In order to fight more effectively against tax evasion in Algeria, on the part of large foreign companies, the 2023 amended finance bill makes significant changes to the provisions of the tax procedure code linked to transfers.
The draft amending finance law (PLFR-2023) provides for a series of major tax and customs measures, aimed, according to the explanatory memorandum, at rationalizing taxation, stimulating national production and fighting more effectively against tax evasion, particularly from large foreign companies. In order to fight more effectively against tax evasion in Algeria, on the part of large foreign companies, the 2023 amended finance bill makes significant changes to the provisions of the tax procedure code linked to transfers.
From now on, companies established in Algeria must prepare annual declarations of transfer costs. This obligation applies to all companies whose turnover exceeds 1 billion dinars, as well as to those holding more than 50% of the capital or more than 40% of the voting rights in a company, whether based in Algeria or abroad. According to the explanatory memorandum, certain multinational companies have artificially inflated transfer costs in order to reduce their tax base in Algeria.
The document underlines that these illegal transfers reach between 50 and 80 billion dollars each year in Africa and that they are continually increasing. Also, within the framework of the tax legislation in force, the Amending Finance Law introduced provisions aimed at limiting the deductions of excessive interest on the amounts of companies as well as the financial interests granted between member entities of the same group. Clearly, these are measures taken with the aim of reducing the abuse of excessive interests between companies in the same group.
“Correct the gaps”
The fact is that despite the existence of a legislative and regulatory framework, the application of legal provisions has proven to be a practical challenge, explains the text of the bill, due to gaps in the determination of certain terms and the inability to cover all possible benefit transfer situations, requiring more exhaustive formulation.
In addition, the fine set at 2,000,000 DA in the event of non-provision of documents is not dissuasive, according to the drafters of the bill who note that these companies prefer to pay the fine rather than provide documents. documents that could be used by the tax administration. The draft LFR underlines that it is imperative today to correct these shortcomings and to review the legislative and regulatory provisions governing the control of transfer rates.
This reform would aim to strengthen transparency and guarantee effective application of tax rules, thus contributing to better management of public finances. It should also be noted that among the key measures of this bill also includes the application of a reduced customs tax rate of 5% for fresh refrigerated beef and sheep meat. Previously subject to the normal rate of 30%, these meats will benefit from this reduced rate from March 1, 2023 (with retroactive effect).
This decision aims, according to the draft amending finance law, to stabilize prices on the meat market, particularly during the month of Ramadan. The amending finance bill also extends the deadline granted to importers of crude soybean oil to produce or acquire this product locally. Until December 31, 2023, they will benefit from compensation and exemptions from customs duties and taxes. This measure aims to encourage domestic oil production and reduce dependence on imports.