Algeria Adopts 2009 Complementary Finance Law

by Lorys Charalambous, Tax-News.com, Cyprus

10 September 2009

Algeria’s 2009 Complementary Finance Law (la Loi de finances complémentaire 2009) has been unanimously adopted by the country’s Popular National Assembly, or APN, and includes tax measures specifically designed to reduce the tax burden borne by businesses in favour of job creation, financial measures intended to support small and medium-size enterprises (SMEs), and tax incentives aimed at promoting national production.

In a speech supporting the adoption of the additional finance law, President of the APN, Abdelaziz Ziari explained that the tax incentives contained in the new law were drawn up in order to boost employment, to promote investment in SMEs in general, and in agriculture and tourism in particular, and to protect Algeria’s interests, while also encouraging foreign investment.

Key tax measures contained in the 2009 Complementary Finance Law include the following:

Tax Relief For Businesses

• In a bid to reduce the tax burden for companies to boost employment, the period of exemption from global income tax (IRG) and professional activity tax (TAP) will be extended for two further years, for young developers who pledge to recruit five permanent staff.
• The exemption period from payment of corporate income tax (IBS) will also be extended from three to five years, for any investor creating one hundred permanent jobs from the initial launch of their project.
• For each job seeker recruited, employers will be granted a reduction in their social security contributions.

Financial Support For SMEs

• Investment funds will be created in order to contribute to the social capital of SMEs created by young entrepreneurs.
• The State pledges to guarantee investment credit accorded to SMEs by banks and other financial institutions.
• The amount of credit guaranteed by the credit guarantee investment bank will be increased from DZD50m to DZD250m.

Measures Promoting National Production

• Investors will only benefit from investment incentives, provided that they favour national production. Exemption from VAT will only apply to goods produced locally.
• The National Investment Council (CNI) may grant exemptions or reductions in taxes and levies for goods produced locally, for up to five years, provided that these goods fall within the framework of emerging industrial activities.
• A 3% tax will be levied on payments by banker’s draft for the importation of goods and services.
• Algeria’s new 30% participation rule guarantees a minimum Algerian participation in foreign companies, seeking to carry out foreign trade activities, of 30%.

Measures To Promote Agriculture

• Income derived from leasing certain agricultural material and equipment produced locally, used for specific operations and processes such as irrigation and the production of olive oil will be exempt from VAT until December 31, 2018.
• Combine harvesters produced locally will also be exempt from VAT.
• A reduced VAT rate of 7% (lowered from 17%) will apply to certain agricultural products and derivatives, including plastic film and pesticides.

Measures To Boost Tourism

• Until December 31, 2014, a reduced customs rate will be levied on equipment and furnishings that are imported in order to modernise and upgrade the sector in line with the government’s ‘Quality Tourism In Algeria’ plan.
• Any sum realised in foreign currency within the tourism sector will be exempt from TAP, and any services linked to tourism will benefit from a reduced VAT rate of 7% for up to ten years.

Incentive Measures To Boost Research And Development

• No levies or taxes will be imposed on equipment bought locally or imported for research and development activities.
• Any expenses incurred while undertaking research and development activities within a company, may be deducted from taxable income or profit – up to 10% of turnover, capped at DZD100m, provided that the deducted sum is then reinvested in research.

Miscellaneous Tax Initiatives

• Income derived from renting residential properties will be exempt from global income tax, in a bid to encourage property rental.
• Two new taxes will be imposed on mobile phone operators. Firstly, a 5% tax will be levied on monthly prepaid top-up sums. Secondly, a 0.5% turnover tax on operators will be imposed.
• Capital gains from the sale of bonds will be exempt from global income tax or corporate tax.
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