In our flash info of May 20, 2020, we briefly reviewed certain tax provisions contained in the draft of the Complementary Finance Act for 2020.
Unsurprisingly, the final text of the law1 approved the tax measures recommended by the public authorities.
In the register of measures impacting foreign companies, we will retain the changes that have occurred in the area of withholding tax due by foreign service providers which do not have a permanent professional establishment in Algeria2.
Thus, the "historic" rate of 24% increases to 30%3 while the option period for the common law regime for these providers is extended to 30 days4 from the signing of the contract.
According to the explanatory memorandum to this provision, "the purpose of these adjustments is to encourage foreign companies operating in Algeria under contracts for the provision of services to opt for the taxation regime under common law (IBS, TAP and VAT), like the companies under Algerian law”.
Following these developments, it would be advisable to carry out a case-by-case analysis of the contracts in question, in order to assess their tax impact and the advantages that the option could offer for the common law regime5, in particular as regards the deductibility of charges.
1. Law n° 20-07 dated 4 June 2020, Official Journal n° 33 dated 4 June 2020.
2. Withholding is not in principle applicable in the presence of a Tax Treaty of non-double taxation. However, it seems useful to obtain confirmation from the Tax Authorities.
3. Withholding tax is applied to the gross amount of remuneration. It discharges all taxes due in Algeria.
4. This deadline was 15 days.
5. The common law system requires the keeping of accounts. To date, the provision of services is subject to corporate income tax at the rate of 26%, the tax on professional activity at the rate of 2% and VAT at the rate of 19%.