Orascom Loses Algerian Tax Appeal

by Lorys Charalambous, Tax-News.com, Cyprus

12 March 2010

Egyptian telecom company, Orascom Telecom, has announced that its Algerian subsidiary, Orascom Telecom Algérie (OTA), has received a rejection to its appeal, made in December last year, against the notice for taxes and penalties it had received from the Algerian tax authorities the month previously.

The notice, amounting to DZD43.9bn (USD615m), was levied in respect of the 2005, 2006 and 2007 tax years. Although OTA has said that its accounts were fully audited during those years, the Algerian tax department increased OTA’s income and non-deductible expenses, resulting in a 45% increase in taxable profits. OTA also argued that, during the period in question, it had the benefit of tax exemptions and protections granted under an investment agreement.

Pending the hearing of the appeal, OTA was not required to pay the full amount of the tax notice. In order to file its appeal, however, OTA had to pay 20% of the reassessment, which is recoverable if OTA's appeal is ultimately successful.

If OTA now wishes to continue through the appeal process, either before the Central Commission or the State Counsel, it will be required to pay another 20% of the remaining balance of the alleged taxes and penalties from its own resources. The amount paid will again be recoverable if OTA is successful in its appeal.

In a statement, it was confirmed that OTA does indeed intend to pursue the Algerian appeal system, and will soon pay over the required amount. On the other hand, its parent company, Orascom Telecom, has said that it is exploring all its options.

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