Algeria: A new set of laws in Algeria to attract foreign investors
To restore the confidence of existing investors and attract new business in Algeria, several legal reforms have been launched. Investors have been promised tax incentives, legislative stability, transparency, guarantees for the transfer of funds and less bureaucracy. The Algerian government hopes that the new legislative framework will convince foreign investors to invest in Algeria.
Published in the official journal on 28 July 2022, the new investment law aims to (i) lay down the rules governing investment, (ii) to define the rights and obligations of investors and the incentive schemes applicable to investments. It applies to natural persons or legal entities, national or foreign residents or non-residents.
The provisions of this Law are intended to encourage investment with the aim to (i) develop priority sectors of high added value; (ii) ensure sustainable and balanced territorial development; develop local natural resources and raw materials; (iii) foster technology transfer and develop innovation and the knowledge economy; (iv) generalize the use of new technologies; (v) boost the creation of sustainable jobs and promote the competence of human resources; and (vi) strengthen and improve the competitiveness of the domestic economy and its export capacity.
This law establishes the principles of freedom to invest and transparency and equality in the processing of investments. It governs investments made through (i) the acquisition of material or intangible assets, directly involved in the production of goods and services, as part of the creation of new activities, the extension of production capacity and/or the redevelopment of the production tool; (ii) shareholding in the capital of a company in the form of contributions in cash or in kind; and (iii) the relocation of activities from abroad.
However, certain activities in strategic sectors: pharmaceutical industry, energy and mining and transportation as well as the activity of importation of products and merchandise for resale “as is” (regardless of the sector) and activities in the defense sector continue to be subject to the 51/49% rule.
The newly created Algerian Agency for the Promotion of Investment (AAPI) has been entrusted with an information, facilitation, promotion, assistance, incentives management and investment follow-up mission. It will do so through one-stop windows. Any foreign investment will be handled by the one-stop-window for major projects and foreign investment in Algiers. The AAPI will host under the same roof representatives of the different administrations in charge of the investment (tax, customs, commercial registry, labour, social security, etc.).
Decrees related to new Investment Law
On 18 September 2022, the Government of Algeria published eight decrees related the implementation of the new Investment Law published in July 2022. The decrees provide for key provisions related to the institutional framework for investment, incentive regimes, conditions of eligibility for benefits and guarantees granted to investors.
Executive Decree No. 22-297 refocus the role of the National Investment Council solely on providing strategic advice on investment, ensuring its overall coherence, and evaluating its implementation; and provides for a one-stop shop dedicated to large investment projects and foreign investments.
Executive Decree No. 22-299 defines major projects as projects with an investment amount equal to or greater than DZD2 billion; it defines foreign investments as any investment including a capital holding by foreign persons, benefiting from a transfer guarantee.
Executive Decree No. 22-300 provides that the foreign investor must bear at least 25% of the overall cost of the investment, in order to benefit from a guarantee (provided under Article 8 of the Investment Law) of transfer of invested capital and the income derived from it.
Executive Decree No. 22-301 provides in its Annex 1, a list of localities (sectors and areas) in which incentive regimes provided in the Investment Act are to be offered.
Executive Decree No. 22-302 defines “structuring investments” as investments with a high potential for creating wealth and jobs likely to increase the attractiveness of the territory and to create a knock-on effect on economic activity for sustainable economic, social, and territorial development, with the following objectives: Import substitution, export diversification, Integration into global and regional value chains, acquisition of technology and expertise. Investments that meet the following criteria are eligible as structuring projects: The establishment of 500 direct jobs, and an investment amount equal to or greater than DZD10 billion.
Executive Decree No. 22-296 provides the investor with the possibility to submit an appeal with the High National Commission for Investment-related Appeals, attached to the Presidency of the Republic.
Executive Decree No. 22-299 provides for a repayment of the benefits granted in the event of the transfer of the goods or services that benefited from these benefits. The repayment of benefits is calculated in proportion to the remaining depreciation period. The Decree provides for the same treatment for the transfer of benefits, except in the case of a prior agreement.
Executive Decree No 22-303 provides that the investor must provide the Agency with a progress report on the project within 30 days of the date of signature by the tax authorities. Failure would result in a decision by the Agency to withdraw the benefits and the refund the used operating benefits.