Egypt's Orascom Appeals Against Algerian Tax Bill

by Lorys Charalambous, Tax-News.com, Cyprus

04 January 2010

Egyptian telecoms firm, Orascom Telecom, has announced that its Algerian subsidiary, Orascom Telecom Algérie (OTA), has filed an appeal against the notice for taxes and penalties it received from the Algerian tax authorities in November 2009.

The notice, amounting to DZD43.9bn (USD623m), was levied in respect of the 2005, 2006 and 2007 tax years, during which, it is alleged, OTA failed to keep proper accounts.

Although OTA has said that its accounts were fully audited during those years, the Algerian tax department has increased OTA’s income and non-deductible expenses, resulting in a 45% increase in taxable profits over the period.

OTA has argued that, during the period in question, it had the benefit of tax exemptions and protections granted under an investment agreement dated August 2001 and signed by the Algeria authorities.

Pending the hearing of the appeal, OTA is not required to pay the full amount of the tax notice. In order to file its appeal, however, OTA has had to pay 20% of the reassessment, some DZD8.78bn, which it reluctantly forwarded on December 24, 2009. The amount paid will be recoverable if OTA's appeal is successful.

As a further effect of the Algerian tax claim, the amounts able to be distributed as dividends in 2010 from OTA’s 2009 net profits may be reduced, which would reduce Orascom Telecom’s liquidity position. Partly to counteract that, the group has announced that it is organizing a USD800m rights issue in Egypt.

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