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3.1. Corporate Tax Residence

The law does not define corporate residence, mainly due to the prevailing territorial tax system. Nevertheless, companies incorporated in Algeria and having therein their registered seat are deemed to be residents. Note that maximum ownership thresholds (see below) govern the participation of foreigners in the capital of Algerian companies. Foreign funding in an Algerian investment project is subject to government approval and certain conditions.

Foreign investment in Algeria is governed by the 49%/51% rule. As per the rule, at least 51% of the capital of an Algerian company must be held by Algerian residents and participation of foreign investors is restricted to 49% of the capital. The rule applied to all business sectors until the Finance Act 2020 removed the restriction on foreign investment with respect to companies operating in the non-strategic sectors. The 49%/51% rule, however, continues to apply to business activities qualified as strategic sectors, which include:

  • Pharmaceutical Industry sector – businesses engaged in manufacturing of pharmaceutical products and medical devices, wholesale of such products and devices, contract research, product registration and promotions, etc.;
  • Energy and mining sector- businesses engaged in extraction and transportation of liquid and gaseous hydrocarbons, extraction and preparation of iron ore, bauxite, precious metal ores, other various metal ores, uranium ore, various mineral products, coal mining and stone quarrying, and others; and
  • Transport sector – businesses engaged in the transportation of passengers and goods on rail, air and maritime as well as handling, land transport infrastructure management, port and airport services.

The 49%/51% rule also applies for military industries and defense activities under the Ministry of National Defense.

Further, the Finance Act 2020 also relaxed the rules governing the state pre-emption right with respect to direct and indirect transfer of shares made by and/or to foreign shareholders in an Algerian company, and the restrictions relating to foreign financing.