Overview of bright spots in Algeria’s new Investment Law

By Wang Jihong and Wu Peng, Zhong Lun Law Firm

Algeria’s new Investment Law, promulgated in July 2022, provides a series of measures to encourage investment with the aim of spurring the development of Algeria’s high value-added industries, promoting technology transfer, boosting the creation of long-term stable employment opportunities and enhancing Algeria’s economic competitiveness and export capacity.

In September 2022, Algeria published the implementing rules to accompany the new Investment Law. An analysis reveals six measures in the new Investment Law and the implementing rules that are bright spots well worth the attention of foreign investors.

Wang Jihong, Zhong Lun Law Firm
Wang Jihong
Zhong Lun Law Firm

(1) Establishment of a new integrated investment management authority. While retaining the National Investment Council, the new Investment Law renames the former National Investment Development Agency as the Algerian Investment Promotion Agency and establishes the High National Commission for Investment Appeals.

The National Investment Council is responsible for formulating the national investment strategy, ensuring the overall consistency of the investment strategy and assessing its implementation. The Algerian Investment Promotion Agency is responsible for registering investments, administering investment incentives, and establishing and managing a digital platform used by investors. The High National Commission for Investment Appeals under the Presidency, with members including judges and economic, financial and other such experts, is responsible for ruling on appeals lodged by investors pursuant to the new Investment Law, opening up a new avenue for investors to seek investment remedies.

Wu Peng, Zhong Lun Law Firm
Wu Peng
Zhong Lun Law Firm

(2) Establishment of one-stop shops. Pursuant to the new Investment Law, the Algerian Investment Promotion Agency will establish one-stop shops functioning as investment service centres at national and local levels, with a one-stop shop at national level providing services mainly for major projects (in which the investment amount is at least DZD2 billion (USD14.2 million) and foreign investments.

The one-stop shops cover administrative authorities and various investment-related functions such as taxation, customs, trade registration, urban planning, land, etc. An investor can carry out the various approval and permit procedures (including land procedures) required for implementing its investment project via these shops. It is expected that the one-stop shops will establish a digital service platform for investors to ensure that the process of implementing investment projects will be open and transparent, and further enhancing the convenience and investment efficiency of foreign investment.

(3) Optimisation of investment incentives. Pursuant to the new Investment Law, investors registered through the above-mentioned one-stop shops are eligible for such investment incentives as exemption from customs duty, value-added tax and property tax relating to their investment projects, as well as exemption from taxes on profits and taxes on professional activity for five to 10 years of their projects’ operation.

These incentives apply to the following three types of investment projects:

    1. Industry-specific projects including investment projects in such industries as new and renewable energy, food, pharmaceuticals, petrochemicals, agriculture, aquaculture and fisheries, mining, tourism, information and communication technologies;
    2. Zone-specific projects including investment projects implemented in Algeria’s highlands and southern regions, developing regions requiring special state support, and regions with natural resources awaiting exploitation; and
    3. Structured projects, namely investment projects capable of offering at least 500 job openings, with an investment amount of at least DZD10 billion and that are conducive to Algeria’s achievement of the following objectives: (i) import substitution; (ii) export diversification;
      (iii) integration into global and regional value chains; and (iv) acquisition of technology and know-how.

It should be noted that the new Investment Law also enumerates “negative list” type activities, goods and services to which the above-mentioned incentives do not apply. For example, the business activities of some pharmaceutical enterprises are not eligible for industry-specific investment incentives.

(4) Specification of the minimum threshold applicable for the investment return transfer guarantee system. The new Investment Law retains the investment return transfer guarantee system of the old law: that foreign investors have the right to transfer abroad in foreign currency their capital invested in Algeria, returns generated and proceeds derived from the sale and liquidation of their investment projects.

Given that the old law did not specify the preconditions that investors were required to satisfy in order to transfer investment returns abroad, the new Investment Law expressly provides this, setting out the minimum threshold for the above-mentioned investment return transfer guarantee system of at least 25% of the total investment cost of the project.

(5) Ensuring the stability of the law. The new Investment Law provides that, unless explicitly requested by investors, any possible amendment or repeal of the new Investment Law in future will not apply to investment projects already registered and implemented under the law, thus ensuring the stability of the law applicable to existing projects.

(6) Improvement of investment assessment and oversight mechanisms. The new Investment Law sets out the methods for assessing each investment incentive based on quantifiable weighted criteria, which determine the duration of tax exemption for which investment projects are eligible during their operational phases.

Additionally, the new Investment Law specifies penalties for which investors may be liable in the event of a violation of laws or regulations.

For example, an investor is required to submit a report on the progress of its investment project to the Algerian Investment Promotion Agency within 30 days of securing the signature of the tax authority. If it fails to do so within the prescribed time without a reasonable explanation, the Algerian Investment Promotion Agency has the authority to cease the application of the investment incentives to the project in question and demand the investor to repay the taxes from which it had previously been exempted.

This article is a general description of several bright spots in Algeria’s new Investment Law. The authors advise foreign investors intending to invest in Algeria to take the specific circumstances of their investment projects into consideration, obtain more detailed investment law information from professional firms or government authorities, and continually keep a close eye on the direction of Algeria’s investment policies, so as to obtain clearer operational guidelines for their investments.

Wang Jihong is a partner and Wu Peng is an associate at Zhong Lun Law Firm

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