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Flash info Algeria: new tax measures from the draft of the 2011 Finance Act

The draft of the finance act for 2011 (hereinafter the “Draft”), in its version adopted by the Parliament on November 14th, 2010, sets in his tax chapter some provisions of great significance concerning companies taxation in Algeria.

The Finance Act (FA) for 2011 should be promulgated by mid-December (without any vote of the Parliament). The main provisions below analyzed should thus be effective one day as from the publication of the FA to the official journal.


Corporate Income Tax

1. Application of the exemption regarding the operations generating currencies

This new measure goes over the general principle related to selling and provisions to be exported. The Draft brings a new definition / condition to apply the exoneration by expressly pointing out “the operations generating currencies”.

Therefore, to benefit from these provisions, companies have to produce to the tax department a document that proves the transfer of currencies to an Algerian resident bank. The Draft specifies that the exoneration will be granted in proportion to the turnover made in currencies (art. 10.5 of the Draft; art. 138 of the CID).

Please, note that the activities of road transport, transport by sea, air transport, activities of reassurance and banking activities are still excluded from this exoneration.

2. Exemption of the activities related to the raw milk

This measure would notably apply to the collectors and producers of raw milk, in order to promote the production milk activity in Algeria (art. 10 of the Draft; art. 138 of the CID).


1. New exemptions in the frame of activities linked to hydrocarbons field

The Draft provides the modification of the list of goods and services exempted from VAT, and destined for the activities of research and/or working, pipe transportation of hydrocarbons, liquefaction of gas and splitting of gas of liquid petroleum (art. 28 of the Draft; art. 9-9 of the Tax Code, CTCA). This modification completes the previous list to make it compliant with the Hydrocarbons law (Law n°05-07). From now on in that frame, the Draft adds the activities of liquefaction of gas and splitting of gas of liquid petroleum, and the activities of refinement building as exempted.

 2. Application of the pro rata rule in case of disrespect of the goods and services use benefiting from the VAT exemption

The principle of the deduction in proportion applies in case of non exclusive use of goods, services and works benefiting from the VAT exemption regarding operations whose list is fixed by the regulation. These operations are related to activities of research and/or working, pipe transportation of hydrocarbons, liquefaction of gas and splitting of gas of liquid petroleum (art. 34 of the Draft; art. 42 of the CTCA). Please, note that this rule was being applied before the Draft but was not expressed within the Algerians law and regulation.

3. Setting up of an auto-settlement procedure

As we could notice with the pro rata issues (above mentioned), this procedure was practiced but not mentioned within the Algerians law and regulation. The Draft sets up the auto-settlement procedure in the VAT field, which allows the payment to the Public Treasury by the customer (legal debtor), when the legal tax payer is located abroad (art. 36 of the Draft; art. 83 of the CID). An Order from the Finance Minister should specify the application modalities of that regime.

Tax procedures

1. Suppression of the payment deferring

The payment deferring provided by for article 74 of the Procedures tax code (CPF) is suppressed concerning foreign companies that do not have economical or financial interest in Algeria anymore. The Draft provides a possibility for the tax collector to demand the immediate payment of the whole amount due by the tax payer non-established in Algeria, when there are regularizations whose recovering is compromise because of the payment deferring whereas those companies are getting through their contracts (art. 19 of the Draft; art. 406 of the CID).

Please, note that this possibility to suppress the payment deferring is not allowed if the tax payer provides the tax administration with guarantees.

2. The payment deferring during the judiciary time of the tax contentious

The Draft foresees the codification of the payment deferring at the judiciary time of the tax contentious, subject for the tax payer to provide the tax administration with guarantees that would allow the Public Treasury to effectively recover the tax (art. 47 of the Draft; art. 406 of the CID). The payment deferring request has to be hand in to the administrative judge territorially competent.

At the moment, the payment deferring is not expressly mentioned by the tax law (no mention under article 74 of the CPF).

However, the administrative judge decides the possibility to postpone the payment at the time of the judiciary step of the tax contentious in the conditions fixed by articles 833 and next of the Civil and Administrative Procedure Code. The judge can grant the payment deferring without presentation of any guarantee.

According to the legislator motivations, the modification aims to make the CPF coherent with the Civil procedure code.

3. Insurance and reinsurance information liability to the tax administration

In the frame of the reinforcement of the provisions related to the struggle against tax and financial fraud, the Draft foresees a new obligation to inform the tax administration regarding insurance or reinsurance companies or any actor in such fields. This information is related to the assurance or reassurance contracts signed by individuals, legal bodies and public entities, regarding their vehicles and their building patrimonies (art. 44 and 45 of the Draft; art. 52 bis and ter of the CPF). Those pieces of information will be mentioned on the “tax case” created by article 179 of the CPF.

4. Motivation of contentious decisions

The Draft provides the setting up of the obligation of motivation of contentious decisions, whatsoever their nature is (art. 46 of the Draft; art. 52 bis and ter of the CPF). Before this provision, the obligation was only concerning the decisions related to total or partial rejection.

5. Appeal for reconsideration regarding the out of penalties amount limited to the direct taxes

This limitation existed before but had not been codified when the CPF was set up, which implied that the appeal for reconsideration was possible whatever the tax concerned. The reintroduction of such a limitation will lead to specify the scope of the appeal for reconsideration, which can be related to the out of penalties amount and subject for the appeal to concern the direct taxes only (art. 48 of the Draft; art. 93 of the CPF).

6. Specifications regarding the collection contentious

The Draft defines the nature and the object of the collection contentious in order to determine its scope of application and distinguish it from the contentious related to the taxable basis and the tax calculation. The collection contentious is related either to pursue act oppositions, or to oppositions regarding forced collection. The claims are either related to the form validity of the pursue action, or the existence of the payment obligation, the debt amount, the eligibility of the amount claimed or other element, but do not question the setting up or the tax settlement.

The claims related to the pursue deeds have to be presented within one month starting from the notification of the contested act. The Director of Big Companies and the Tax Director of the Wilaya (Algerian administrative unit) have one month to hand over their decision. If they do not respect the deadline or if the tax payer does not agree with their decision, he will be able to refer this matter of the administrative judge within one month following the administrative decision (art. 49 to 52 of the Draft; art. 153, 153 bis, 153 ter and 154 of the CPF).


Regarding the customs field, the Draft foresees to make easier the immediate control procedure provided in the frame of the struggle against the fraud. After the withdrawal of the goods granted, Customs administration can monitor a posteriori to make sure the Customs declarations are accurate and authentic (art. 61 of the Draft; art. 92 ter of the Customs code).

Other measure

Finally, please note the reintroduction by the Draft of the obligation of accounting audit of the SARL. Its mention had been involuntarily deleted by the FA for 2010 (art. 66 du Projet ; art. 44 de la LF pour 2010).


Jean-Jacques Lecat