Taxable income is determined using the accounting profits and adding back non-deductible expenses and deducting the allowable non-taxable incomes.
The inventory valuation method for tax purposes must match the accounting method as defined by the Algerian Financial Standards (SCF).
Capital gains realised on the sale of assets are taxed as ordinary income when realised by a company subject to CIT. 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.
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 (natural persons) are subject to a WHT at source of 15% (previously 10%).
In accordance with Article 46 of FL 2022, distributed profits between Algerian resident entities that have been previously subject to CIT undergo a 5% WHT.
Bear in mind that the received profits are not included in the taxable base for CIT calculation purposes.
Interests paid are subject to 10% WHT and are included in the income of the beneficiary and subject to CIT 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 is subject to CIT when received by a taxable corporate entity in Algeria. Rental income paid to non-residents is subject to 30% 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 set at the rate of 19%, which must be reverse charged by the local payer.
In accordance with the domestic tax law, royalties are subject to 30% WHT. A reduction of 30% on the taxable basis is applicable for royalties paid for the use of software, making the effective tax rate 21%.
In the presence of a DTT, royalty rates are provided by the DTT provisions.
Note that royalties on software having benefited from the 30% taxable base reduction, as well as royalties paid based on the DTT provisions (reduced rates as part of the DTT preferential regime), are subject to the Algerian VAT set at the rate of 19%, which must be reverse charged by the local payer.
Realised gains and losses are subject to CIT. However, unrealised gains and losses are not subject to CIT. 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 CIT.
Subject to DTT provisions, income from other countries is liable to CIT in Algeria, except exportation revenues and revenues realised in hard currency by resident legal entities, which are exempted.