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Global transfer pricing guide

Transfer pricing - Algeria

01 Oct 2023

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Introduction to transfer pricing in Algeria
Transfer pricing rules
  • Algeria’s transfer pricing (TP) legislation is stated in the Tax Procedures Code (TPC), Article 169Bis. The executive decree of November 17th 2020 fixed the content of the initial documentation that must be submitted to the tax administration and the additional documentation which is only required in the event of a tax audit.
  • The Associated enterprise concerned by the transfer pricing documentation are defined by article 141Bis of the Direct Tax Code.
OECD guidance
  • Algerian tax legislation provides, as a means of interpretation, the transfer pricing guidelines for multinational companies, approved by the Organization for Economic Co-operation and Development (OECD).
Transfer pricing methods
  • Algerian tax regulations require a presentation of the transfer pricing method applied and the justification of this method according to the arm's length principle and allowing a comparability analysis (market analysis, functional analysis, economic situation, contractual clauses).
Self-assessment
  • Algeria’s transfer pricing legislation is placing the onus on taxpayers to self-assess their transfer pricing positions and to be able to demonstrate the arm's length prix applied in the intragroup transactions.
Transfer pricing documentation
Preparation of transfer pricing documentation
  • In Algeria, there are two types of TP documentation to prepare. Initial Documentation and Additional Documentation.
  • The initial documentation, to be filed annually, justifying the transfer prices. It must include two categories of information, the first concerns general information of the group and the second concerns the company operating in Algeria.
  • Additional documentation is only required in the event of a tax audit (Any other document or information requested by the tax administration in the event of a tax audit).
Master and local file
  • The Local File and Master File (Initial Documentation) is an obligation for taxpayers concerned by the TP documentation.
  • In addition, it is worth mentioning that the documentation for Algeria must be prepared in French or Arabic.
Some risk factors for challenge
  • Transactions with low tax jurisdictions (tax paradise) resident related parties.
  • Persistent losses in any entity can be a raison of a full tax audit with a risk of a big tax adjustment.
  • Head office charges and interest rates for intra-group loans are capped by tax regulations.
Penalties
  • According to article 192-3 of the Algerian Direct Tax Code, the failure or the incomplete production of the TP documentation, within thirty (30) days from the tax administration notification, leads to the application of a fine of 2,000,000 Algerian Dinar.
  • An additional penalty of 25% of the amount of the tax adjustment, if any, is applicable.
Economic analysis and how to demonstrate an arm’s length result
  • The Algerian tax law requires a presentation of the method for determining the prices applied and the justification of this method with regards to the arm's length principle and allowing a comparability analysis (market analysis, analysis functional, economic situation, contractual clauses).

For further information on transfer pricing in Algeria please contact:

Ali Bensadok.png

Ali BENSADOK
T 00213550922263
E ali.bensadok@dz.gt.com

Sofiane.png

Sofiane
T 00213555628868
E sofiane.bilek@dz.gt.com

Rafik.png

Rafik BOUSSA
T 00213555010560
E rafik.boussa@dz.gt.com

 

 

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