IBS.

Foreign income

Subject to DTT provisions, income from other countries is liable to IBS in Algeria, except exportation revenues and revenues realised in hard currency by resident legal entities, which are exempted.