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N°6, July 2009

KPMG Algérie

The Supplementary Finance Act for 2009, Main Measures

I Changes to Ordinance No. 01-03 on
Investment Development

II Extension of the obligation to reinvest

all exemptions granted under the
Preferential Tax Scheme

III Tax on profits of companies and groups

of companies

IV Arrangements of benefits to companies

V Implications of Implementing the New

Financial Accounting System

VI Regulation of economic activity,

promotion of domestic investment and
foreign investment controls

VII Measures restricting Imports

VIII Other measures

News n° 6, Juillet 2009 2

- The State and the economic public 03).

This note is not intended to be a companies (EPEs) have a right of first
comprehensive analysis but a simple refusal on all transfers of shares of foreign - The granting of benefits under the general
presentation of the main provisions of the shareholders or in favour of foreign scheme is necessarily subject to a written
supplementary budget law published in the shareholders (section 4 d added to Ord. 01- undertaking by the beneficiary to give
OG No. 44 of 26 July 2009 (Ordinance No. 03). preference to products and services of
09-01 of 22 July 2009 on the - Share in national import companies may Algerian origin (article 9 b added to Ord. 01-
Supplementary Finance Act for 2009). be held by public participation. To this end, 03). The rate is fixed by a regulation.
a company may be created, which will be
I CHANGES TO ORDINANCE NO. 01-03 responsible for the acquisition of shares as - The granting of VAT exemptions is limited
ON INVESTMENT DEVELOPMENT part of the legal minimum of the possible to acquisitions of Algerian origin. However,
public participation in the capital of export this advantage may be made when it is
Articles 58, 59, 60, 61, 62, LFC trading companies (Article 74 LFC). duly established the absence of similar
local production (article 9 b added to Ord.
Measures relating to shareholders Other measures 01-03).
- Foreign investment can only be achieved - The funding required for the realization of
through a partnership in which the resident foreign investment, whether direct or in - The CNI has the authority to grant, for a
national shareholding represents 51% of partnership, with the exception of the period not exceeding five years,
the capital. Several partners may be constitution of share capital, should be exemptions or reductions of duties, taxes
included in the quota of national ownership established, except in special cases, or charges, including value added tax,
(art.4 b added to Ord. 01-03). through the use of local financing (art. 4 b levied on the price of goods produced by
- The foreign trade activities may only be added to Ord. 01-03). inward investment as part of emerging
carried out by individuals or foreign legal - Foreign investments made in the industrial activities (article 12 c added to
entities in partnership with the resident economic production of goods and services Ord. 01-03).
national shareholding which is not less than are subject to a declaration of investment
30% of the share capital (art. 4 b added to with ANDI prior to their implementation - Amending Article 9 of Ordinance No. 01
Ord. 01-03). (art.4 added to Ord. 01-03). 03 on investment development, an
The supplementary budget law contains no - Any proposed foreign direct investment or exemption period of 05 years for IBS is
provision on the compliance requirements investment in partnership with foreign granted to companies that create over 100
of existing companies. capital must be subject to prior review by jobs and starting out. This privilege, which
- Foreign investments made in partnership the National Board of Investment (CNI). aims to promote employment, in addition
with the economic public companies (EPEs) Thus, all foreign investment eligible or not to other tax, para-fiscal and customs
must meet the new provisions of Article 4 for tax benefits must first be reviewed by incentives, and removes the 3-year period
b (see above, first paragraph). These the CNI (art. 4 b added to Ord. 01-03). as provided previously to Article 9 of
provisions are also applicable in cases Concerning Algerian investments equal to Ordinance No. 01 -03 (LFC Art. 35).
where their capital is opened to foreign or exceeding 500 million dinars, the
ownership (art. 4 b added to Ord. 01-03). granting of benefits under the general
- Investments made by resident nationals in scheme is subject to a mandatory decision
partnership with public economic of the CNI (section 9 c added to Ord. 01-
companies (EPEs) may only be achieved 03).
through a minimum participation of these - The time limits for processing applications
companies, equal to or over 34% of the for benefits are deleted (for reminder,
The supplementary finance law for 2008
capital. These provisions are also applicable these times were 72h for the benefits
introduced the obligation to reinvest profits
in the case of the opening of their capital to provided under the realisation and 10 days
equivalent to the tax exemptions or
resident national shareholders (section 4 d for those provided in respect of the
reductions granted on corporate profit
added to Ord. 01-03). exploitation) (Article 7 ord. 01-03).
It adds that the national shareholders may - Foreign investments, whether direct or in
waive, after approval of the CPE (Council of partnership, are made with the condition of
In order to promote sustainable
State Participation), the option to purchase producing foreign exchange balance
investments, taxpayers who receive tax
shares held by the public economic surplus in favor of the Algerian economy
exemptions or reductions with respect to
company (EPE) at the end of a period of 5 during the lifetime of the project (a text of
all taxes, customs duties, para-fiscal taxes
years. the monetary authority will specify the
and other benefits are required to reinvest
detailed application) (art. 4 added to ord. 01-

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News n° 6, Juillet 2009 3

the profits of these exemptions or

reductions within four years from the date Groupings In the absence of a specific application rate,
marking the end of the financial year, which for mixed activities, each of the two rates
were subject to the preferential tax scheme - Application of differential rates of IBS (19% and 25%) is applied to half of the
(Art. 57 suppl.). The investor may be (19% and / or 25%) to consolidated taxable profit.
exempted from this obligation by a decision profits of corporate groupings
of the CNI. Article 3 suppl. - Article 138 b of the Tax - Consolidation of VAT by the parent
Code company
The reinvestment must be made for each Article 18 suppl. - Article 31 b of the Tax
financial year or for several consecutive The Supplementary Finance Act for 2008 Code
financial years. If over several years, the fixed IBS rates by type of activity and
period of 4 years is deducted from the established the following rates: The 2009 Finance Act introduced VAT and
closing date of the first financial year. The TAP exemptions for transactions between
requirements of this Article shall apply to - 19% for the production of goods, member firms in order to avoid multiple
losses for the years 2010 onward, and to construction, public works and tourism taxation of transactions within the same
earnings of pending assignment at the date activities; group of companies.
of promulgation of the supplementary - 25% for commercial activities and
finance law for 2009. Failure to respect this services. The accounts are consolidated at the parent
obligation entails the repayment of the company in accordance with Article 138 b
exempted taxes and the application of a tax The provisions of Article 150-1 of the Tax of the Tax Code, and VAT charged on
penalty of 30%. Code (Article 5 of the Supplementary goods and services purchased by or for the
Finance Act for 2008) set a 25%IBS rate for various member companies of the
III TAXES ON POFITS OF COMPANIES mixed activities, where earnings from grouping.
AND GROUPS OF COMPANIES commercial activities and services is over
50% of total earnings excluding taxes. This measure authorizes the consolidation
The tax on corporate profits (IBS) of VAT in the parent company in order to
The supplementary financial act for 2009 allow recovery of the tax by avoiding the
- Definitions of activities in the rate of determines the IBS rate to be applied to formation of structural withholdings.
IBS at 19% or 25% the consolidated earnings of corporate
grouping for tax purposes. IV ARRANGEMENTS OF BENEFITS TO
Article 7 suppl. - Article 150 of the Tax COMPANIES
Code Where the activities carried out by
members corporations of the grouping are - Maintenance of the amount of capital
With this measure, the issue of corporate taxed at different IBS rates, the profits gains from revaluation in the capital of
taxation is further clarified with the formal resulting from the consolidation is subject the company
definition of activities benefiting from one to tax at a rate of 19% where earnings Article 27 of the Tax Code
of the two rates under IBS. under this rate are significant. Otherwise,
the consolidation of profits is permitted by The provisions of Article 45 of the Finance
Under IBS at 19%: building activities and earning category. Act 2006 (amended and supplemented in
public works, that are activities registered particular by Article 56 of the Finance Act
as such with the Trade Registry and give Profit consolidation refers to all balance 2007) would provide for exemptions from
rise to specific sectorial social security sheet accounts, not the mathematical tax on company profits, subject to their
contributions. addition of the earnings for each of the incorporation into the capital of the
companies within the grouping. company, the gains from the revaluation of
The management of resorts and spas are depreciable and non-depreciable property,
classed as tourist activities. Activities Thus, when total revenues at the 19% IBS plant and equipment on accounts closed as
conducted by travel agencies, on the other rate exceed 50%, this rate applies to the at 31 December, 2006.
hand, are not regarded as tourist activities consolidated taxable income.
and therefore do not benefit from the 19% The revaluation was permitted only for
IBS rate. Otherwise, to avoid penalizing the those assets on the balance sheet for the
consolidation scheme, the SFA for 2009 year 2006 (filed with the tax authorities
provides for the simultaneous application of before 1 April 2007) and between the date
two rates of IBS for each type of earnings.

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News n° 6, Juillet 2009 4

of issuance of Executive Order (i.e. 4 July the exemption period to 1 January 2008. accounting for income and expenses of
2007) and 31 December 2007. operations in progress.
The new provision freezes the amount of IMPLEMENTATION OF NEW FINANCIAL - Tax support for low-value assets
the company’s capital gains from ACCOUNTING SYSTEM Article 5 suppl. - Article 141 of the Tax
revaluation in the share capital, in addition Code
to the statutory minimum, to avoid - Definitions of the new accounting
speculative measures to reduce the share system must be respected by Low-value items including tax-free amount
capital of the gain included, and therefore businesses. which does not exceed 30 000 DZD may
distribute it. If the company has benefited Article 6 suppl. - 141 c of the Tax Code be recognized as expenses deductible for
from the incentives linked to investment the year of their commitment and property
promotion, the legal minimum is equivalent Companies must comply with the acquired free of charge are recorded as
to the initial capital of the company plus the definitions laid down by the new system assets at fair value.
revaluation surplus included in equity. provided that they are not inconsistent with
the tax rules applicable to the tax base. This provision is intended to simplify the
- Taxation of shares or capital stock in management and tax accounting for low-
companies that benefited from the - Limits of the percentage-of-completion value items and thereby reduce the
revaluation and re-evaluated fixed method regarding accounting for constraints for management and
assets revenues resulting from long-term monitoring of depreciable property.
Article 28 of the Tax Code contract
Article 4 suppl. - Article 140 of the Tax In addition, the uses referred to in Article
Disposals of shares or capital stock in Code 141-3 of the Tax Code, in terms of
companies that benefited from regulatory depreciation, have been amended, as the
revaluations give rise to payment of an Regarding long-term contracts, the provision now refers to use "provided by
additional registration fee whose rate is set measure requires accounting for the regulation."
at 50%. The fee is based on the amount of percentage-of-completion method rather
generated capital gains. than the completed method. - Reversal of preliminary expenses
Article 8 - Article 169 of the Tax Code
Disposals of re-valued assets are also By this measure, "the taxable profit for long
subject to this fee. This right is based on term contracts which relate to the creation Preliminary costs included in accounting,
the amount of capital gains from of goods, services or both goods and before the entry into force of the financial
revaluation. services whose production covers at least accounting system, are deductible from
two accounting periods or years, is taxable income in line with the initial
No time limit is provided for the calculated exclusively with “percentage-of- reversal scheme.
implementation of this measure. completion method”, regardless of the
type of contracts: lump sum contracts or The tax legislation in force does not provide
- The exemptions granted to securities cost-plus contracts. for a specific tax treatment of preliminary
transactions payable on 1 January 2008 expenses. This aspect is dealt with by the
instead of 1 January 2009 The Act provides for, moreover, a legal chart of accounts, which provided their
Article 33 suppl Finance Act. obligation to have, under these provisions, absorption within a maximum of five (05)
the management tools, system of years while the new accounting framework
The renewal of exemptions for tax on calculating costs and internal control to provides for their immediate elimination.
global income (IRG), corporate taxes (IBS) validate the percentage of completion and
and registration fees under Article 46 of the review, as the project progresses, the To avoid projecting the expenses entirely
2009 Finance Act, for five (5) years, for the estimated costs of revenue and income. on the year 2010, or all charges pending
tax years 2008 to 2012 as the first preliminary elimination at 31/12/2009, the
exemption period expired on 31 December The measure aims to encourage supplementary Finance Act maintains the
2007. construction companies to keep records of original plan for reversing this charge.
costs and exclude the provision for loss on
However, article 46 established the termination of deduction rights. - Taxation of capital gains for the
exemption period of five (5) years with revaluation of fixed assets
effect from 1st January 2009. The new The benefit of real estate companies is, in Article 10 - Articles 185 and 186 of section
measure pushes forward the beginning of principle, reached following the method of 8 of the Tax Code

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News n° 6, Juillet 2009 5

connection with the execution of a contract - The exemptions in question run from
Capital gains resulting from the revaluation and legally incumbent on the foreign the enactment of this Act and until 31
of fixed assets at the date of entry into partner cannot be borne by institutions, December 2012.
effect of the new financial accounting public bodies and companies incorporated
system and will be posted to the tax result under Algerian law.
within a maximum period of five years. - Suspension of exports of non-ferrous
The new provision applies to contracts scrap
The supplement of depreciation expenses concluded after the date of enactment of Article 64 suppl. - Article 84 of 2007
derived from the revaluation of operations the supplementary Finance Act, provided Finance Act
will be posted to the income of the year. that amendments to original contracts are
considered new contracts. Therefore, they Article 84 of the 2007 Finance Act had a
will be subject to the new provisions. regulation laying down the conditions
VI CONTROL OF THE ECONOMY, governing the export activity of certain
INVESTMENT PROMOTION AND - Measures to encourage business products, materials and goods, including
NATIONAL CONTROL OF FOREIGN creation by the unemployed: the waste of ferrous and nonferrous metals,
INVESTMENT exemptions due under the approved leather and cork. With the new provision,
- Bank loans limited to real estate investments prolonged the export of non-ferrous metals is
loans Article 65 suppl. suspended.
Article 75 suppl.
Article 54 (amended) of the 2005 Finance - Establishment of a tax applicable for
Banks are only allowed to grant loans to Act provides for an exemption from taxes charging prepaid mobile phones
individuals as part of real estate loans. The on total income or the tax on corporate Article 32 suppl.
procedure for applications might be profits, the tax on professional activity and
specified by regulation. the tax on built properties, under income or The measure establishes a tax applicable to
profits of the activities authorized before 31 prepaid charges. It is due monthly by the
- Removal of tobacco approvals issued December 2009 over a period of three (3) mobile operators regardless of the mode of
by tax administration to distributors and years from the year during which the charging.
retailers of tobacco products activity began. This deadline is cancelled.
Article 19 suppl. The tax rate is 5%. It applies to the amount
- Tax and customs exemptions for charged each month. The product is paid by
The measure removes the authorizations interbank companies specializing in operators to tax authorities with the
and approvals issued by the Tobacco Tax asset management and debt collection relevant tax jurisdiction within twenty (20)
Administration to distributors and retailers companies days of the following month.
of tobacco products. Only tobacco Article 70 suppl.
companies are involved in the authorization.
The benefits to interbank asset VII MEASURES LIMITING IMPORTS
management companies and debt
- Set threshold for ownership of the collection companies are designed to - Extension of the scope of the bank
national capital by residents to 51% or promote the development of these debit tax on imports of services
more for the activities within the activities. The companies are: Article 63 suppl.
tobacco industry - Exempted from registration fees upon
Article 19 suppl. - Article 298 of the Tax registration; The provisions of Article 2 of the
Code - Exempt from land registration fees for supplementary Finance law for 2005
real estate acquisitions in the established the banking domiciliation tax on
The capital held by national residents must framework of their registration; operations and costs of imports of ten
be not be less than 51%. - Exempted from customs duty and thousand dinars (10 000 DZD) for any
exemption from the value added tax; request to open a domiciliation file on an
- Assumption by the foreign partner of - Exempt from tax on corporate profits import transaction, within further
taxes due in connection with the and corporate taxes for a period of clarification.
execution of a contract three (03) years from the year of start
Article 31 suppl. of activity. The new measure clarifies that this tax is
due both on imports of goods and services.
Taxes, duties and taxes payable in

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News n° 6, Juillet 2009 6

not being eligible for the tax and customs - Change of the name of the Algerian
The fee is: related incentives related to investment Development Fund now called the
- 10 000 DZD for any requests to open a promotion, exclusion from incentives Fonds National d’Investissement –
domiciliation file to an import transaction of granted by the tax authorities, from Banque Algérienne de Développement
goods or merchandise. submissions to public tenders and from ("National Investment Fund -
- 3% of the amount of the domiciliation for foreign trade operations (Article 29 suppl.). Development Bank of Algeria) (art 55
services imports. suppl).
- Imports operations may not be carried - Capital of National Investment Fund -
The capital goods and raw materials that out by third parties Development Bank of Algeria set at
are purchased for resale are specifically Article 66 suppl. 150 billion DZD (art. 56 suppl).
excluded from this requirement, subject to - Support for agricultural activity through
underwriting prior to each import of a Banking procedures relating to the imports measures of VAT exemption in
commitment not to sell the property. business should be performed necessarily respect of rent paid under the lease
by the holder of registration certificate or contracts on hardware and equipment
- Establishment of a tax on trucks and the manager of the importing company. manufactured in Algeria (art. 24 suppl).
cranes and higher tax rates on The presence of the holder is required for - Any request for cancellation of a trade
passenger cars and utilities border control formalities. register is subject to the submission
Article 13 suppl. of a tax certificate issued by the
- Banking domiciliation procedures, competent authorities (art. 39 suppl)
For new vehicles whose engine capacity prerequisite for all imports operations to be issued within 48 hours after
exceeds 2500 cm3, the tax is increased to Article 67 suppl. application, regardless of the tax
200 000 DZD for petrol engines and 300 to situation of the person concerned.
000 DZD for diesel engines. Banking domiciliation procedures for any This does not exclude, however,
imports operation is essential prior to its prosecution if the person concerned is
The vehicle tax is extended to trucks and implementation, with financial transactions indebted to the tax administration.
cranes: 340 000 DZD for trucks and cranes and clearance. - Possibility of customs administration
from 8 to 22 tonnes, 500 000 DZD for to resort to specialized companies and
equipment over 22 tons. agreed to check the goods before
- The documentary credit (credit letter) their shipment into the customs
- Prohibition of foreign trade operations as the only means of payment for territory.
for operators without a tax ID imports - The maximum period during which
Article 36 suppl. Article 69 suppl. goods at port is reduced by 2 to 4
months (art. 41 suppl).
The procedures for direct debit Payments for imports must be completed - Tourism: measures mainly aim to
(domiciliation) and clearing operations by credit letter. promote this sector. The
related to foreign trade are subject to the supplementary law requires the
submission of tax identification number With regard to this last point, documentary incorporation of companies in the
(TIN). credit accounts may only be opened with tourism sector and the capital
correspondents approved by Algerian increases are exempt from the
- Penalties for offences relating to customs banks. Because of the bank commitment, registration fee (section 43 suppl).
clearance and commercial laws and this payment method requires credit - The benefits linked to tourist activities,
regulations authorization granted at the discretion of hotels, spas, tourist restorations
the bank. classified, travel and rental of tourist
The fight against fraud has led to the vehicles are subject to reduced rate of
inclusion in the Fichier National des VAT (art. 42 suppl).
Fraudeurs (blacklist of fraud offenders) of VII Other measures
serious offenders concerning banking and ENTRY INTO FORCE
financial laws and regulations, including - Obligation to pay a deposit for issuing
those related to transfer of funds and occupation permits (art. 51 suppl). The provisions of the 2009 Supplementary
money laundering (art. 30 suppl.) and in - Restructuring charges fees related to Finance Act enter into force one day after
case annual accounts are not published. private occupation of public roads and their publication (publication in the Official
highways (Article 52 suppl). Gazette on 26 July 2009).
The penalties for inclusion on this list are

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News n° 6, Juillet 2009 7

Contact us

KPMG Algérie S.P.A.

Algiers office
42, rue Abou Nouas 16035 Hydra
16035 Alger
Tel: +213 (0)21 60 02 38
Fax: +213 (0)21 60 02 29

Oran office
1, avenue Cheikh Larbi Tebessi
(ex-avenue Loubet)
31000 Oran
Tél. : +213 (0)41 40 59 09
Fax : +213 (0)41 40 59 10

E-mail :
web :

The information contained herein is of a general nature and is not intended to © 2009 KPMG International. KPMG International is a Swiss
address the circumstances of any particular individual or entity. Although we cooperative. KPMG Algérie S.P.A. is a member of the KPMG
endeavor to provide accurate and timely information, there can be no network of independent members firms of KPMG
guarantee that such information is accurate as of the date it is received or that International. All rights reserved.
it will continue to be accurate in the future. No one should act upon such KPMG and the KPMG logo are registered trademarks of KPMG
information without appropriate professional advice. International, a Swiss cooperative
KPMG International does not provide professional services to
KPMG Algeria SPA, a joint stock company with capital of 100 030 DZD clients. All member firms are separate legal entities and
000.00, registered in the Trade registry in Algiers under the number 02B independent, as is KPMG Algérie SPA, the Algerian member
0018309 16/00. Tax registration number 000216289042735. Registered firm of KPMG International.
office: 42, rue Abou Nouas, 16035 Hydra, Algiers, Algeria.

© 2009 KPMG Algérie S.P.A. is a member of the KPMG network of independent members firms of KPMG International, a Swiss cooperative. All rights reserved. Printed in Algeria.