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Algeria Issues Ruling Clarifying Application of Corporate Tax Rates as Amended in 2015 — Orbitax Tax News & Alerts

Algeria's tax authority recently issued a ruling that clarifies the application of the country's corporate tax rates as amended by the Additional Finance Law 2015 in July 2015.

Applicable Rates

Algeria's corporate tax rates of 19% and 25% (depending on sector) were originally replaced by Finance Law 2015 with a single tax rate of 23% effective 1 January 2015. However, the Additional Finance Law 2015 increased the standard rate to 26%, and set reduced rates for certain sectors.

The ruling clarifies that the amended rates apply for the whole of 2015 and future years, with reduced rates applying as follows:

  • 23% for companies engaged in:
    • Construction, including real estate and public works (rate may also apply for permanent establishments of foreign companies); and
    • Tourism services, including accommodation along with restaurants, entertainment, etc., but excluding hotels that only provide accommodation and travel agencies; and
  • 19% for manufacturing activities, including extraction, production, shaping and transformation, but excluding packaging and commercial display for resale purposes.

The standard 26% rate applies for all other sectors.

Mixed Activities

According to the ruling, when a company is engaged in multiple activities that would be subject to different rates, the method for determining the applicable rate(s) depends on whether the activities are specifically stated in the company's registration documents or not.

If the activities are specifically stated in the company's registration documents, the profits from each activity are determined separately using separate accounting records. To allocate common costs, the taxpayer is to apportion the costs to each activity based on the amount of revenue from that activity in relation to total revenue. For losses that have been carried forward to 2015, the same apportionment approach may be used, but from 2016, only losses related to a specific activity may be used offset profits of that activity.

If the activities are not specifically stated in the company's registration documents, the tax rate applicable for the company's principal business will apply for all profits.