The Finance Act 2009 implementing article 182 of the Code des impôts directs et taxes assimilés [direct taxation and related imposts code] provides that all funds transfers to foreign destinations are conditional upon obtaining a certificate known as a “transfer certificate” from the tax office. T
he statute states that banking institutions are responsible for demanding the aforesaid certificate in support of a transfer request.
The Order of October 1 2009 regarding lodging of a declaration and issue of the certificate for foreign funds transfers sets out a number of application procedures, in particular:
- the documents required; and
- the persons charged with the formal requirements for a transfer application.
By reason of these new considerations, a dichotomy has emerged between the provisions of the aforementioned implementing Order, which a priori give rise to the new interpretation by the Direction des Grandes Entreprises (DGE) [tax department for large-scale businesses], and the written guidelines issued by the Direction des Opérations Fiscales* [tax operations department] for other operational departments within the tax office (external departments).
[* Notice No. 266/MF/DGI/DOFR/SDEF]
Status of Tax Pre-payment as a Condition for Obtaining a Transfer Certificate
Under the terms of the Order, the documents required for the purpose of applying for a transfer certificate do not include documented evidence of pre-payment of tax in respect of the payment for which a certificate is sought.
On the other hand, the general tax office’s implementing instructions (in particular those from the DGE which pre-dated promulgation of the Order, and subsequent to the said Order, those applied by the Direction des Opérations Fiscales) require, inter alia, documentary evidence of pre-payment of tax on the transfer transaction, in particular:
- Regarding transfers under works contracts: production of documentary evidence of payments of income tax and duties (TAP [taxe sur l'activité professionnelle = tax on business activities], VAT, provisional payments of IBS [impôts sur le bénéfice des sociétés = corporate income tax]) levied on agreements for which transfer requests are made (Gn°50 declaration pursuant to which payments have been made and payment receipts issued); and proofs of payment of distribution tax ("branch tax").
- Regarding transfers under service provision agreements: production of documentary evidence of payment of withholding tax (IBS) levied with respect to agreements for which transfer requests are made (Gn°50 declaration pursuant to which payments have been made and payment receipts issued).
- Regarding transfer of dividends: production of documentary evidence of payment of IRG /dividends.
Hence even if the DGE appears to have abandoned the requirement applicable before promulgation of the Order of pre-payment of tax, the new notice issued by the Direction des Opérations Fiscales appears to carry over the said requirement to apply to administrative departments other than the DGE.
In some circumstances this interpretation and application overturns the legal principle governing the rules related to the taxable event when the same is actual receipt of payment, as is the case in particular for:
- provision of services subject to 24% withholding tax;
- VAT and TAP with respect to construction works; and
- taxes on dividends (IRG or IBS).
Moreover it should be noted that the transfer certificate form appearing in the schedule to the order contains wording that seems to be in the spirit of the old DGE directive under which the authorised officer certifies that the funds to be transferred have been:
- taxed in accordance with the statutes and regulations in force;
- adjusted; or
- exempted.
Persons Carrying out the Formal Steps for Obtaining a Certificate
Under the aforecited order of October 1, a funds transfer declaration must be provided either by:
- the Algerian party (the ordering entity), where legal or natural persons are involved who have no permanent presence in Algeria, and who are acting pursuant to an agreement for provision of services or construction works, whether or not accompanied by supplies of materials or fittings; or
- the legal or natural person intending to repatriate income derived from capital or to transfer sale, divestment or liquidation proceeds, or royalties, interest or dividends.
Now tax office doctrine established the following distinction:
- Regarding transfers under works contracts: in this case the formalities for filing a transfer application would fall upon the business receiving the funds (co-contracting party). In some forms of the tax office doctrine involving foreign businesses not exempted from the obligation to make a declaration, the duty to produce the roll extract falls upon businesses receiving the funds in question. The said form, which seems to apply to businesses operating in Algeria under the actual accounting system, appears to be somewhat ambiguous and vague insofar as service-providing businesses without permanent premises remain subject to simplified declarative obligations.
- Regarding transfers under service-provision agreements: in this case, formal requirements for filing a transfer application fall upon the business responsible for payment of withholding tax (the contractor).
Contact
Samir Sayah Manager of the Algiers office | CMS Bureau Francis Lefebvre samir.sayah@cms-bfl.com
