TaxNewsFlash-Africa

March 20, 2009
No. 2009-01

Algeria: Overview of Tax Provisions in the 2009 Finance Act

The tax provisions included in Algeria’s 2009 Finance Act of 30 December 2008 (loi n°08-21 du 30 décembre 2008, portant loi de finances pour 2009), enacted on its publication in the Algerian gazette of 31 December 2008, include the following items.

Branch Tax

Article 46 of the Algerian direct tax code (Code des impôts directs) as amended by the 2009 Finance Act, introduces a branch tax in Algeria. With this change, profits of a foreign company’s Algerian branch/permanent establishment (PE) that are transferred outside of Algeria will be treated as distributed income and, as such, subject to a 15% withholding tax.

KPMG Observation

Tax professionals with Fidal* note that certain income tax treaties within the Algerian income tax treaty network contain provisions that could “neutralize” the effect of this branch tax.

Taxation of Capital Gains Realized by Foreign Companies on Disposals of Shares

Article 47 of the 2009 Finance Act institutes a taxation of capital gains realized by foreign companies on the sales of shares. Henceforth, such capital gains are subject to a final (libératoire) corporate income taxation at a rate of 20%.

KPMG Observation

Again, certain tax treaties in the Algerian income tax treaty network provide that such capital gains are to be taxed only in the country of residence of the beneficiary of the capital gain.

Requirement to Declare Transfers of Funds Abroad

The 2009 Finance Act introduces a new requirement into Algerian tax law, requiring all transfers of funds to foreign companies, for any purpose whatsoever, to be declared first to the appropriate Algerian tax authorities.

A formal statement setting out the tax treatment of the transferred funds must be submitted within no more than seven days from the date on which the declaration is filed. In addition, banking institutions—before making a transfer—must require that the formal statement be presented in support of the transfer request.

Increased Penalties Against Investors Who Benefit From Tax and Customs Advantages Granted by the Agence Nationale de Développement de l’Investissement—ANDI (Algerian National Investment Development Agency)

Increased penalties against investors who benefit from tax and customs advantages granted by the Agence Nationale de Développement de l’Investissement—ANDI (Algerian national investment development agency): Under the supplementary 2008 Finance Act, profits corresponding to exemptions granted by the ANDI, pursuant to the Algerian Investment Code, must be reinvested within four years from the close of the financial year for which the income was subject to the favorable treatment. Failure to comply with this measure requires investors to replay (restore) the amount of the tax advantage, and also be subject to a 30% penalty.

The 2009 Finance Act adds to this regime another sanction that is to be imposed in the event an investor fails to comply with these requirements—that is, withdrawal of the approval which granted the tax advantages. As a result of a withdrawal sanction, all duties, taxes, and royalty fees become immediately due and payable to the Algerian tax authority.

For more information, contact a tax professional with Fidal Direction Internationale* in Paris:

Yves Robert, Tax Partner : +33.1.55.68.15.76, yrobert@fidalinternational.com

Mohamed Mahjoubi, Tax Manager: +33.1.55.68.16.53, mmahjoubi@fidalinternational.com

*Fidal is a French law firm that is independent from KPMG and its member firms.

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