On 2 January 2021, Government Officially published a Decree of 17 November 2020, which replaces the Decree of 12 April 2012. Initial transfer pricing documentation, which is submitted with the tax return, includes:
- Basic documentation regarding Group
- a general description of the field(s) of activity
- exercised including changes occurring during exercise ;
- a diagram illustrating the legal and capital structure of the group as well as the geographical location of the entities operational;
- a description of the supply chain of the five (5) main goods or services offered by the group. The required description could take the form of a diagram or diagram;
- a description of the main geographic markets where the main goods and services of the group are sold;
- general description of the functions performed, the risks incurred and assets committed by each of the companies related and which affect the company operating in Algeria;
- the list of the main intangible assets or categories of intangible assets of the multinational group held (patents, trademarks, trade names, know-how, etc.), in relation to the company operating in Algeria, as well as entities that legally own it;
- a general description of the pricing policy of transfer of the group, in particular that relating to research development and intangible assets.
2. 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.
- 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.
3. Complementary documentation
This additional documentation 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 in the development, ownership and operation of intangible assets. This description includes in particular the location of the main research facilities and development and that of the management of the activities of research and development;
- a description of the reorganization operations businesses as well as acquisitions and divestitures assets occurring during the audited year;
- a functional analysis describing the main contributions of the various group entities to the creation of value, i.e. the key functions performed, the risks material assumed and material assets used;
- an identification of the associated companies involved in each category of controlled transactions and their relationship with the audited company;
- a comparability analysis and a functional analysis details of the taxpayer and associated companies for each category of controlled transactions mentioned in the documentation, including any changes by compared to previous years;
- a description of the transactions carried out with other affiliated companies (such as purchase of services of manufacturing, procurement of goods, provision of services, loans, financial guarantees and guarantees of good execution, licensing of assets intangible assets etc.) including the nature of the flows and the amounts, including royalties. These elements can be presented by global flows, and by 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.
On the other hand, this new Decree also describes the companies, which are required to prepare the documentation, in line with the extension of the documentation requirements by the 2018 Finance Law, including:
– Company group members, including those operating in the hydrocarbon sector; and
– Foreign companies undertaking temporary activities in Algeria on a contractual basis.
Penalties for documentation failure
According to the Decree, if a taxpayer fails to submit documentation or submit an 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. Additionally, a 25% penalty may be imposed on any tax reassessments.
