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8.2.2. Withholding Taxes

General

Various payments to non-residents without a permanent establishment or fixed business establishment in Algeria attract a final withholding tax at varying rates. The recipient of the income has the option in most cases to elect for net taxation instead, in which case an application for net taxation must be filed within 15 days from the receipt of the relevant income. With respect to contracts involving construction and real estate, however, tax is assessed on a net basis. In that case, a tax prepayment equal to 0.5% of gross revenues received is required to be remitted to the Treasury by the 20th day of the following month and can be credited against the final tax due.

Failing an election for net taxation where available, the withholding tax is due on the gross amount paid. However, in the case of commingled contracts, including both a sale of goods and service or other elements, the component relating to the sale of goods is excluded from the withholding tax base, but only on the condition that the contract components are invoiced separately. Also, any interest component in remuneration of payment in installments of the agreed price is excluded from the withholding tax base. In contrast, where the contract mentions only the net amount payable, a gross-up provision applies whereby the payment is increased by 31.5789% (by 10.619% with respect to lease payments benefitting from 60% tax base reduction, and by 20.192% with respect to computer software payments benefitting from 30% tax base reduction (80% until 31 December 2019, see below)).

The withholding tax is generally due on the gross amount paid. However, withholding tax is due on a reduced tax base with respect to the following: 70% (previously 20% till 31 December 2019) for computer software, 40% for lease payments, and 50% for certain capital gains.

Amounts agreed in foreign currencies must be converted using the official sale price of the relevant foreign currency on the day of the signature of the contract. The transfer of payments and fees in foreign currency is generally subject to a prior declaration to the tax administration and the obtaining of a waiver to the effect that tax was either duly withheld on the payment or not withheld for valid reasons.

Dividend

Tax is withheld at the rate of 15% from gross dividends distributed to non-residents.

Interest

Tax is withheld at the rate of 10% from gross interest paid to non-residents. A 40% rate applies to interest on bearer securities.

Royalty Copyright

Tax is withheld at the rate of 30%% from gross royalties paid to non-residents. A 21% (30% on 70% of the gross amount) rate applies to royalties for the use of computer software.

It is clarified that the reduced rate is applicable only 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 treaty are applicable.

Royalty Patent

Tax is withheld at the rate of 30% from gross royalties paid to non-residents. A 21% (30% on 70% of the gross amount) rate applies to royalties for the use of computer software.

It is clarified that the reduced rate is applicable only 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 treaty are applicable.

Royalty Trademark

Tax is withheld at the rate of 30% from gross royalties paid to non-residents. A 21% (30% on 70% of the gross amount) rate applies to royalties for the use of computer software.

It is clarified that the reduced rate is applicable only 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 treaty are applicable.

Service Management

Tax is withheld at the rate of 30% (previously 24% until 30 April 2020) if the fees are deemed to be made for services of any nature furnished or used in Algeria by a non-resident without an Algerian business establishment.

However, tax is withheld at the rate of 20% on service management fees if the services are rendered under a “management contract.”

Service Technical

Tax is withheld at the rate of 30% (previously 24% until 30 April 2020) on payments made by an Algerian resident for technical services furnished or used in Algeria by a non-resident without an Algerian business establishment.

Capital Gains

Capital gains on the disposal of shares and similar securities by non-resident legal entities are subject to tax at the rate of 20%. Gains on shares realized by non-resident venture capital companies qualify for a 50% exemption (taxed at 20% but only on 50% of their amount).

Shipping Companies

A 10% withholding tax applies to revenues derived by non-resident shipping companies, but only to the extent the country of residence of the relevant company imposes a tax on Algerian shipping companies. Pursuant to a reciprocity clause, the effectively applicable rate in Algeria will mirror the rate applicable to Algerian shipping companies in the relevant foreign country and, therefore, may be lower or higher than the standard 10% rate.

Lease Payments

Payments for the lease of equipment are subject to withholding tax at the rate of 30% but only on 40% of their amount (effective rate of 12%).

Below is a discussion of domestic withholding tax rules for most of the common cross border payments.

Capital Gains 20.0 %
Dividends 15.0 %
Interest 10.0 %
Royalty Copyright 30.0 %
Royalty Patent 30.0 %
Royalty Trademark 30.0 %
Sales 0.0 %
Service Management 30.0 %
Service Technical 30.0 %

* Rates are current as of 18 September 2022