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April 22, 2019
Algerian Tax Authority issues additional guidance on limitation of technical assistance costs and interest deductions under 2019 Finance Act
The Algerian Tax Authority recently issued Circular N’01 IMF / OGI / DLRF / LF19 (the Circular). The purpose of the Circular is to clarify the application of Article 2 of the 2019 Finance Act (FA 2019),1 with respect to amendments to the provisions of Article 141 of the Code of Direct Taxes and Assimilated Taxes, regarding:
The limitation of the deduction of technical assistance costs related to services rendered by foreign companies
It should be noted that under Article 2-1 of FA 2019, amounts paid by local taxpayers for technical assistance costs to a foreign-based company are considered deductible in the determination of taxable profits subject to the following limitations:
The Circular, through an example, confirms that a reinstatement is mandatory in the case where one of the two thresholds is exceeded (turnover or overhead).
It also indicates that the threshold is to be taken into consideration for the determination of the non-deductible portion of the costs is the lowest threshold.
The Circular states that technical assistance always involves a transfer or a complement to know-how or technology that cannot be linked to other types of services. Accordingly, technical assistance can be defined by its content and includes the provision of specialized technicians as well as technology support contracts.
The Circular sets forth the following examples:
The limitation on interest deductions
According to Article 2 of FA 2019:
It is important to note that these measures are not applicable (retroactively) for the determination of the taxable basis for 2018. They are applicable to the costs incurred during the fiscal year 2019.
1. See EY Global Tax Alert, Algeria’s 2019 Finance Bill introduces new tax measures, dated 23 January 2019.
For additional information with respect to this Alert, please contact the following:
Ernst & Young Tax & Legal Algérie, Head of Africa desk – Maghreb and Francophone Africa and Head of Algeria Tax Practice, Alger
Ernst & Young Tax & Legal Algérie, Business Tax Advisory, Alger