To make Algeria more attractive to foreign investors, the Algerian government has simplified the requirements to reinvest part of the tax savings generated under the Algerian investment incentives regime.

Determining the reinvestment amount

Circular No. 27/MF/DGI/DIVCEF/LF23, dated on 24 March 2024, was issued to clarify the implications of the new measures introduced by Article 09 of the Financial Act for 2023, modifying Article 142 of the Direct Tax Code.

Following the introduction of the investment incentives in 2008, investors benefiting from the incentives regime were required to reinvest, within four years, all of their tax savings related to the investment's setup and exploitation phases in Algeria.

The Financial Act for 2016 limited this obligation to reinvesting, within four years, 30% of the tax savings related to the exploitation phase.

The Financial Act for 2023 introduced a cap to the obligation to reinvest 30% of the tax savings related to exploitation phase — the cap is 30% of distributable income.

Consequently, the amount to be reinvested for a fiscal year should not exceed 30% of the distributable income. The remaining amount could be distributed to the shareholders.

The distributable income refers to net income after tax and after deduction of the legal reserves, as defined in Article 722 of the Algerian Commercial Code.

Reinvestment timelines

Circular No. 27/MF/DGI/DIVCEF/LF23, dated on 24 March 2024, indicates that the reinvestment should be conducted within a four-year period; the calculation's starting date is the last day of the fiscal year of the income subject to the preferential regime.

The Circular clearly specifies that the reinvestment operations should be conducted on one or several fiscal years without exceeding the four-year timeline.

Note that if accumulated tax savings to be reinvested relates to several fiscal years, the four-year timeline is calculated separately for each fiscal year.

Form of reinvestments

The reinvestment should take the following forms:

• Acquisition of tangible or intangible assets in connection with the production of goods and services; acquisitions that are part of activities not eligible for tax savings are not considered reinvestment transactions
• Acquisition of investment securities
• Acquisition of shares or similar securities to participate in the capital of another company involved in the production of goods, public works, buildings or services, provided that the full amount of the benefit to be reinvested is paid up
• Participation in the capital of a company with the "start-up" or "incubator" label, subject to the full amount of the benefit to be reinvested being paid up

Effective date

The new measures introduced by the Financial Act for 2023 have been in force since 1 January 2023. Consequently, they are applicable for the fiscal year 2023 declared in 2024 tax filings.