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8.1.1. Corporate Income Tax

Algeria applies different corporate tax rates depending on the economic sector of the activity of the taxpayer. The standard rate is 26% and applies as a default rate unless the taxpayer is eligible for another specified rate. Capital gains are generally included in taxable income and taxed at the standard corporate tax rate. However, capital gains derived from the sale of shares are subject to tax at the rate of 15%.

The other rates are as follows:

  • 19% for manufacturing activities including extraction, production, shaping, and transformation, but excluding packaging and commercial display for resale purposes. Effective 1 January 2022, a reduced rate of 10% applies to qualifying manufacturing companies on profits reinvested in the acquisition of capital assets, or the acquisition of shares, or other securities representing at least a 90% participation in the capital of another manufacturing, construction, or service company;
  • 23% for construction activities (including real estate, public works, and hydraulic projects), as well as for tourism services (including accommodation along with restaurants, entertainment, etc., but excluding travel agencies and hotels that only provide accommodation); and
  • 5% withholding tax rate on dividends distributed between resident companies that are subject to corporate income tax or expressly exempted (effective 1 January 2022).

For the purposes of the above, activities related to mining and hydrocarbons are not considered as manufacturing activities and are, therefore, outside the scope of the reduced 19% rate. Further, construction activities are eligible for the 23% rate only if listed as such in the Commercial Register, and only if giving rise to the payment of the social security contributions specific to the construction sector.

In general, the determination of the applicable rate depends on whether or not the relevant activities are specifically stated in the company’s registration documents. In the case of consolidated groups where the group members are engaged in different activity sectors, the applicable rate will be the one corresponding to the group’s preponderant activity. Where there is no preponderant activity, the income corresponding to each type of activity will be assessed at the rate corresponding to that activity. In the case of multiple business activities other than within consolidated groups, income from each activity is assessed to tax at the rate applicable to the relevant activity on the condition that the taxpayer keeps separate books of accounts for each activity. The taxpayer is required to allocate direct and indirect charges to, and determine the income derived from each sector of activity as if it were an independent enterprise.

According to the tax administration, the taxpayer may elect to either follow analytical accounting methods and attribute actual cost and revenues to each activity or allocate costs and revenues based on the proportion of turnover of the relevant activity to aggregate turnover. Failing the maintenance of separate accounting, the standard 26% rate applies by default to the taxpayer’s aggregate income.  

Effective 1 January 2021, listed companies are eligible for a reduction in corporate income tax for a period of 3 years. The reduction is equal to the opening rate of the share capital on the stock market.

Single Flat Tax

An alternative taxation system known as the single tax on presumed income (IFU) applies to natural persons and eligible entities with a turnover not exceeding DZD 8 million (reduced from DZD 15 million effective 1 January 2022) in a given year. Legal entities were excluded from the scope of application of IFU from 1 January 2020 but reinstated with restrictions, and the option to opt for the regular profit tax regime, from 1 May 2020. As from that date, entities active in the following sectors are not eligible for the IFU:

  • Real estate development;
  • Importing goods for resale;
  • Clinics and healthcare activities;
  • Classified catering and hotel activities;
  • Precious metal refiners and recyclers, manufacturers and merchants of gold and platinum works; and
  • Public, hydraulic, and building works.

Effective 1 January 2021, taxpayers under the IFU tax regime are excluded from the scope of VAT.

The IFU is assessed at the following rates:

  • 12%, in the case of service delivery activities; and
  • 5%, in the case of production and sales activities, including distribution of goods and services via digital platforms or through the use of the network (introduced by Finance Act 2019).

Tax on Professional Activity (TAP)

TAP  applies in addition to the corporate tax. For corporate taxpayers, the tax is due on the gross turnover (exclusive of VAT) derived from activities conducted in Algeria, but tax base adjustments ranging from 25% to 75% or outright exclusions from the tax base apply to various economic sectors. The TAP rates are:

  • 1.5% standard rate (reduced from 2% effective 1 January 2022) with 25% reduction in the tax rate for building and hydraulic activities, 30% reduction in the tax rate for wholesale transactions, etc.;
  • 1% (without any deductions) on manufacturing activities; and
  • 3% on hydrocarbon pipeline transport activity.