Costs incurred as part of corporate research and development may be deducted from income or profit (IRG/IBS) up to a maximum of 30% and up to a maximum of 200 million dinars.
With the help of these incentives, businesses of all sizes and types are urged to invest in R&D to increase their competitiveness and produce more competitive and creative goods and services.
Open Innovation
Deduction of up to 30% of revenue or profit (IRG/IBS) and a maximum of KD 200 million for costs associated with open innovation initiatives completed in conjunction with organisations that have acquired the “Startup” or “Business Incubator” label.
By allocating R&D expenses from large firms to startups and business incubators, this approach seeks to incentivize investment in incubators and startups within the context of open innovation.
Investing in startups:
30% of the exemptions received through the Algerian Agency for the Promotion of Investment are reinvested, on average, in incubator or startup capital.
This policy intends to encourage the private sector to contribute more to startup funding.
The maximum annual turnover is established at five million Algerian dinars, and the single tax rate is fixed at 5% for operations carried out under the self-employment legal system.
Charles Rapulu Udoh is a Lagos-based lawyer, who has several years of experience working in Africa’s burgeoning tech startup industry. He has closed multi-million dollar deals bordering on venture capital, private equity, intellectual property (trademark, patent or design, etc.), mergers and acquisitions, in countries such as in the Delaware, New York, UK, Singapore, British Virgin Islands, South Africa, Nigeria etc. He’s also a corporate governance and cross-border data privacy and tax expert. As an award-winning writer and researcher, he is passionate about telling the African startup story, and is one of the continent’s pioneers in this regard
In terms of funding for startups in Africa, Nigeria and Algeria are miles apart. In fact, startups based in Africa’s “Big Four” — Nigeria, Kenya, South Africa, and Egypt– raised 80% of the $1.19 billion in capital raised by African startups in the first half of this year. South Africa and Nigeria drew more than half of the money (28 percent and 27 percent, respectively, each worth $300 million). This is despite the fact that startups in the West African country are being chopped regularly at the guillotines of regulators — CBN; SEC; NITDA, etc.
On the contrary, although Algeria has not seen floods of this funding for its startup ecosystem, it has, nevertheless, not failed to create a favourable ecosystem, by way of policies and financial support system, to make that happen.
And so, intrigued by this, a delegation from the Nigerian Institute of Political and Strategic Studies (NIPSS) set out on a journey to the North African country to learn a few or more things. This gone Wednesday at Algiers, they were introduced to the country’s startup support system by the Minister Delegate in charge of Knowledge Economy and Startups, Yacine El-Mahdi Oualid.
The visit allowed for the exchange of experiences and the presentation of Algeria’s efforts to promote the startup ecosystem through “effective policies aimed at the development of startups in Algeria,” according to the executives from the two nations present at the ceremony.
The Nigerian delegation would travel to six (6) Algerian wilayas — provinces — (Tipasa, Annaba, Souk Ahras, Laghouat, Oran, and Tindouf) — where they would visit a variety of micro-enterprises, startups, agricultural cooperatives, complexes, and research centers (Anthropology Research Center social and cultural, and Renewable Energies Research Unit).
Startup Act Africa
As Nigeria struggles to support its local startup ecosystem, here are a few things the delegation and indeed Nigeria, could learn from Algeria.
Making A Specific Law In Support Of Startups
Although Algeria does not have a Startup Act strictly so-called, the country has enacted legislations and inserted provisions in existing laws to encourage its local startup ecosystem.
Specifically, Executive Decree 20–254 of September 15, 2020 created a national committee for the labeling of “startups”, “innovative projects” and “incubators”. The Decree has since been published in the country’s official gazette.
The implementation of the Decree has been instrumental in shaping a new future for the country’s startup ecosystem.
For instance, startups and incubators in Algeria labelled under the Decree are the greatest beneficiaries of the country’s finance law. The country’s 2021 Finance law provides for changes in taxes (Tax On Professional Activities, TAP; and Value-added Tax VAT).
“Exempt from VAT and subject to 5% of customs duties, are equipment acquired by companies with the label “startup”, ” says article 84 of the Finance Act.
“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 law further states.
For companies with the “incubator” label, they are also exempt from TAP, Corporate Profit Tax (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 law states.
Launch Of ‘Algerian Startup Fund’, A National Fund For Startups; As Well As ‘Algeria Venture’, A National Startup Accelerator
The Algeria Startup Fund (ASF) focuses on equity investments in startups instead of credit facilities.
According to Ahmed Haftari, Director General of this fund which began operations last January, the value of the funding granted by the Fund to companies bearing the label “Startup” and “innovative project” oscillates between 2 and 20 million DA ($15k-$150k).
Already, sixty innovative projects were reportedly being examined for funding by the Fund.
Added to the national startup fund is a national startup accelerator “Algeria Venture”.
Located at the Parc des Grands Vents (Dounia Parc) in Algiers, the startup accelerator will be “the showcase” of innovative Algerian projects on the international scene, according to Yacine El-Mahdi Oualid.
Algeria Venture aims to introduce, according to Oualid, the concept of “Open Innovation” which will allow Algerian and foreign companies to “outsource” their innovation projects by taking advantage of products and services developed by startups in the area of interest to them.
The site for the new accelerator inaugurated in the capital Algiers can accommodate up to 30 startups for a period ranging from six to 12 months, said the minister, adding that calls for demonstrations will be “periodically” launched in order to select projects having strong growth potential and which would be “interesting” to integrate into the accelerator.
A Youthful Minister Of Startups Has Been Instrumental In Influencing Policies Affecting Startups In Algeria
Algeria understands that the country’s startup ecosystem is largely driven by young people and has responded to this trend by appointing a youthful minister in charge of startups.
Aged only 27, Yacine Oualid became Algeria’s new Minister of Startups — a newly created ministry under the newly elected President Abdelmadjid Tebboune’s administration — on January 02, 2020.
He studied at the Faculty of Medicine of the University of Sidi Bel Abbès.
Prior to becoming Algeria’s Minister of Startups, in June 2016 Yacine Oualid created SSH, a company specializing in cloud solutions for businesses, which would later become the first private web host in Algeria. In September 2019, he and his partner founded Smart Ways3, a startup in the field of logistics and geolocation. In December of the same year, he founded Bright Solutions, a leading IT company providing IT solutions and services, headquartered in England.
“If I have to sum it up, I would say that the New World Economy is taking shape, and that Algeria wishes, and will, become a major player. My goal, with all the players in the sector, is to participate in this transformation of the largest country in Africa,” Yacine said upon assumption of office.
“In a more practical way, my role is first of all to set up a legal framework which is favorable to startups. Once set up, this legal framework will facilitate the creation of startups and their financing. The goal is to see materialise in a few months’ time, Algerian champions, who will be able to offer their services all over the world. Algeria is determined to become an African pillar of innovation and we want to offer our entrepreneurs the best framework for entrepreneurship and innovation,” he added.
Apart from influencing the enactment of startup-friendly policies, Oualid has been instrumental in activism against ‘bad regulations’ against startups in the North African country. For instance, his intervention ensured that Algeria’s first taxi service solely for women, Moov Services, re-launched its operations just three months after its activities were banned in Blida, Algeria’s northwestern province.
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
Promoters of ailing businesses founded by young people in Algeria will now benefit from the refinancing of their companies, says the Algerian ministry in charge of micro-enterprises, referring to a presidential decree published in number 1 of the Official Journal (JO). In a press release, the ministry specified that the new scheme is covered in decree N 20–441 of December 30, 2020 which amended and supplemented presidential decree N96–234 of July 2, 1996, relating to support youth employment.
startup
Under the terms of the said decree, “young promoters can now benefit from the refinancing of their companies in difficulty”.
To qaulify to benefit, the amount of the investment may not exceed ten (10) million Algerian dinars ($75k). The investment threshold is also cumulative according to the number of young promoters, especially when the project is carried out in the form of a consortium. This is with a view to promoting synergy between micro-enterprises.
According to the decree, “the investments must have been made by young promoters either individually, collectively or in the form of a group, in accordance with the laws and regulations in force.”
Under article 09 of the same decree, “young developers can equally benefit from the use of premises in specialized micro-zones set up as rental, for the production of goods and services”.
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
Algeria’s Minister Delegate to the Prime Minister in charge of micro-enterprises, Nassim Diafat, has indicated that the National Agency for the Support of Youth Employment (ANSEJ) will soon be renamed in order to be reoriented towards entrepreneurship.
Minister of Industry, Ferhat Ait Ali Braham
“We have moved away from the social approach of ANSEJ. Today, we have a new economic approach which has prompted us to change the name of this organization into a National Agency for the support and promotion of entrepreneurship ”, he announced during the inauguration by the Minister of Industry, Ferhat Ait Ali Braham, from a FabLab of the company “ALRIM, a subsidiary of the group of metallurgical and steel industries” Imetal,
The Minister Delegate specified in this context that this agency will be focused 70% on training and 30% on funding and monitoring.
Algeria’s National Agency for Youth Employment Support ( Ansej ) is the country’s organization responsible for managing a credit fund for the creation of businesses. She participates in the public employment service .
Ansej is in charge of implementing a support system for business creation for people under 40 years of age. It manages a credit fund, granting loans at zero interest rate (0 rate loans), complementary to bank loans. Committees composed of representatives of banks and institutions grant the loans after examining the files of the promoters.
A bank guarantee fund supplements the financing instruments. Algeria ‘s Ansej advisors provide follow-up to promoters who have obtained a loan.
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
