Algeria's General Directorate of Taxes (DGI) issued new clarifications in June regarding the tax framework for non-resident foreign companies operating in Algeria. The DGI released these clarifications through two regulatory circulars, number 43 and number 45. These regulatory circulars provide essential guidance for non-resident foreign companies. Circular 45 specifically outlines the tax obligations for non-resident foreign companies working in Algeria, detailing the specific requirements they must meet. The clarifications aim to unify the application of provisions from the Finance Law for 2026, ensuring consistent interpretation and implementation across all affected entities.
New Rules on Deemed Profits
Circular 43 addresses the tax on deemed distributed profits for non-resident companies operating in Algeria. This clarification follows an amendment to Article 46 of the Direct Taxes and Similar Duties Code, which was introduced by Article 6 of the Finance Law for 2026. Prior to this amendment, until December 31, 2025, the tax on deemed distributed profits was conditional on the actual transfer of profits abroad. The recent amendment, however, removed this condition, streamlining the taxation process.
Under the new framework, the tax-generating event is now considered to be the net profit after tax upon the closing of the fiscal year. This means that net profits realized by branches or permanent establishments of foreign companies in Algeria, after corporate income tax deductions, are regarded as deemed distributed profits, regardless of whether they have been physically transferred out of the country. The tax becomes due upon the liquidation of the final balance of the corporate income tax. The tax base for these deemed distributed profits consists of the net profits realized after paying corporate income tax, with the applicable rate for distributions to non-residents. Payment of this tax must be made using the payment voucher "G series number 50." The deadline for payment is the twentieth day of the month following the deadline for submitting the annual results declaration, ensuring a clear timeline for compliance.
Permanent Establishments and Contracts
Article 13 of the Finance Law for 2026 introduced Article 153 bis into the Direct Taxes and Similar Duties Code, establishing new tax obligations for foreign entities. Foreign companies operating in Algeria through a permanent establishment or other professional establishment are now subject to the same tax obligations as legal entities covered by the real profit system. This measure aims to standardize the tax treatment for these entities within the Algerian framework, promoting equity and clarity in the tax system.
Additionally, Article 161 of the Direct Taxes and Similar Duties Code underwent an amendment specifically clarifying obligations related to contracts. Foreign companies are now required to submit a copy of the original contract, any subsequent new contracts, all associated appendices and amendments, and any decisions regarding contract termination to the competent tax administration. These submissions must be completed within the legal deadlines stipulated by the DGI. This change reinforces the regulatory oversight of foreign business activities and their contractual agreements within the country, ensuring transparency and proper documentation.
Expanded Tax Penalties
The scope of the tax penalty outlined in Article 194-5 has been significantly expanded. This broader penalty now encompasses compliance with accounting obligations for foreign companies. These obligations include maintaining a numbered and indexed register of purchases, acquisitions, revenues, salaries, bonuses, commissions, service fees, and rents. The expansion aims to enforce stricter adherence to financial record-keeping standards for non-resident entities operating in Algeria, ensuring full and accurate financial reporting. This move shows the DGI's commitment to enhancing fiscal discipline and ensuring that all foreign companies operating within its jurisdiction adhere to the established accounting and tax regulations.