Algeria

New tax measures introduced by Finance Law (FL) 2024

Abolishment of the Tax on Professional Activity (TPA)

In order to reduce the tax burden for economic operators, the TPA has been definitively removed from the Algerian tax system.

Introduction of Local Solidarity Tax (LST)

The LST is a new tax that replaces the TPA. The new tax is deemed on monthly turnover for specific activities, notably: 

• pipeline transport of hydrocarbons (set at the rate of 3%), and
• mining activities (set at the rate of 1.5%).

The taxation rules are similar to those of the TPA.

Tax measures to improve purchasing power

Value-added tax (VAT) exemptions apply until 31 December 2024 to the following operations:

• The import and sale of certain widely consumed products intended for human consumption, including peas, chickpeas, beans, lentil, broad beans, rice, and others. The detailed list of products covered by this temporary exemption is set forth in article 65 of FL2024.
• Sales of locally produced fruit, fresh vegetables, eggs, broiler chicken, and turkey.

Extension of VAT exemption period for new technologies

The VAT exemption has been extended until 31 December 2026 for Internet-related services and fees, notably: 

• Fees and royalties relating to fixed Internet access services, as well as expenses relating to the leasing of bandwidth intended exclusively for the provision of fixed Internet service.
• Fees associated with hosting web servers in data centres located in Algeria and in .DZ (dot dz).
• Website design and development fees.
• Fees related to maintenance and support relating to website access and hosting activities in Algeria.

This measure aims at reducing communication costs and promoting information and communication technology development.

Taxation of recoverable waste at reduced VAT rate

Waste recovery for recycling is encouraged by extending the application of the reduced rate of VAT, set at 9% on the sale of the recoverable waste to the following materials: wastepaper, rubber, end-of-life tires, used motor, gearbox and lubrication oils, edible oils and fats, and lead-acid batteries, when the latter are intended for recovery.

Taxpayers reporting obligations

Introduction of a penalty for failure to file the annual return of salaries and other paid emoluments (Gn°29)

Failure to file or late submission of the annual statement of salaries and other emoluments paid (Gn°29) now entails the application of a penalty set at the rate of 5% of the annual wage. 

It should be noted that extending of the deadline for filing the annual corporate income tax (CIT) return (Gn°4) does not automatically extend the deadline for filing the Gn°29 return. In this respect, therefore, the deadline is set on 30 April of each year, with no possibility to postpone under the current tax regulation.

Clarification on the reporting and payment obligations relating to the withholding tax (WHT) on profits distributed to legal entities

Article 11 of FL2024 introduces article 154 into the Direct Tax Code (DTC), specifying that debtors distributing income from transferable securities must pay the 5% WHT at the time of payment, following reporting obligations and penalties outlined in articles 121 and 122.

Tax audits

Amendment of the rules governing tax audits

Articles 44 and 45 of FL2024 bring forth enhanced provisions, ensuring increased guarantees for taxpayers undergoing accounting audits, selective audits, or in-depth audits of the overall tax situation (VASFE), as follow:

• Extended preparation time:
  • Accounting audits and selective audits: Minimum preparation time increased from 10 to 20 days.
  • VASFE: Minimum preparation time extended from 15 to 30 days.
• Access to taxpayer's charter:
  • The audited taxpayer for each type of audit now has the ability to consult their charter on the Directorate General of Taxes (DGI) website.

• VASFE audit notice requirements:

• Full disclosure on the audit notice, including names and ranks of auditors, the audit period, and relevant taxes.
• Mandatory written notification to the audited taxpayer regarding any changes in auditors during the VASFE audit.

Possibility of seeking expert assistance for tax audits

In the ongoing drive against fraud, tax evasion, and intricate tax planning, tax authorities now harness the expertise of external specialists during tax audit missions, to navigate nuanced challenges in sectors such as hydrocarbon, mining, pharmaceuticals, and financial services.

This progressive step comes with a pivotal requirement: designated experts must uphold professional secrecy, mirroring the confidentiality obligations incumbent upon the tax administration's internal agents, as stipulated in article 65 of the Tax Procedures Code (TPC).

Collection

Payment schedule: Reduction in the initial instalment

In order to reduce the impact on the cash flow of taxpayers wishing to sign up to a payment schedule, FL2024 provides for a reduction in the minimum initial payment of the tax liability from 10% to 5% when the commitment is signed with the head of the tax collection department.

Registration duties

Reorganisation of transfer duties applicable to certain lease contracts

Article 28 of FL2024 supplements the provisions of article 222 of the Registration Code (RC), making the following deeds subject to a fixed duty of 4,000 Algerian dinars (DZD):

• Rental of premises for professional or commercial use under an ’Ijara Mountahia Bitamlik‘ or leasing contract.
• Rental of equipment.

In addition, the previous wording of article 222 of the RC had provided for the payment of a 2% duty on lease contracts.

The purpose of fixing this fee at DZD 4,000 is to encourage operators to use this type of financing.

Financial markets

Exemption for income and capital gains from the financial and bond markets

As part of the development of financial and bond market activities, Article 67 of FL2024 extends the exemptions provided for by Article 44 of FL 2019, in terms of personal income tax (PIT), CIT and registration duties, for a period of five years, until 31 December 2029.

PIT and CIT exemptions apply to the following operations:

• Income from shares and similar securities listed on a stock exchange or bonds and similar securities with a maturity of five years or more listed on a stock exchange or traded on an organised market, as well as income from shares or units in undertakings for collective investment in transferable securities.
• Income and capital gains from the sale of bonds, similar securities, and similar treasury bonds listed on a stock exchange or traded on an organised market with a minimum maturity of five years issued within a period of five years.
• Bank term deposits for a period of five years or more.

Furthermore, transactions involving securities listed on a stock exchange or traded on an organised market are exempt from registration duties.

Reduction in CIT rate when share capital is listed on the stock market

To encourage companies listing their capital on the stock exchange, Article 68 of FL2024 provides for the renewal for a period of three years, from 1 January 2024, of the reduction in CIT proportionally to the rate of opening of share capital on the stock exchange.

Islamic finance

Exclusion of certain incomes from CITable base

To encourage the growth of Takaful insurance operations, FL2024 introduced adjustments to the tax legislation, notably by amending article 147 Ter of the DTC, aimed at establishing tax neutrality and equitable tax treatment similar to that applied to conventional insurance operations. 

More specifically, the proposal is to exclude from the CITable base income from the mandatory investment of pooled funds in Sharia-compliant financial instruments under Takaful insurance when dedicated to charitable acts under the supervision of the National Sharia Authority for the Islamic Finance Industry.

Exemption for Retakaful transactions

Article 34 of FL2024 extends the VAT exemption for reinsurance operations to those relating to Retakaful contracts.

Tobacco industry

Complementary Tax on tobacco company’s profits revised upwards

Article 10 of FL2024 amended article 150 bis of the DTC, relating to the Complementary Tax applied to profits made by tobacco manufacturers. 

The changes include an increase in the tax rate applied through the introduction of the concept of integration rate and the definition of integration.  

Indeed, integration is defined as the industrial process of manufacturing a final product by incorporating locally produced raw materials and components.

For this purpose, depending on the integration rate of each company, the Complementary Tax is set at:  

• 16% when the integration rate is equal to or more than 40%.
• 20% when the integration rate is less than 40%.

However, for newly licensed tobacco manufacturers, the tax rate to be applied is set at 16% for a period of three years from the date of starting the business, irrespective of their integration rate. 

It is also specified that the methods for calculating the integration rate will be set by a decree from the Ministry of Finance.  

Increase in the Additional Tax on Tobacco Products (ATTP)

Article 72 of FL2024 provides for an increase in the rate applied to tobacco products from DZD 37 to DZD 50, which represents a 35% increase in the ATTP per pack or box. This measure is justified by the low tax pressure applied to tobacco products in Algeria compared with other countries.  

Solidarity contribution 

To encourage tobacco manufacturers to source their products from the domestic market, and thus limit their reliance on imports, article 86 of FL2024 provides for an increase in the rate of the solidarity contribution from 2% to 5%, applicable to raw materials and inputs used in the manufacture of tobacco products.

Transport of tobacco leaves

The amendment to Article 271 of the Indirect Taxes Code (ITC) provided for in Article 42 of FL 2024 entails that companies processing tobacco leaves will now have to obtain an acquired security deposit for the transportation of these products, except for direct movements from the plantation to the dryer and then to the warehouse.

This measure aims to strengthen the traceability of tobacco leaves, giving tax authorities a better overview of these movements for more effective tax control.

Measures related to state’s private domain

Introduction of a rental royalty for land concessions intended for commercial housing promotion projects

As a reminder, AFL for 2023 had introduced a rental royalty payable over a 33-year period for real estate concessions granted as part of investment projects.

Article 82 of FL2024 also provides for the introduction of a similar scheme applicable to commercial housing promotion projects. The latter involves the payment of an annual rental fee, set by the relevant local real estate authority, corresponding to 1/20 of the market value of the conceded land.

It should be emphasised that the concession in question can be converted into a transfer under the conditions specified in this article as soon as the project has been completed and the certificate of conformity obtained in accordance with the regulations in force, and with the agreement of the granting body.

In addition, the concession guarantees that the promoter will obtain a building permit. It also enables the promoter to take out a hypothec with credit institutions on the real estate rights resulting from the concession.

In addition, article 83 of FL2024 provides that performing concession deeds for land intended for the construction of these projects gives rise to the payment of a state remuneration according to the following rates:

• 1% calculated on the cumulative amount of annual rental royalties corresponding to the time allotted to the property promoter to complete the project when this amount is less than or equal to DZD 500,000.
• 75% when the amount of these royalties exceeds DZD 500,000.

Lastly, article 78 of FL2024 also stipulates that performing concession deeds is subject to registration duties and land registration tax at the following rates:

• 2% registration fee calculated on the cumulative amount of annual royalty fees corresponding to the time allotted to the property promoter to complete the project.
• 5% for land registration tax calculated on the same basis as above.

Introduction of electronic payment at the state private domain and land registry offices

As part of the strategy to modernise the administration of the national domain, FL2024 (Article 85) introduced the possibility of paying state, land, and cadastral fees and taxes electronically.

Benefit from the payment schedule for state royalties

It should be recalled that the provisions of Article 87 of FL2018 had provided for the possibility for domain collectors to grant a payment schedule for the collection of various domanial debts or any other due amounts for the settlement of the price of transfer of land or real estate.

This schedule is granted for a maximum period of 36 months, after the initial minimum payment of 10% of the amount of the state-owned claim.

The new wording introduced by Article 86 of FL2024 provides that the initial payment requirement of 10% of the amount of the claim does not apply in case of royalties payable in respect of the use of agricultural land.

Customs measures

Completing customs formalities electronically

As part of the government's ongoing modernisation and development of public administration, article 80 of FL2024 amending and supplementing article 91 Ter of the Customs Code provides that customs declarations will henceforth be made electronically, except in special circumstances.

The same article states that customs procedures will be carried out based on digital documents, that the declarant is required to keep the original documents making up the file for the period stipulated by law (i.e. 15 years), and that these must be presented at the request of any customs department.

Finally, it is important to note that electronic declarations have the same legal effects as manual declarations. 

Declaration of the amounts of money held on entering or leaving the country.

Article 81 of FL2024 amends the provisions of article 198 bis of the Customs Code, to require travellers entering or leaving the country to declare in writing to the customs authorities sums denominated in national or foreign currencies when they exceed the threshold set by laws and regulations. The model for this declaration will be published by order of the Minister of Finance.

It should be noted that prior to FL2024, the obligation to declare was limited solely to the holding of an amount denominated in foreign currency exceeding the regulated threshold. The finance law therefore extends the scope of this obligation to include amounts denominated in domestic currency.

Authorisation for customs clearance of engines for the propulsion of boats less than five years old

With the aim of relaunching fishing and aquaculture activities through the rehabilitation of the national fleet, article 92 of FL2024 authorises customs clearance for the release for consumption, in used condition, of engines used to propel boats less than five years old, under certain tariff subheadings, for the benefit of owners and/or operators of fishing and aquaculture vessels.

Lower customs duties on inputs used in the manufacture of spectacle frames

Article 93 of FL2024 also provides for a reduction in customs duties on inputs used to manufacture spectacle frames. This provision applies to:

• Cellulose acetate sheets for the design of spectacle frames, classified under tariff subheading 3920.73.30.00, for which the customs duty is reduced from 15% to 5%.
• Parts and accessories for spectacles, under tariff heading 9003.90, for which the customs duty is reduced from 30% to 15%.

This measure is designed to encourage the development of the spectacle frame manufacturing industry.

Import of inputs for aquaculture farming activities

As a reminder, FL2022 provided for imports of inputs required for livestock farming to be subject to the reduced 5% customs duty rate and the reduced 9% VAT rate. 

In this same context, article 90 of the current FL2024 provides that the benefit of this provision will henceforth be conditional on the presentation, at customs clearance, of a certificate issued by the services of the Ministry responsible for fisheries.

Imports of crude soya oil

Article 91 of FL2024 extends the deadline for importing crude soya oil free of customs duties and VAT to 31 December 2024. As a reminder, this deadline was set by Article 18 of the Amending Finance law for 2023 (which supplemented and amended Article 148 of FL2022 on 31 December 2023 (i.e. a further year extension).

The new wording of Article 148 of FL2022 requires crude oil importers/processors to begin the production process for this raw material by 31 December 2024, at the latest, or to acquire it on the domestic market. Should they fail to begin the production process, the operators in question will lose the benefit of the compensation and customs and tax exemptions provided for in Article 148.