Algeria’s Tax Laws For 2021 Grant Startups, Incubators A Range Of Exemptions

Labelled startups and incubators in Algeria will be the greatest beneficiaries of the country’s proposed finance law. The 2021 Finance Bill which was submitted to the country’s Council of Ministers on Sunday 04 October 2020, provides for changes in taxes (Tax On Professional Activities, TAP; and Value-added Tax VAT).

Tax law

The most striking incentives under the 2021 Finance Bill concern startups. Considered as “the engine” of Algeria’s new economic model, companies in Algeria with a startup label will be exempt from several taxes, starting with the TAP (tax on professional activity) and the IBS (tax on corporate profits. companies) for a period of 2 years from the date of obtaining the said label. 

“Exempt from VAT and subject to 5% of customs duties, are equipment acquired by companies with the label “startup”, ” says article 84 of the bill. 

“The purpose of this measure is to allow the Algerian startup to devote all of its financial resources, as well as all the attention of its management to activities related to its startup and rapid development,” the bill further states. 

For companies with the “incubator” label, they are also exempt from TAP, IBS in addition to Global Income Tax (IRG) for a period of 2 years. 

“Exempt from VAT are equipment acquired by companies with the “incubator” label entering directly into the realization of their investment projects,” the bill states. 

On October 3, a meeting on startups took place, in the presence of Tunisian President Abdelmadjid Tebboune. The head of state officially launched the Startup Fund.

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Read also: As AfCFTA Comes Into Force In 2021, Here Are Key Points Startups Should Know About The Agreement

Changes In VAT Are Also Favourable To Startups 

According to Article 8, Paragraph 2, of the Algerian Code on Turnover Taxes (P9), persons (whether natural or legal, such as startup companies) whose total turnover is less than or equal to 30,000,000 DA ($227m), were excluded from the scope of the value-added tax. The 2021 Finance Bill modifies this second paragraph and plans to exclude from the scope of the VAT, businesses carried out by persons subject to the Single Flat Tax regime. A flat tax refers to a tax system where a single tax rate is applied to all levels of income.

Algeria’s Complementary Finance Law of 2020 also modifies the provisions of Article 50 on the granting of VAT refunds. Consequently, to qualify for VAT refunds, the beneficiary must hold a regular account in the form, produce a statement of assessment, and declare its earnings monthly. Repayment requests must relate to a tax credit equal to or greater than one million dinars (1,000,000 DA) — $7570.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer