The Investment Code of ALGERIA

The new Investment Code of Algeria was promulgated by the Government in 1993. It has been preceded by the Law on Money and Credit in 1990 which establish the principle of foreign investment. This new Code is considered as being one of the most advantageous in the Mediterranean area in terms of incentives offered to investors by countries such as Turkey, Tunisia or Morocco.

In addition to the stipulations of the Algerian Business Law, in terms of protection of the investments, the recent Investment Code guarantees respect of the acquired advantages, free transfer of funds and income, and equal treatment of all investors. For the first time, Algeria does not distinguish between investments made by foreigners and nationals. And in order to develop an attractive investment promotion regime, no performance or incentives are required from foreign investors.

As part of its efforts leading to the privatization, Algeria intends, through this new Code, to encourage investments and capital inflows from private as well as foreign investors in order to diversify and modernize the economic activities of the country. Therefore, all investments are pre-approved and the only role of the Government is to determine what advantages a particular investment should receive under the law. The Code of Investment offers many advantages to investors. Repatriation of foreign capital and profits are not only assured but now also guaranteed by the State.

Foreign investors are likewise nationals in acceding to property ownership. The Algerian Government welcomes investments in all economic sectors and thus offers very attractive incentives ranging from tax exemption to relief on income tax, customs duties and Value Added Tax on equipment and supplies for the initial investment or exported products. Investments with high exporting or importing substitution proportion are particularly welcomed. Companies with export-oriented investments are exempted from taxes on a sliding scale. Those firms exporting all their production will be totally exempted from taxes, while the others will be taxed only on the portion of the production that remains in the country Investments in the offshore zones are also encouraged and will be offered a host tax as well as other investment incentives. In specified areas, as precised thereafter, investment will get additional benefits among others tax holidays of up to 10 years and free land property.

In addition, the government had also reduced the income tax paid by foreign personnel to a flat rate of 20% for the portion of the monthly salary in excess of $2,200.

The Investment Code established five schemes in terms of advantages to be granted according to the location and the nature of the investments:

In each and every case, investors in Algeria are granted with the followings:

The investment promotion efforts lead the government of Algeria to set-up the Agency for the Promotion Support & Monitoring of Investment A.P.S.I. to assist potential investors in accomplishing first the formalities for registering their investment applications, to accord the advantages listed by the Code and to streamline the investment process.

To register a proposed investment and apply for the advantages listed in the Code, the investment process is limited, by law, to a time frame of 60 days (which in practice would not last more than 30 days) and to producing two main documents:

What is the general scheme ?

This scheme covers all investments in zones other than those geographically specified, the free-zones. Investments made through specific arrangements are not covered by the terms of this regime.

Under this general scheme, investors will get the following benefits:

  • For launching the project during an initial period of 3 years:
    • Reduced customs duties on imported equipment to a 3% rate;
    • no value added tax will be applied to goods and services involved in the investment implementation process;
    • flat fee of 0.5% for Articles of Association;
    • tax-free transfer of real estate ownership.
  • For carrying the business for a period of 2 to 5 years.
    • There will be no corporation tax (I.B.S), no contribution levy (Valeur forfaitaire) and no tax on commercial or industrial activity (Taxe d'activité industrielle ou commerciale T.A.I.C).
    • Also, employer's contribution to the social security system will be reduced to a 7% rate.
  • After this first period, the corporation tax will be limited to a 33% on reinvested capital.

    • Meanwhile, there will be neither corporation tax, nor tax on commercial or industrial activity (T.A.I.C), or contribution levy on the export proportion of the production.

What is the scheme for specific zones ?

These zones cover geographic areas that are defined according to a set of socio-economic criteria or with existing potentialities in need for development.

Investors will get the following benefits:

  • For launching the project during an initial period of 3 years:
    • Reduced customs duties on imported equipment to a 3% rate;
    • no value added tax will be applied to goods and services involved in the investment implementation process;
    • flat fee of 0.5% for Articles of Association;
    • tax-free transfer of real estate ownership.
  • There will also be:
    • Total or partial coverage of infrastructure expenditures by the government;
    • purchase of real estate at a reduced rate or at a symbolic price of 1 Algerian Dinar.
  • For carrying the business during a period of 5 to 10 years:
      • There will be no corporation tax, no contribution levy, no tax on commercial or industrial activity (T.A.I.C), and no property tax.
      • Employer's contribution to the social security system will be either totally or partially waived.
      • The corporation tax, as well as the tax on commercial or industrial activity (T.A.I.C), and the contribution levy on the export proportion of the production will be waived on a permanent basis.

    What is the free-zone scheme ?

    The free-zones are defined as areas where industrial or commercial activities are carried-out in foreign currency, tax-free and in accordance to specific or simplified procedures. The government guarantees investors in the free-zones against administrative requisition or violation of the legal framework of the Investment Code. Transfer of capital or income is unconditional. Opportunity is also given for settlement of dispute by arbitration or by application of arrangement concluded by Algeria.

    Interested in operating in such zone should obtain an establishment permit delivered after signing a contract.

    Under this scheme, there will be no tax under any condition except for vehicles for personal use. There will also be unlimited period for storage of goods. Employment and salaries are not subject to the Algerian legislation. There is no obligation to maintain a banking account in Algeria. A flat rate of 20% of income tax is applied to salaries earned by foreign employees. Up to 20% of the production may be sold in Algeria and more if 50% of the added value is Algerian originated.

    What is the greater south scheme ?

    This is the scheme applied to Saharan areas of Algeria and encompass the wilayate of Adrar, Illizi, Tamanrasset and Tindouf. The government is willing to spare no effort to develop these areas. Therefore, more incentives are given to investors to attract more economic activities in these areas.

    The only condition is to submit a Declaration of an investment in one of the wilayate of this zone. Potential investors will get support and assistance of the A.S.P.I for realizing the project.

    The advantages are as follows:

    • For launching the project during an initial period of 3 years:
        • Reduced customs duties on imported equipment to a 3% rate;
        • no value added tax will be applied to goods and services involved in the investment implementation process;
        • flat fee of 0.5% for Articles of Association and for subsequent capital increase;
        • tax-free transfer of real estate ownership.
    • There will also be:
      • Total coverage of infrastructure expenditures by the government;
      • purchase of real estate at a symbolic price of 1 Algerian Dinar;
      • acquisition of land for agriculture purpose for a symbolique price of 1 Algerian Dinar;
      • rebate of 50% on interest rates on credit used for investment.
    • For carrying the business:
      • During a period of 5 years, the employer's contribution to the social security system will be waived;
      • During a period of 10 years, there will be tax holidays. Thereafter, tax will be reduced to a flat rate of 16.5% on profits reinvested anywhere in Algeria.
      • Meanwhile, there will be neither corporation tax, nor tax on commercial or industrial activity (T.A.I.C), or contribution levy on the export proportion of the production.
    • In addition, the Financial Law of 1995 has extended a 50% rebate on taxes on earnings of companies operating in the Great South area until year 2000.

    What is the scheme for the peripheral of the greater south ?

    This scheme applies to wilayate bordering Saharan areas of Algeria. This area encompasses the wilayate of Bechar , Biskra, El Bayadh, El Oued, Djelfa, Ghardaia, Ouargla, Naama et Laghouat.

    The government is encouraging efforts to develop these areas. Therefore, some attractive incentives are given to investors willing to develop economic activities in these areas. The only condition is to submit a Declaration of an investment in one of the wilayate of this zone. Potential investors will get support and assistance of the A.S.P.I for realizing the project.

    The advantages are as follows:

    • For launching the project during an initial period of 3 years:
      • Reduced customs duties on imported equipment to a 3% rate;
      • no value added tax will be applied to goods and services involved in the investment implementation process;
      • flat fee of 0.5% for Articles of Association and for subsequent capital increase;
      • tax-free transfer of real estate ownership.
  • There will also be:
    • Coverage of half of the infrastructure expenditures by the government;
    • acquisition of land for agriculture purpose for a symbolique price of 1 Algerian Dinar;
    • rebate of 25% on interest rates on credit granted for investment.
  • For carrying the business thereafter:
    • During a period of 7 years, the employer's contribution to the social security system will be waived.
    • During the same period of 7 years, there will be a tax holidays. Thereafter, tax will be reduced to a flat rate of 16.5% on profits reinvested anywhere in Algeria.

    Meanwhile, there will be neither corporation tax, nor tax on commercial or industrial activity (T.A.I.C), or contribution levy on the export proportion of the production.

    DISCLAIMER
    • This is only a personal contribution based on second use documents, mainly produced by the Investment Promotion Support & monitoring Agency (A.P.S.I). Therefore, it should not be construed as being an offer to invest in Algeria which would be based on thorough research and contacts with Algerians as well as American experts in this field.
    • This is, to my best knowledge, what is commonly believed to be accurate and the way to profitably invest in Algeria.
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