Government Role in the Economy


Algeria’s market of 35 million inhabitants, energy wealth, and growing demands for modern infrastructure have generated interest from governments and companies around the world. On one hand, Algeria’s economy is expected to grow at a healthy rate of 3-5% over the next several years based on higher world prices for oil. As Algeria is a non-traditional market for many exporters, Algeria can open doors in several new sectors such as health & nutrition, franchising, and home & housewares.

Algeria is a market that requires patience and determination, it is advised to demonstrate a long-term commitment to maximize their chances of success. Algeria remains one of the few countries not to have joined the WTO. It joined the Arab Free Trade Area at the beginning of 2010.

The Algerian Government has recently implemented new controversial measures concerning trade and investment. Below are policies which have been implemented recently as well as a summary of a ‘Complementary Finance Law’ published in the Official Journal July 26, 2009. The Law contains nine chapters comprising 30 pages.

Policies:

  • Pharmaceuticals ban on 800 drugs (implemented Jan 2009)

  • Refurbished heavy equipment ban (implemented Aug 2009)

  • Freezing of consumer credit (implemented Aug 2009). It is expected that this policy will seriously hurt export opportunities in cars and other large household appliances.

Complementary Finance Law:
I - Investments

  • All foreign investment can only be realized in a 49/51 partnership with Algerian investors. The 51% majority Algerian share can be represented by several Algerian partners or entities.

  • All foreign investments must demonstrate a favorable balance in foreign exchange during the lifetime of the project.

  • The Government and Algeria and state-owned companies can reject or accept all transfers of shares of foreign shareholders.

  • Foreign investments in goods and services must register a Declaration of Investment with ANDI, the National Agency for Investment Development.

  • Foreign investment is subjected to prior review by the National Investment Council, NCI.

  • Foreign investors must commit to preferential treatment for Algerian goods and labor in order to obtain Algerian Government investment incentives. This commitment must be submitted in writing to the CNI and ANDI.

  • Foreign investors are exempt from VAT only when purchasing Algerian products or products that are not produced in Algeria.

  • The CNI has the authority to grant, for a limited period not exceeding 5 years, exemptions or reduction of duties, taxes or charges, including VAT.

  • An exemption period of 5 years on Corporate Tax is granted to companies that create over 100 jobs.

  • Investors that benefit from Algerian Government tax exemptions are required to re-invest the equivalent of their tax exemption inside Algeria within four years of commencing the investment activity.

  • Corporate taxes are established as follows: 19% for production, public works and tourism activities; 25% for commercial and services activities.

  • Commercial banks registered under Algerian law are only allowed to grant loans to individuals as part of real estate activities.

II – Measures affecting imports

  • Import activities can only be exercised by individuals or foreign legal entities within the framework of a partnership whose resident national shareholding is equal to at least 30% of the share capital.

  • A banking domiciliation fee of 10,000 DZD (approx. $150) is levied on each import transaction of goods. For import of services, the fee is 3% of the transaction amount.

  • Capital goods and raw materials are explicitly excluded from this requirement, provided the importer commits in writing that imported goods are not to be re-sold.

  • Algerian importers must obtain a Tax Identification Number, NIF, from the Algerian Tax Administration in order to proceed with import activities.

  • Imports operation may not be carried out by third parties. Banking domiciliation procedures relating to the imports business should be performed by the holder of the trade registration or the general manager of the importing company. The physical presence of the holder is required for border control formalities (Border Police and Customs)

This measure was amended on August 12 2009 authorizing the formalities to be made by a third party provided they can show a mandate as well as an official declaration at the Wilaya (state) where the import company is headquartered.

  • An importing company must domicile its operations at an Algerian bank before beginning business.

  • A letter of credit in the only way to pay for imports. LC’s may only be opened with correspondent banks approved by Algerian banks.

  • Importing companies that want to cancel their trade registration must submit a tax certificate to the National Center of Trade Registration within the Ministry of Commerce within 48 hours of applying for cancellation.

  • The customs administration may engage specialized companies to check goods and perform inspections before shipments arrive to Algeria.

  • These measures enter into effect and are enforceable as of July 27 2009.