Financial Year – 1 January – 31 December
Currency – Algerian Dinar (DZD)
Corporate Tax Summary
Residence – The tax system in Algeria is based around six tax codes relating to direct taxes, indirect taxes, turnover taxes and the registration, stamp duty and tax procedures. The system has changed substantially since the 1990s to adapt to the evolution of the economy and structural changes aimed at steering the country towards a free-market economy and at opening up to both private and foreign investment.
One core principle of the Algerian tax system, which is common to a lot of countries, is that any income derived from Algeria must be taxed in Algeria. This applies to individuals and corporations. For example, an employee working in Algeria, even if not a tax resident, will be subject to income tax on his/her salary and foreign companies providing services to Algerian clients are subject to a withholding tax in Algeria on the income derived from their activities.
Some of the key features of the Algerian tax system that an investor should be aware of are:
- Except for specific taxes, such as land tax, it is a declarative system
- Significant attention should be paid to formal obligations (legal books to complete, information to be provided in support of tax returns, etc)
- The importance of taxes withheld at source: income tax on salaries, taxes on dividends, interests or services provided by foreign service providers – this puts an obligation on the person paying as well as on the person receiving the income
- The setting up of a directorate for large enterprises dedicated to the oil and gas sector, foreign companies operating in Algeria, and the most important Algerian companies
Algeria’s tax system consists of 16 major parts, these are direct and indirect taxes:
- Global income tax (IGR)
- Property tax
- Corporate profits tax (IBS)
- Value added tax
- Wealth tax
- The single flat-rate tax (IFU)
- Tax on professional activity (TAP)
- The registration fees
- Stamp duty
- Customs duties
- Tax on petroleum products
- Circulation duty
- Domestic consumption tax
- Sanitation tax
- The right of guarantee
- Tax on slaughter
More information on these taxes can be found here: http://www.mf.gov.dz/.
Basis of Taxation – The taxable profit is the net profit, equal to the difference between the income received by the company and the expenses borne by it.
Net profit is determined on the basis of the results of all operations carried out by the company, including the disposal of any assets, either in progress or at the end of operation. The transactions carried out may relate to the very purpose of the company or have no direct link with its activities. They may be carried out on a principal or ancillary basis.
It is also defined as the difference between the net asset values at the close and the opening of the period, the results of which must be used as a basis for taxation, less any additional contributions and plus any deductions made during this period by the operator or their partners. It follows that the profit is not only the result of profits and losses – in income or capital – generated by operations carried out by the company, but also of the comparison of the active and passive values inventoried in accordance with the Commercial Code.
Where several activities are carried out at the same time, legal persons subject corporate income tax (Impôt sur le Bénéfice des Sociétés, or IBS) must keep separate accounts for these activities, making it possible to determine the share of profits for each activity to which the appropriate IBS rate can be applied.
Failure to keep separate accounts will systematically lead to the application of the 26% rate.
Corporate Income Tax (IBS) Rates
|For manufacturing activities||19%|
|For building activities, public works and hydraulics, as well as tourist and thermal activities, excluding travel agencies||23%|
|For other activities||26%|
|Minimum corporate tax||DZD 10,000|
|Branch remittance tax (applicable to profits transferred to a non-resident by the branch or permanent establishment of a foreign company)||15% calculated on net profits (after IBS)|
Tax Rate for Foreign Companies
IBS is levied on all Algerian-sourced profits, including the income of representative agents of foreign companies and the income of companies that do not have an establishment or representative agent but carry out a complete cycle of commercial activities in the country.
Capital Gains Taxation
Capital gains are generally taxed as ordinary income at the corporate income tax rate (IBS). In some cases, 35% relief is granted if the assets have been held for up to three years, or 65% if the assets have been held for longer periods.
An exemption can be granted on capital gains deriving from the disposal of assets, provided that the company commits to re-invest them within a three-year period.
|Corporate Income Tax Rate (%)||See above|
|Branch Tax Rate (%)||30%||Income earned by foreign companies that do not have a permanent professional establishment in Algeria and that temporarily carry out an activity within the framework of contracts are subject to corporate income tax at the rate of 30% (Article 150 of the Algerian Tax Code). The withholding tax is levied on the gross amount of turnover received. This withholding covers the tax on the professional activity and the value added tax.|
In the case of contracts relating to the use of computer software, a deduction of 30% is applied to the amount of royalties (Article 156 of the Algerian Tax Code).
|Withholding Tax Rate:|
|Dividends – Franked||15%||Article 104 of the Algerian Tax Code|
|Dividends – Unfranked||15%||Articles 104 and 46-48 of the Algerian Tax Code|
|Dividends – Conduit Foreign Income||15%||Articles 104 and 46-48 of the Algerian Tax Code|
|Interest||10% and 40%||The withholding tax rates for corporate income tax are set as follows:|
10% – For income from receivables, deposits and guarantees. The related withholding tax constitutes a tax credit which is deducted from the final tax.
40% – For income from anonymous or bearer securities. This withholding is in full discharge.
Article 150 of the Algerian Tax Code
|Royalties from Intellectual Property||20%||20% for sums received by companies within the framework of a management contract, which are taxed by means of withholding tax. The withholding tax is in full discharge of the company’s obligations.|
Article 150 of the Algerian Tax Code
|Fund Payments from Managed Investment Trusts||0% and 26%||Venture capital companies are exempted from corporate income tax for a period of five years from the beginning of their activity.|
Article 138 of the Algerian Tax Code
|Branch Remittance Tax||15%|
|Net Operating Losses (Years)|
|Carry Back||4 Years|
|Carry Forward||4 Years|
Individual Tax Summary
Residence – According to the Algerian legislation, the following individuals are considered as having a tax domicile in Algeria:
- People having a dwelling as an owner, a usufructuary, or who rent a house for a duration of at least one year (even in the case that the rental is made by the employer).
- People performing a professional activity in Algeria, whether salaried or not.
- People who have their principal place of stay or the centre of their principal interests in Algeria (e.g. if a person spends more than 183 days in Algeria over a period of one year).
Basis of Taxation – Residents are taxed on global income, while non-residents are only taxed on income received in Algeria. Algerian source income includes profits from Algerian securities, capital assets and farms.
Global Income Tax (IRG)
Global income tax applies to individuals, members of civil partnerships, members of partnerships, members of jointly and severally liable holding companies and members of civil partnerships subject to the same regime as general partnerships. The taxable income is:
- Professional benefits
- Rental income
- Agricultural income
- Wages and salaries
- Income from movable capital
- Capital gains from the sale for pecuniary interest of buildings, whether built or not
The overall income tax base is determined by totalling the net categorical income or profits. Excluded are those subject to taxation at the withholding tax rate and the following expenses:
- Interest on loans and professional debts and those contracted for the construction or acquisition of housing
- The insurance policy taken out by a landlord-lessor
- Old age and social insurance contributions which are taken out in a private capacity
There are three methods of payment for IRG: the instalment system (30% of the profit made in the last financial year), the withholding tax system, and provisional taxation.
Under the instalment system, when the amount due exceeds DZD 1,500, the taxpayer must pay two instalments: from 20 February to 20 March and from 20 May to 20 June.
Withholding tax applies to salaries and wages paid by employers, non-commercial profits (income paid from abroad to beneficiaries or companies established for tax purposes outside Algeria), and income from assets. It must be paid to the fund of the recipient of the various contributions within the first 20 days of the month following the receipt of the income and the payment must be accompanied by the declaration form provided by the tax authorities.
Provisional tax must be paid by 30 April each year at the latest. It is calculated at a proportional rate of 10%, giving entitlement to the tax credit. To pay the provisional tax for the IRG, the taxpayer must apply to the tax collector’s office of the Tax Department.
Allowances and exemptions may be permanent or temporary. Spouses who opt for joint taxation have a 10% allowance on their total income. Persons who voluntarily take out insurance (individual or group) for a minimum of eight years are entitled to an allowance equivalent to 2% of the amount of the net premium paid, up to a maximum of DZD 20,000.
The following persons can benefit from a permanent exemption in the category “professional benefits”:
- Theatre companies which carry out a theatrical activity on the basis of the revenue they earn
- Persons with a total annual income that is less than or equal to the tax threshold of the scale
- Income from activities relating to raw milk for consumption as it is
- Companies belonging to approved associations of disabled people and the structures that depend on them
- Sums which are collected in the form of fees, royalty fees, royalties for literary, scientific, cinematographic or artistic works, by artists, authors, composers and inventors
Artisans can benefit from a two-year exemption when they are involved in traditional crafts, or perform an arts and crafts activity. Activities that are created by young investment promoters within the framework of ANSEJ, CNAC and ANGEM are entitled to a three-year exemption from the date of starting their activity. If the activity is in an area to be promoted, the period is extended to six years.
Salaries and wages paid by employers are subject to the monthly IRG scale.
Income from the rental of real estate for civilian residential use is subject to income tax according to the following scale:
- Income from the rental of dwellings for collective use – 7% in full discharge of tax, the total is calculated on the gross rent amount
- Income from the rental of dwellings for individual use – 10% tax-free, the total is calculated on the gross rent amount
- Income from the rental of premises for commercial or professional use – 15% in full discharge of tax, the total is calculated on the gross rent amount
Capital gains on the sale of properties for valuable consideration are 5% in full discharge of tax, whether they are built or not.
The One-Off Flat Rate Tax (IFU)
The IFU applies to legal or natural persons, companies, and cooperatives engaged in commercial, industrial, craft or non-commercial activities whose annual turnover does not exceed fifteen million dinars, as well as investment promoters who carry out activities or have projects eligible for assistance from the National Youth Employment Support Fund, the National Microcredit Support Fund or the National Unemployment Insurance Fund.
Persons subject to the single flat-rate tax scheme must complete and send (between 1 and 30 June each year) a provisional turnover statement to the tax inspector in the place where the activity is located. The tax rates are:
- Sales and production of goods – 5%
- Other activities – 12%
Filing Status – Spouses who opt for joint taxation have a 10% allowance on their total income. Persons who voluntarily take out insurance (individual or group) for a minimum of eight years are entitled to an allowance equivalent to 2% of the amount of the net premium paid, up to a maximum of DZD 20,000.
Personal Income Tax Rates
|Taxable Income||Tax Payable – Residents||Tax Payable – Non Residents|
|DZD 0 – DZD 120,000||0 %||0 %|
|DZD 120,001 – DZD 360,000||20|
|DZD 360,001 – DZD 1,440,000||30|
|More than DZD 1,440,000||35%||35%|
Goods and Services Tax (GST)
|Rate||19% and 9%|
|Taxable Transactions||Value added tax (VAT) (Taxe sur la valeur ajoutée – TVA)|
Standard Rate 19%
A special reduced rate of 9% applies to sales operations carried out on the internet, the supply of natural gas for a consumption of less than 2,500 thermal units per quarter, specific kits dedicated to the automobile industry, and the supply of electrical energy for low-voltage electricity consumption of less than 250 KWH per quarter.
The acquisition of products, goods and services already benefiting from a VAT exemption or VAT franchise regime is zero-rated.
|Filing and Payment|
Other Taxes Payable
|Payroll Tax||PIT is withheld on salary and assimilated income (minus employee social security contributions) according to a progressive scale (with a maximum rate of 35%). Additionally, training tax and apprenticeship tax are each levied at the rate of 1% of the payroll cost.|
|Stamp Duty||A transfer tax is applicable to land, buildings, and ongoing businesses at a rate of 5% for registration fees, plus 1% tax applicable for the publication formalities of the transfer of ownership of land and buildings. Additionally, registration duties are due on the transfer of shares or movable assets and on the merger, demerger, increase, or decrease of the share capital of existing companies.|
Stamp duty is levied at varying rates on transactions including the execution of various documents and deeds.
|Land Tax||Property tax is an annual tax on all constructed property, regardless of its legal status, located on the national territory. In particular this applies to:|
A permanent exemption applies to:
A temporary exemption applies to:
The above exemptions do not exempt the owners and the dwellings mentioned therein from the payment of a fixed property tax of the order of DZD 500 annually.
Last updated: 14.09.2020