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June 15, 2020

Algeria enacts 2020 Complementary Finance Act including foreign direct investment incentives

On 4 June 2020, the Algerian Government enacted the Complementary Finance Act for 2020.

This Alert summarizes the key fiscal and investment measures.

Foreign Direct Investment (FDI) incentives

The key FDI measures include:
  • Establishment of an initial list for strategic sectors1 with retention of the 51/49 local majority shareholding rule. This majority obligation no longer applies to non-designated activities.
  • Removal of the State’s pre-emption right as provided for under Law 16-09 dedicated to the promotion of investment.

    Nevertheless, it is specified that any transfer between foreign parties, of the share capital of an entity governed by Algerian Law and related to a strategic sector (as described below), remains subject to prior Government authorization.

  • Elimination of the mechanism restricting use of external financing for investments made by Algerian companies.2 In line with the Government’s objective to attract foreign investors, specifically by modifying the requirement for a majority national shareholding obligation (51/49 rule), the possibility of foreign financing for investments made by Algerian companies has been reinstated.
  • Activities carried out by individuals or companies in the Southern regions of the country3 benefit from a 50% reduction on the paid amounts of Personal Income Tax (PIT) and Corporate Income Tax (CIT), for a period of five years.

    For eligibility matters, individuals or companies must be fiscally registered and permanently established in the below-mentioned regions.

    This incentive does not apply to the hydrocarbons sector, with the exception of the distribution and sale of oil and gas products.

Repeal of provisions Introduced by the 2020 Finance Act

  • Elimination of the taxation, at a withholding rate of 15%, of Companies’ profits (earnings after tax) that were neither distributed nor subscribed to the share capital of the firm within a period of three years.
  • Elimination of the taxation, at a withholding the rate of 15%, of dividends paid to corporates (between resident legal entities).


Increase in taxes

  • The Act increases the rate of the withholding tax applicable on revenue generated by foreign companies involved in service contracts, from 24% to 30%.


1. Strategic sectors: resale activities, mining, energy, hydrocarbons, pharmaceuticals, railways, ports, airports, military related industries and electricity transport.

2. Repeal of the provision introduced by the Finance Act for 2016 providing that: (i) the financing necessary for the realization of foreign investments, whether direct or in partnership, except for the constitution of capital, shall be set up through local financing; and (ii) external financing allocated to the realization of strategic investments by companies under Algerian law was authorized, on a case-by-case basis, by the Government.

3. List of regions: Illizi, Tindouf, Adrar, Tamenghasset, Timimoun, Bordj Badji Mokhtar, In salah, In Guezzam, Djanet.


For additional information with respect to this Alert, please contact the following:

Ernst & Young Algérie, Head of Africa Desk – Maghreb and Francophone Africa and Head of Algeria Tax Practice, Alger
Ernst & Young Algérie, Business Tax Advisory, Alger



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