Company Formation in Algeria:
In Algeria for attraction of the foreign investment, persuading the foreign investor as well as the domestic investors and facilitating them, the legal cover has been provided. The establishment of the five Free Trade Zones in Algeria where investments are exempt from all customs, taxes and other fees are really causes for the attraction of investment and motivation of the foreign investors as well as the domestic investors.
The Algerian Investment Code (Code des Investissements), amended by Ordinance 01-03 of August 20, 2001, stipulates the regulations applicable to national and foreign investments made towards the production of goods and services as well as to investments resulting from the attribution of concessions and/or licenses. Any establishment, expansion, rehabilitation or reorganization conducted by a legal entity and relating to economic activities to produce goods and services (with the exception of trade) is likely to benefit, as specified by the Investment Code. In this regard, the regulations apply to both residents and non-residents. The guiding principle is that, the greater the investment interest for the Algerian economy, the more significant the advantages granted.
Customs tariff dismantling came into effect on 1 January 2002, based on eight-digit international HS nomenclature and comprising four customs duty rates: 0 percent, 5 percent, 15 percent and 30 percent, according to the degree of transformation of imported materials. The 5 percent rate is applied on raw materials and capital goods, the average rate of 15 percent to semi-finished and intermediate products and the highest rate of 30 percent to consumer products. Tax exemptions are also available in some sectors and for the equipment needed for new investments. Customs fees have been removed, but provisional additional duty (DAP) of 12 percent is applied to protect goods produced locally, to be abolished by January1, 2006. 
Free Trade Zones in Algeria:
There are five free trade zones in Algeria where investments are exempt from all customs, taxes and other fees.
Entrepreneurs desiring to enter the Algerian market can either open a branch office or set up a company by creating a legal entity under Algerian trade law, a joint venture with an Algerian resident (private individual or corporate entity) by creating a mixed investment Company (SEM), or securing shares in the capital of an already existing company.
The National Agency for the Development of Investment (Agence Nationale de Développement de l’Investissement, A.N.D.I.):
This agency is the substitute of the Agency for the Promotion, Support and Monitoring of Investment (Agence de Promotion, de Soutien et de Suivi des Investissements”, A.PSSI). Its mission is to Promote, develop, and monitor investments, Welcome, inform and help investors. Make easy the implementation of official procedure when companies are formed. Make easy investment projects by decentralizing the services presented and grouping them in a single office. Grant investors benefits they can claim under the present system. Manage programs of financial help to investors. Make certain completion of promise by investors during the exemption period.
Limited Liability Companies (“Sociétés à Responsabilité Limitée”, SARL):
Losses are restricted to the partner’s contributions. Requirement for minimum amount of share capital is 100,000 DA. Management modalities (one or several managers) are required.
Joint Stock Companies, J.S.C. (Sociétés par Actions, S.P.A.):
The numbers of shareholders are less than 7 and the requirement for minimum amount of the share capital is 1,000,000 DA. For the management of SPA a board of directors or directory and supervisory board are required.
Limited Partnership with Shares (Sociétés en Commandites par Actions), SCA:
The general partners are jointly responsible for the debts of the company whose shares are not freely transferable.
Individual limited company (EURL):
Requirement for minimum amount of share capital is 100,000 DA for EURLs.
Joint venture (SNC):
SNC are not registered in the Registry of Commerce and devoid of legal personality.
Sleeping partnership (SCS):
Holding company (SP):
Operating a business as an individual with no input from other people
Sole Partnership and Sole Ownership:
Assets and taxation are tied to the owner Socieites, No minimum capital requirement, especially suited to SME.
Procedures are required to form a company in Algeria:
The Deeds must be recorded and a deed drawn up by the notary (solicitor).
The constitutions of the company shall on pain of nullity be published in an official bulleting of legal notices.
The constitution of the company must be introduced to the court.
Registration in the commercial register must be made within two months of incorporation.
If you have created a partnership or corporation, you must, within 30 days of the beginning of your business subscribe to the Inspector of taxes.
Starting a business in Algeria takes approximately 24 days.
Confirm uniqueness of company name from the Centre National du Registre du Commerce (CNRC) and pick up registration forms.
Deposit start-up capital with a notary republic, which will deposit capital in a bank and obtain a deposit certificate before drawing up statutes.
Draw up and notarize company constitutional documents.
Submit specimen of managers’ signatures.
Prepare and submit the release for the registered office of the company.
Obtain the criminal record and birth certificate of the manager.
Publish the company constitution on the legal journal, Official Bulletin of Legal Announcements (BOAL), and a nationally circulated newspaper.
File company registration with the commercial registry within two months of company’s formation.
Pay for the stamp duty and obtain a receipt.
Register for income tax, Impot sur le revenue global des personnes physiques (IRG), corporate tax, Impot sur les benefices des personnes moreal ou des societies (IBS), and value added tax (VAT) with the local tax inspector.
Register with the Caisse National des Assurances Sociales des Travailleurs Salaries (CNAS), a social security department.
Open the company’s bank account with a commercial bank.
Register with the Caisse National de Security Sociale des Non Salaries (CASNOS), another social security department.
Register with the Unemployment Insurance Fund (CNAC).
Make a company seal.
Have company’s accounting books stamped at the court.
Note: Just before you begin the process to start a business, confirm details with knowledgeable entities. Policies and procedures may alter between the time of this publication and when you start the process. The World Bank provides a list of local partners that helped collect and document business-related procedures here.
However, following the Supplementary Finance Law for 2009, foreign investments in Algeria must be preliminarily declared to the National Investment Development Agency (Agence Nationale pour le Développement de l’Investissement – ANDI) and seek prior approval of the National Investment Council (Conseil National de l’Investissement – CNI).
Furthermore, there is a foreign investment restriction in that an Algerian national resident partner must have at least 51% of the share capital.
The following are considered to be investments as per Algerian rules:
Acquisition of assets which fall within the framework of the creation of new activities or which are likely to expand production capacity, or to renovate or restructure manufacturing facilities.
Participation in the capital of enterprises (in the form of in-kind or cash contributions).
Buyout of activities within a total or partial privatization.
According to the new rules mentioned above, branches of foreign companies are no longer permitted in Algeria. Therefore, liaison office plays a pivotal role in formation of a company in Algeria.
It is compulsory to have a physical address for the head office, which must be proved by the ownership of the premises or a notarized lease.
Once all requisite documentation has been collated (which will require to be legalized by the relevant Algerian consulate for foreign documents), the preliminary steps mentioned above have been fulfilled, and the corporate name reserved, the articles of association must be signed in the presence of a notary, who would then proceed to a publication regarding the creation of the company.
Registration is also necessary to be made with the trade register (Centre National du Registre du Commerce – CNRC) and later with the tax administration and the social security administration (CNAS). It should be noted that specific declarations must be met when importing the share capital to ensure future repatriation of dividends.
Foreign companies coming to Algeria to carry out specific and punctual services or construction contracts may operate by way of registration with the tax and social security administration, but without the need for a legal entity to be established in the country.
Foreign exchange rules are significant in Algeria and any transaction of funds must be made through a commercial bank which is responsible for its compliance with existing rules and to report such movements to the Central Bank. Specific conditions and formalities exist, for example, for dividends, technical support and importation of services. Dividends cannot be transferred when they are derived from a trading activity but only when they come from a production (of goods or services) activity. Importation of goods must be paid by documentary credit. Importations of service, when authorized, are subject to the payment of a 3% domiciliation tax.
Apart from the share capital, investments in Algeria must be financed locally.
For Financial Services:
Financial services are subject to a specific regulation and are under the authority of the Central Bank and the Credit and Monetary Council (Conseil de la Monnaie et du Crédit – CMC).
Accounting/Finance for companies and Algerian branches of foreign companies:
All companies must produce annual financial statements, management report and additional appendices. Such financial statements must be published with the CNRC one month after the annual general meeting that has approved them and in no case after 31 July. Failing to meet this requirement can lead to a fine of 300,000 DA and being listed on the “swindlers’ file” which implies exclusion from all public bids and inability to transfer funds outside Algeria.
Presently all companies must have their annual accounts audited by duly registered Algerian auditors. Audit fees are defined by law. 2010 Finance Law has excluded EURLs and smaller companies from this obligation, on the basis of their amount of turnover (< 10,000,000 DA).
As mentioned earlier, foreign investors have certain obligations and requirements that require to be fulfilled, namely, preliminary declaration to ANDI, get prior approval of the CNI and requirement for an Algerian national resident to hold 51% of the share capital for companies formation after 28 July 2009.
Furthermore, a pre-emption right that benefits the Algerian state and state owned companies has been introduced in recent times regarding a transfer of shares of an Algerian company made to or by foreign shareholders.
There is no compulsion to have resident managers for the company. However, in practice, tax administration requires at least an address in Algeria for the person designated as the company’s representative and a certain number of procedures require physical presence of the manager.
Accounts must be presented for a twelve month period which is the calendar year. The first financial year may be extended, upon approval by the tax administration. Books must be kept in Algerian Dinars and a certain number of formal requirements must be followed to avoid rejection of the accounts in case of a tax audit.
Format Starting January 2010, the Algerian Accounting Rules Changed Significantly:
Both accounting principles and financial statements formats have been harmonized with IFRS principles. The new system is required for all companies, except the smallest ones.
The main changes with prior system are the compulsion to make a cash flow statement and some notes as part of financial statements, and to book adjustments for leasing, pension provisions, provisions for impairment, deferred taxation etc.
Another important impact will be that companies will no longer be authorized to present significant amounts in extraordinary items.
There is no specific approval required for tax purposes. However, all companies must register with the tax administration and get a tax identification number. Additional registration may be essential for the purposes of tax on professional activity, which is paid locally for each site where the company operates.
Advance Tax Rulings/Advance Pricing Agreements (APA):
Such processes are not properly organized under Algerian law but it is in practice always likely to raise questions to the tax administration and ask for confirmation regarding the tax treatment of a specific operation.
Income tax compliance Apart from the accounting obligations mentioned above, taxpayers must submit a declaration of existence to the tax authorities having jurisdiction over the territory in which they operate within thirty days after beginning their activities.
At the time of transferring or winding up a company, payable taxes will be at once assessed on the basis of the income that has not yet been taxed.
Taxes on corporate profits are set up in the name of legal persons where their headquarters or their main establishment is located.
The annual income statement must be submitted at the latest by 30 April each year. If the entity has suffered losses, the amount of the shortfall must be declared under the same conditions.
Starting from 2010, the deficit of a financial year is deductible from the profits of subsequent fiscal years up to and including the fourth fiscal year:
1. The freedom to offset losses against profits is given to firms during this four-year period; however the firms must post their oldest losses first.
The payment of taxes by firms established under Algerian law consists of three installment payments of 30% of the taxes pertaining to the income of the last fiscal year. The tax balance is recovered by spontaneous payment without a tax roll.
Corporate income tax rate is 25% of profits for services or distribution activities, and 19% of profits for construction, public works, tourism and production of goods.
In the case of newly formed corporations, each installment payment is equal to 30% of the tax calculated on the basis of an estimated 5% yield on called-up capital.
Indirect tax compliance Value-added tax (VAT) applies to any activity pertaining to sales operations, construction works, the performance of services and importation, regardless of the legal status of the persons concerned in conducting these operations and without consideration of their situation with regard to the provisions contained in the legislation as far as other taxes.
In the case of sales, a transaction is deemed to have taken place in Algeria when it is carried out in accordance with delivery terms and conditions of the merchandise in Algeria.
Before the finance law for 2010 this period was of five (5) years. In the case of other operations, a transaction is deemed to have taken place in Algeria, when the service performed, the transferred right, the rented object or the studies done are used or exploited in Algeria.
The normal rate is 17% and reduced rate is 7%. Some operations are exempted.
Other tax compliance Companies operating in Algeria also have other tax obligations, such as the payment of tax on professional activity (Taxe sur l’Activité Professionnelle – TAP), which is a tax based on turnover and normally equal to 2% of turnover.
Companies are also responsible to withhold a certain number of taxes, the most important of which being the income tax due by their employees on their salaries (paid according to a progressive rate, from 0 to 35%), as well as social security contributions. It might also be required to withhold taxes due by Foreign Service providers.
Director’s liabilities to tax Directors are not necessary, subject to tax in Algeria. However, the managers acting on behalf of companies or the CEO (Directeur general) are deemed to have an activity in Algeria and therefore should be subject to tax.