The Complementary Finance Law (CFL) for 2011 has recently been published, in Official Journal no 40 of July 20, 2011. Among the changes it brings in, three deserve to be highlighted: the amendment to the wording of article 256 of the Registration Code (I), the wider use of private agreements for transfers of private land held by the State (II) and the relaxation of the requirement that imports must be paid for by means of documentary credits (III).
I. Amendment to article 256 of the Registration Code
Under the wording derived from the CFL for 2010, article 256 of the Registration Code provided that upon a transfer for consideration of the absolute title to real property, or a lesser interest in real property, or a business or its clientele, half of the price was to be paid to a notary.
This obligation to deposit funds with the notary also applied to instruments transferring stocks and shares or amending corporate constitutions, as well as transactions increasing company capital by incorporating reserves and contracts for the incorporation of companies with foreign capital, unless the notary produced a bank certificate showing that funds were on deposit.
The purpose of article 7 of the CFL for 2011 is:
- In relation to transfers between natural persons for consideration of absolute title, bare title or beneficial rights to real property, to limit the amount which must be deposited to one fifth of the price. However, where such transactions are made between corporations, or where they are intended to transfer a business or its clientele, the amount to be deposited is still half the price.
- In relation to the incorporation of companies with foreign capital, to withdraw the option of providing the notary with a bank certificate proving that funds are available. In other words, the new provision makes it mandatory to deposit half the price with the notary (i.e. on his account at the Treasury).
In practice, this will give rise to cashflow difficulties, especially for transactions involving large sums. It involves freezing significant sums (half the price) in the notary’s hands, for a period of up to 30 days. There are further issues as to how, in practice, these amounts are to be transferred to the notary’s account, bearing in mind that under the exchange control regulations, foreign funds entering Algeria are deposited in a currency holding account, and can only be transferred to the company’s bank account.
II. Wider use of private agreements for transfers of private land held by the State
Order 08-04 of September 1, 2008 provided that private lands belonging to the State were to be sold by reference to full written particulars, at open or restricted public auctions or by private agreement. Public auction was the general rule, while sales by private agreement were permitted, exceptionally, in limited cases such as investment projects falling under the regime of the convention, subject to approval by the National Investment Council.
Article 15 of the CFL for 2011 abolished public auctions of private land held by the State and thus made private agreements the only means of acquiring such land.
That article relaxes the rules by providing:
- For this form of transfer to apply to all the real property that is potentially available, including residual assets of dissolved public companies, surplus assets of Public Economic Enterprises and land used for industrial zones and business parks.
- For the Wali to authorize private agreements on the proposal of the Committee for Assistance with Localization and Promotion of Investments and for the Regularization of Real Estate (“Comité d’Assistance à la Localisation et à la Promotion des Investissements et de la Régularisation du Foncier” - CALPIREF).
- For the Wali to authorize private agreements upon the recommendation of the National Agency for the Development of Tourism (“Agence Nationale de Développement du Tourisme” - ANDT) or, in respect of land situated within a new town or its tourist development areas, on the proposal of the body administering the new town
- For the introduction of allowances against the rent fixed by the lands department, reducing the sum payable to 90% or 50% of its original level, or to a symbolic Dinar.
III. Relaxation of the requirement that imports must be paid for by means of documentary credits.
Article 69 of the CFL for 2009 provided that imports were only to be paid for by means of documentary credits. Imports of industrial inputs and spare parts were excepted when made by companies producing goods, provided firstly that the sole purpose of importation was to meet the company’s strict production needs, and secondly that total annual orders of this kind did not exceed 2,000,000 DA in value for any single company.
Following the tripartite summit held by the Government, employers, and trade unions on May 28, 2011, this payment requirement has been relaxed by article 23 of the CFL for 2011. Under that provision, companies producing goods and services are permitted to pay for imports of equipment, industrial inputs and other products used in production, as well as strategic items in cases of urgency, by payment against documents or by documentary credit. For imports of this kind, the exemption mentioned above is extended to new equipment which assists in improving productivity, and the ceiling is raised from 2,000,000 to 4,000,000 DA.
Furthermore, the following details have been made clear:
- The banking domicile requirement still applies, irrespective of the means of payment.
- The requirement to pay by documentary credit does not apply to imports of services.
- The business activity of purchasing items and reselling them in the same condition must be carried out by means of documentary credits.