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ALGERIA: 2020 Finance Act Allows Majority Foreign Ownership

Foreign investors are no longer limited to 49% ownership of non-strategic Algerian companies, while tax rates have been adjusted on a range of goods and services.

The changes follow Algeria’s previous head of state, Adelkader Bensalah, signing the 2020 Finance Act into law on 11 December 2019. The new legislation introduces measures to encourage overseas investment in the country by allowing foreign investors to hold majority stakes in Algerian companies, proposes the creation of new economic zones, and introduces tax incentives to encourage start-ups and new technology innovation.

The new Finance Act repeals the “51/49 rule” for foreign ownership in non-strategic business sectors, introduced in the former investment law (Ordinance No.01-03 of 20 August 2001). This capped foreign investment ownership at a maximum of 49%, with the remainder being held by local investors.

Under the new regime, strategic business sectors still subject to the cap will be determined in due course by further regulation, but are likely to include hydrocarbons, banking, insurance or telecommunications, according to an analysis by LPA-CGR Avocats, a French law firm.

The new Act also permits the use of external financing for “productive, strategic, structuring and targeted” projects from development-oriented financial institutions, subject to the required approvals from the relevant Algerian authorities. According to the Act’s explanatory notes, the intention is to allow such projects to benefit from loans from international and regional financial institutions of which Algeria is a member.

There are also various tax rate changes that will impact foreign trade. There is an increase from 1% to 2% on the rate of the solidarity contribution applicable to the import of goods. The rate for imports of services is raised from 3% to 4%; and that for the import of goods intended for resale rises to 0.5% from 0.3%.

There are also profit tax and value-added tax exemptions applicable to start-ups during their launch and development phase. The Act also provides that online sales of digital goods and certain electronically supplied services in Algeria will now incur valued added tax (VAT) at a reduced rate of 9%.

Content provided by Picture: HKTDC Research
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