Algeria

New tax measures introduced by Finance Law (FL 2023)

Increasing the deduction thresholds for certain expenses

In order to simplify and reduce the tax burden on taxpayers subject to CIT, the provisions of articles 10 and 11 of FL 2023 provide for an increase in the deduction limits for the following expenses:

• The expenses paid in cash are increased to DZD 1 million;
• Expenses incurred within the framework of research and development, as well as those incurred within the framework of "open innovation programs", that are carried out by companies with the "start-up" or "incubator" label, deduction limits increase from 10% to 30% of the taxable profit with a ceiling now set at DZD 200 million instead of DZD 100 million.

New tax exemptions for Corporate Income Tax

FL 2023 in its article 7 has granted the following new exemptions:

• Permanent exemption: Fishing and aquaculture cooperatives and their unions benefiting from an approval issued by the authorized services of the ministry in charge of fishing and aquaculture and operating in accordance with the legal and regulatory provisions which govern them, except for operations carried out with non-member users.
• Temporary exemption: Profits from taxes on investment accounts made within the framework of banking operations related to Islamic finance for a period of five (5) years, starting from January 1, 2023.

Asset’s depreciation tax rates

The provisions of Article 8 of FL 2023 modify and complete Article 141-3 of the DTC relating to the deduction of depreciation for tax purposes, by providing the depreciation period rules and allowed depreciation rates for CIT purposed

he new wording of Article 141-3 specifies that the deduction of Assets depreciation will be conditional to the application of the regulatory depreciation periods which will be fixed by an order of the Minister of Finance.

Tax treatment of Cash payments

In order to harmonise the tax treatment of cash settlements under various applicable taxes, duties and fees, Articles 10, 18 and 23 of FL 2023 modified the rules applicable to (i) the CIT deduction of expenses paid in cash, (ii) the deduction of the related input VAT and (iii) has increased the maximum limit of stamp duties to be applied on cash receipts of any nature.

According to the new provisions, it is now established that:

• Expenses paid in cash are not deductible when their amount exceeds DZD 1 million including all applicable taxes. 
• VAT on the acquisition of goods and services is not deductible when the amount of the acquisition exceeds DZD 1 million including all applicable taxes (previously fixed at DZD 100,000) 
• The stamp duty on receipts for cash collections is limited to a maximum of DZD 10,000. 

FL 2023 has also clarified the tax treatment of cash payments made into bank or postal accounts for the settlement of deductible expenses, specifying that these payments are deductible for Corporate Income Tax (CIT) purposes regardless of their amount and that the related VAT remains deductible to the extent the other general input VAT deduction rules are fulfilled.

Reorganization of the exemption mechanism applicable to the Oil & Gas activities

FL 2023 (articles 20 and 24) has reorganized the VAT exemption regime and the VAT-free purchase regime granted for the hydrocarbon sector under the provisions of articles 9-9 and 42-1 of the Turonover Tax Code, respectively as follows:

• The exemption regime provided for in Article 9-9 of the TTC applies to goods, services and works acquired or carried out as part of conducting “hydrocarbon activities” as defined by the relevant legislation.
• The VAT-free purchase regime provided for in Article 42-1 of the TTC now applies to all suppliers and subcontractors of companies engaged in "hydrocarbon activities" as defined by the relevant legislation.

Distinction between real estate development and construction activities

In order to align with the provisions of Article 16 of Law 11-04 dated 17 February 2011 governing the activity of real estate development which clearly specify that any natural or legal person undertaking a real estate project intended for sale or rental, is required to use an independent contractor. The legislator, in Article 19, distinguishes between construction operations and those relating to the activity of real estate development.

With the amendment made:

• The construction activity has been explicitly excluded from the scope of the real estate development activities. However, it remains understood that the construction activity remains a transaction subject to VAT under Article 2.2 of the TTC (construction works).
• VAT and TAP reporting tax events for construction activities is made by the total or partial collection of invoiced amounts;
• VAT and TAP reporting tax events for real estates development activities is made by invoicing or delivery of properties sold.

Clarification of the profit reinvestment obligation

As a reminder, Article 142 of the DTC underlines the obligation for taxpayers benefiting from an exemption or reduction of CIT and TPA (granted in the exploitation phase) to reinvest 30% of the profits corresponding to these exemptions.

Article 9 of FL 2023 provides an amendment of this measure by limiting the amount to be reinvested at 30% of the distributable profit of the year concerned. 

The article also provides for clarifications regarding the application of this obligation as follows:

• The reinvestment obligation must be fulfilled within a period limited to 4 years from the end of the financial year in which the profit made benefited from a preferential regime. Similarly, in the case of a combination of tax benefits granted over several years, the four-year reinvestment limit must be considered separately for each year.
• In practice, it has also been clarified that the reinvestment can take the form of:
  • The acquisition of assets, tangible or intangible, directly involved in the production of goods and services;
  • Acquisition of investment securities ;
  • The acquisition of shares or similar securities, allowing participation in the capital of other manufacturing or service supply companies and/or ;
  • The acquisition of a stake in the capital of start-ups or incubators, particularly in the context of support for the open innovation program.

Limitation period in case of force majeure

Article 35 of FL 2023 amends the provisions of Article 39bis of the Tax Procedures Code (TPC) by introducing the possibility of extending the 4-year limitation period provided for in Article 39 of the same Code in the event of force majeure.

At present, the limitation period can only be interrupted by sending the taxpayer a notification of adjustment. Thus, the statute of limitations for the fiscal year concerned is closely linked to this condition.

The introduction of this measure provides the tax administration with the possibility to extend the limitation period until the end of the force majeure event that prevented the audit from being initiated or carried out.

Limitation period for withdrawal of tax benefits

Article 36 of FL 2023 introduces Article 41 bis in the Tax Procedures Code to specify that in the event of total or partial withdrawal of tax benefits granted under the various preferential regimes, the limitation period provided for in Article 39 of the Tax Procedures Code starts from the date the decision to withdraw the tax benefits has been issued.

Judicial litigation - Establishment of the Administrative Appeal Court

The amendments made by articles 39, 40, 41, 43 of the FL 2023 aim to harmonize the provisions of articles 82, 90, 91, 153 ter and 154 of the Tax Procedures Code with the provisions of the new Civil and Administrative Procedures Code promulgated by Law 22-13 of 12 July 2022.

The said amendments relate  to :

• The institution of the Administrative Court of Appeal ruling against orders and judgements given in first instance by the Administrative Court.
• The determination of the competence of the Council of State as a court of cassation ruling against the final orders of the Administrative Court of Appeal.

Company vehicle tax

Article 48 of the FL 2023 amending the provisions of Article 26 of Ordinance No. 10-01 on the Supplementary Finance Law for 2010, exempts companies from paying the said tax on nine-seater vehicles.

Electronic cigarettes and hookah devices.

FL 2023 (Article 29) introduced new measures relating to the taxation of tobacco products by including the electronic cigarette and hookah in the list of tobacco products to be subject to the same regime and conditions of taxation as those of conventional tobacco products.

Thus, it is foreseen that:

• The manufacturing of these products is subject to the approval referred to in Article 298 of the Indirect Tax Code;
• The liquid products for charging or recharging electronic cigarettes or other similar devices are subject to the Internal Consumption Tax (ICT). The ICT will be applied at a proportional rate of 40%, on the prices before tax charged locally, or on the customs value of imported products.