The Algerian government has eased restrictions for reinvesting tax savings under the Algerian investment incentives regime. The government expects that this will attract more foreign investment in Algeria.
Determining the reinvestment amount
On 24 March 2024, the Algerian government released Circular No. 27/MF/DGI/DIVCEF/LF23 to explain the effects of the new policies introduced under Article 09 of the Financial Act for 2023.
The Financial Act for 2023 was introduced after amending Article 142 of the Direct Tax Code.
After launching investment incentives in 2008, investors taking advantage of this regime had to reinvest all their tax savings from the setup and operational phases of their investments in Algeria within four years.
The Financial Act for 2016 restricts this requirement, requiring 30% of the tax savings to be reinvested from the exploitation phase within four years.
The Financial Act for 2023 introduced a new regulation, which capped the mandatory reinvestment of tax savings from the exploitation phase at 30% of distributable income.
As a result, the maximum amount that must be reinvested for any fiscal year is limited to 30% of the distributable income. The remaining amount can be distributed among shareholders.
Reinvestment timelines
Circular No. 27/MF/DGI/DIVCEF/LF23 stipulates that reinvestment must occur within four years; this period begins on the final day of the fiscal year.
The Circular also states that reinvestment operations must span one or more fiscal years but cannot exceed four years.
Reinvestments forms
Reinvestment should occur as mentioned in the following:
- Acquiring tangible or intangible assets related to goods and services production.
- Acquisitions related to activities not eligible for tax incentives are not considered as reinvestments.
- Buying investment securities.
- Acquiring shares or equivalent securities to invest in the capital of companies engaged in producing goods, public works, constructions, or providing services, with the condition that the total profit slated for reinvestment is fully paid.
- Investing in the equity of companies designated as “start-ups” or “incubators”, with the condition that the total profit that will be reinvested is fully paid.
The new measures introduced by the Financial Act of 2023 took effect on 1 January, 2023, and will be presented in the 2024 tax filings.
