Algeria's Directorate General of Taxes has issued a circular clarifying the taxation of fees (royalties) under contract paid to non-residents for the use of computer software, which was amended as part of the 2020 Finance Act. Previously, the tax base for withholding tax on such fees paid to non-residents was reduced by 80%, resulting in an effective withholding tax rate of 4.8% (24% on 20% of the gross amount). With the amendments of the Finance Act, the reduction was reduced to 30%, resulting in an effective withholding tax rate of 16.8% (24% on 70% of the gross amount), as confirmed by the circular.
The circular also notes that the 30% reduction only applies when fees are paid to a resident of a country that does not have a tax treaty with Algeria. If the recipient is a resident of a tax treaty country, the provisions of the tax treaty are applied.
The change is effective from 1 January 2020. However, the circular provides that the 80% reduction remains applicable to software use contracts concluded prior to 1 January 2020.