The purpose of this flash info is to comment the principal tax and customs provisions of the LFC (Algeria's Additional Finance Act) for 2015 (published in Official Journal no. 40 of July 23rd 2015).
I . Tax provisions
1. Direct Tax
- Single flat-rate tax (IFU): option for the common income scheme
Article 34 of the LFC for 2015 states that new taxpayers who are in theory subject to the single flat-rate tax may, as soon as they begin operating, avoid flat-rate taxation and opt for taxation according to the common income scheme, notwithstanding the amount of the generated turnover.
- Corporate tax for companies (IBS): from a single rate to three different rates
According to Article 2 of the LFC for 2015, the IBS1 rates are established as follows:
- 19% for goods production2 activities;
- 12% for construction, public and hydraulic works3 activities, as well as the touristic and thermal businesses, with the exception of travel agencies;
- 26% for other activities (sales and services).
The aim of this change in rates, according to the explanatory statement for the above-mentioned article, is to implement tax incentives for production of goods activities by taxing them at a rate of (19%) different from that applied to the sales and services sectors (26%).
Entities with several different activities in parallel, and subject to the IBS, must keep separate accounting procedures in order to determine the applicable rate for each activity.
- Changes to the Tax on the business activities (TAP):
Article 3 of the LFC for 2015 introduced the rates below:
- 1% without reductions4 for goods production activities;
- 2% for the construction and public works activity with a 25% reduction;
- 2% for all other activities (sales and services), without reduction;
- 3% for transport by hydrocarbon pipeline activities, without reduction.
It is interesting to note that according to the explanatory statement for this provision, application of the 1% rate concerns only products arriving on the market for the first time. In other words, a product that is already in the sales circuit will be subject to the 2% rate, unless it is intended for the construction and public works sector – in which case, a 25% reduction applies.
2. Turnover Tax
Article 31 of the LFC for 2015 introduces an exemption of VAT on the portion corresponding to repayment of medium- and long-term property loans, including property leasing.
Thus the VAT rate applicable to property leasing has been aligned with that of medium- and long-term loans that are already subject to exemption.
- Increase in the registration fee applicable to liaison offices
Registration fees applicable when a liaison office is opened or its approval is renewed are now set at 1,500,000 DA instead of 100,000 DA prior to the LFC for 2015.
- Non-application of the escrow procedure in the absence of financial flow in cash
Amended by the LFC 2015, Article 256 of the Registration Code states that there is no obligation to pay one-fifth (1/5) to the notary, since notarised deeds do not generate a financial flow in cash (such as deeds amending company by-laws: addition or removal of an activity, change of registered office or of management, etc.).
- Reduction of the registration fee rate from 50% to 30%
The rate of the additional registration fee5 payable at sale of the shares of companies that have been subject to regulatory re-evaluations as well as on transfers of re-evaluated fixed assets is reduced from 50% to 30%. This rate applies on the amount of the re-evaluation capital gain.
4. Tax procedures
- Extension of the right of first refusal to transfer of shares
Article 38 part 5 of the Tax Procedures Code is amended such that the tax authorities may exercise their right of first refusal within one year starting from registration of the transfer of shares. This right would apply if the price was insufficient and would give rise to payment to the transferees of the amount of this price, plus 10%.
- Possibility of reduction on surcharges for fraudulent activity
Provided that they pay an amount corresponding to 50% of their tax debt and agree to a payment schedule for the remaining 50%, taxpayers whose fraudulent activity complaints have been withdrawn may now enjoy the right to an administrative appeal6.
This procedure covers surcharges for fraudulent activity applied prior to the 2012 financial year for direct taxes and prior to 2009 for turnover taxes.
Note that the moderation of surcharges must correspond to the difference between the tax penalty previously applied (100% for direct taxes and 200% for turnover taxes) and that imposed by the current provisions of Articles 193-2 of the direct taxes and assimilated taxes code and 116-II of the turnover taxes code (minimum of 50% and calculation of a majoration rate according to the concealment, capped at 100%).
II. Customs provisions
Prior to the LFC 2015, there was no legal deadline for the payment of fees and taxes in cash7.
Customs declarants are now given 5 business days from the time of their liquidation to pay fees and taxes to the relevant customs collector. Once this deadline has passed, a late payment penalty of 1.25% per month of delay8 will be calculated from the day following the deadline until the day of payment, inclusive.
III. Other provisions
For all requests to apply for domiciliation for a goods import transaction, a domiciliation tax at a rate of 0.3%9 will be applied, with the total tax not to be less than 20,000 dinar.
- 1 As a reminder, the Finance act for 2015 introduced a single IBS taxation rate of 23%, applicable to all activities, with no distinction between production, sales and services
- 2 Goods production activities involve those that consist of extraction, manufacture, processing or transformation of products, with the exception of the activities of packaging and sales presentation for resale. Furthermore, note that oil business activities subject to the taxation system of law 05-07 of 28 April 2005, amended and completed, are not subject to the 19% taxation rate
- 3 The construction and public and hydraulic works activities subject to the 23% rate are defined as businesses registered as such on the trade and companies register and which give rise to payment of employer/employee contributions specific to the sector
- 4 Reductions of the TAP tax base are set out in Article 219 of the Direct Tax and Assimilated Tax Code.
- 5 This fee was introduced by the LFC for 2009
- 6 Articles 92 and 93 of the Tax Procedures Code
- 7 Other methods of payment are: guaranteed bond, goods removal credit and administrative credit
- 8 According to article 108 of the customs code
- 9 Prior to the LFC for 2015, the amount of the domiciliation tax was 10,000 DA