Flash info Algeria

According to our information, the Finance Bill for 2020 recently adopted by the Council of the Nation (upper house) would enact new rules on the placing of funds in escrow in the presence of notaries.

An amendment introduced and adopted by the members of the lower house provides for a reduction in the percentage of funds to be placed in escrow from half to 1/5 of the price of a transfer for valuable consideration of full ownership or one of its divisions of a building, a business or a client base. The same applies to deeds transferring shares or stocks and to deeds amending companies, with the exception of deeds or transactions increasing the share capital by incorporation of reserves and to contracts for the formation of companies with foreign capital, subject to the presentation by the notary of a certificate of deposit of advances with a bank.

What would be the scope of this provision?

First of all, it is important to remember that the escrow agent is subject to tax considerations. Indeed, it allows the tax authority to ensure that the tax status of the transaction is compliant.

To this end, it is the responsibility of notaries to submit a request for a tax status in connection with the elements relating to the transaction within 10 days of the conclusion of the contract. If they do not receive a response within a maximum of 30 days, the notaries would be required to divest themselves of the funds, regardless of the amount of the transactions.

The reduction in the percentage of funds to be placed in escrow under the above transactions is expected to have a positive effect on the cash flow of fund beneficiaries and investors as the amounts capitalised during the period of the escrow would be reduced to 1/5 instead of half.

Please contact your usual CMS advisor for further assistance.