Algeria updated its transfer pricing documentation requirements with the Decree of 17 November 2020, which was published in the Official Gazette in January 2021 and replaced the Decree of 12 April 2012. While the general requirements for initial documentation were maintained, including basic group documentation and company-specific documentation, the required content of the documentation was revised/expanded and detailed requirements were introduced for complementary (additional) documentation.
Initial documentation, which is submitted with the return, includes:
- Basic Documentation Concerning the Group
- a general description of the activities performed, including any changes that occurred during the fiscal year;
- a description of the organizational structure displaying the legal and equity relationships as well as the geographical location of the operational entities;
- a description (including if necessary, in the form of diagrams or flowcharts) of the supply chain for the five main products or services offered by the group;
- a description of the main geographic markets where the group's main goods and services are sold;
- a general description of the functions performed, risks assumed, and assets used by each of the related companies that affect the enterprise operating in Algeria;
- a list of the main intangibles held by the group (patents, trademarks, trade names, know-how, etc.) to the extent relevant to the enterprise conducted in Algeria, as well as the entities that legally own it; and
- a general description of the group's transfer pricing policy, including in relation to R&D and intangibles;
- Company-Specific Documentation:
- a detailed description of the activities and strategy of the local enterprise, including the types of transactions carried out, and whether or not it has been involved in or impacted by restructuring operations or transfers of intangibles during the reporting year and the preceding year;
- a description of the transactions performed with other related entities, such as the purchase of manufacturing services, the acquisition of goods, the provision of services, etc.;
- copies of the auditor's annual report and financial statements for the year covered by the documentation;
- a description and justification of the transfer pricing methods used by reference to a comparability and functional analysis;
- a list and description of the service level agreements with related entities, including cost-sharing, licensing, and research contracting agreements;
- a list of the intangibles that are key to the determination of the transfer pricing policy and of the entities that are the legal owners thereof; and
- information on any transfer of intangibles between the related entities and the corresponding remuneration.
Complementary documentation, which may be requested in the event of an audit and must be submitted within 30 days, includes:
- A general description of the group's strategy with respect to the development, ownership, and exploitation of intangibles, including the location of the main R&D centers and of the management of R&D activities;
- A description of the restructuring operations and of the transfer of assets within the group during the year(s) under audit;
- A functional analysis addressing the value creation within the group by reference to the key functions, risks, and assets;
- Identification of each group entity involved in the audited transactions, including its relations with the audited Algerian enterprise;
- A detailed functional and comparability analysis of the audited taxpayer and of related entities for each category of transactions mentioned in the documentation, including changes from previous years if any;
- A description of the transactions with group entities including their nature and amounts (may be aggregated by global flows or type of transaction);
- Copies of all agreements with related entities; and
- Copies of all intra-group agreements concluded by the audited enterprise as well as of any unilateral, bilateral, or multilateral APAs or other decisions by foreign tax authorities impacting the determination of the transfer prices by the audited enterprise.
The latest decree also specifies which companies are required to prepare the documentation, which is in line with the extension of the documentation requirements by the 2018 Finance Law, including:
- Members of a group of companies, including those operating in the hydrocarbon sector; and
- Foreign companies undertaking temporary activities in Algeria on a contractual basis.
Where a taxpayer fails to produce documentation or produces incomplete documentation, whether initial or complementary, the tax authorities will issue a notice to comply with the requirement within 30 days. Failing to comply within the 30-day limit may result in sanctions, including a fine of DZD 2 million. In addition, a 25% penalty may be imposed on any tax reassessments.