Doing business in Algeria offers international and African investors access to one of the continent’s largest energy producers, a sizeable domestic market and a strategic position between Europe, the Maghreb and sub‑Saharan Africa. The political system in Algeria is evolving, but the country continues to seek quality foreign direct investment (FDI) and to reform key aspects of its investment, tax and company laws.
Understanding Algeria’s political environment, available investment incentives and the regulatory framework is essential for assessing whether Algeria is a good country to invest in and for structuring compliant cross‑border projects.
Algeria: Country Information
Algeria is the leading natural gas producer in Africa and the second-largest natural gas supplier to Europe. With a territory of 2.4 million km² and a dynamic demography (+700,000 inhabitants/year, 45.7 million inhabitants in 2023), Algeria stands out with the third-largest GDP on the African continent, estimated at USD 244.7 billion in 2023 according to the IMF, and the highest GDP per capita in the Maghreb, reaching USD 4,982 in 2023. The Algerian economy is heavily reliant on hydrocarbon exports. On average, the hydrocarbon sector accounted for 14% of GDP, 86% of exports, and 47% of budget revenues between 2019 and 2023. The currency is the Algerian Dinar (DZD).
Key economic indicators:
- Population (2023): 45.7 million inhabitants
- Current GDP (2023): USD 244.7 billion
- GDP Growth (2023): 4.2%
- Unemployment Rate (2022): 11.6%
- Inflation (2023): 9.3%
- Public Budget Balance (2023): -3% of GDP
- Public Debt (2023): 49.5% of GDP
- External Debt (2023): 1.5% of GDP
- Exchange Rate USD/DZD (May 14, 2024): 134.33
- Exchange Rate EUR/DZD (May 14, 2024): 145.30
- Current Account Balance (2023): 2.2% of GDP
- Foreign Exchange Reserves (2023): USD 68.9 billion.
This macroeconomic profile is an important starting point for foreign investors considering doing business in Algeria, particularly in sectors linked to hydrocarbons and emerging diversification efforts.
Political System
The People’s Democratic Republic of Algeria is a constitutional representative democracy based on a multiparty semipresidential regime. The President is head of State and the Prime Minister is the head of Government. The Parliament is divided into two chambers, the People’s National Assembly and the Council of the Nation. This political system in Algeria is an important element of the overall risk assessment for international investors.
Investment Climate
Algeria remains a sizeable and lucrative market for foreign investors. Several factors clearly outline Algeria’s future potential, namely the country’s strategic geographical position, its infrastructure, its oil wealth and abundant natural resources and its growing population which recently reached 45.7 million. In addition, Algeria offers a skilled and affordable workforce as well as electricity, gas, and water at competitive prices.
Although hydrocarbons remain the backbone of the Algerian economy, accounting for more than 85% of exports, there are business opportunities in numerous other sectors such as agriculture, infrastructure, housing, clean energy, and pharmaceuticals. In particular, Algeria’s infrastructure investments and projects in renewables and manufacturing are seen as important for diversifying the economy and attracting more Algerian foreign direct investment.
In 2020 the Algerian Government launched ambitious efforts to improve the investment climate and respond to the coronavirus pandemic. Steps taken have included revising the country’s investment legislation to ease market entry for foreign investors and ending the 49% cap on foreign equity in all non-strategic sectors. These reforms form part of the evolving Algerian foreign investment framework and are central to assessing whether Algeria is a good country to invest in.
Forms of Business
The Algerian Commercial Code provides for five types of commercial company formation in Algeria, namely:
- Partnerships (société en nom collectif)
- Limited partnerships (société en commandite simple)
- Limited partnerships by shares (société en commandite par actions)
- Limited liability company (société à responsabilité limitée)
- Joint stock company (société par actions).
Law No. 22-09 of 5 May 2022 introduced a new form of commercial company, the simplified joint stock company (société par actions simplifiée), exclusively for companies certified as “start-ups”. One of the main characteristics of this type of company is the freedom that the shareholders have to organise the functioning of their company in the articles of association. In contrast to the rigidity of the joint-stock company, the simplified joint stock company is extremely flexible.
The limited liability company and the joint stock company are in practice the most used corporate forms because they limit the liability of their members to their contributions to the company’s share capital.
Formation of a Company
The incorporation of an Algerian company involves the signing, in front of a public notary, of the articles of association. The articles must be drafted in Arabic and governed by Algerian law. Foreign investors must import foreign currencies through legitimate banking channels in order to subscribe and pay the Algerian company’s share capital in front of the notary.
Exchange Controls
An important question that frequently arises is how the repatriation of investment proceeds operates under Algerian law, and how it is effectively implemented in practice. The Investment Law expressly provides for a transfer guarantee of dividends and investment proceeds in favour of foreign investors.
The transfer guarantee allows any foreign investor to transfer in foreign currency the dividends and other revenues resulting from its investment, subject to certain conditions being met. In most cases, foreign investors can transfer the dividends and other revenues distributed by their Algerian subsidiary in foreign currencies, although such transfers are subject to a cumbersome administrative process with local banks, particularly for the first transfer
Taxation
Algeria has entered into several double-taxation treaties such as with France, United Kingdom, Germany, China and the United Arab Emirates (UAE). Algeria’s double tax treaties applicable to commercial companies are as follows:
Corporate Income Tax (“IBS”)
The purpose of the IBS is to tax profits realised in Algeria by an Algerian company. There are three IBS rates, depending on the sector of activity of the considered company:
- 19% for the activities of production of goods
- 23% for the building, civil engineering, hydraulic, tourism and thermal activities except travel agencies
- 26% for the other activities.
Value Added Tax (“VAT”)
VAT is imposed on all operations of sale, real estate works and provision of services, which have an industrial, commercial or handicraft character, and which are performed or used in Algeria. The rate for VAT is set at 19%. Products exported out of Algeria are not subject to VAT.
Tax on Professional Activities (“TAP”)
The turnover of an Algerian company is subject to the tax on professional activities at the rate of 1.5%. The TAP is calculated yearly on pre-VAT sales, and can be deducted from the IBS taxable base. Companies carrying out production activities are exempted from the TAP. Turnover corresponding to exported products is excluded by law from the scope of the TAP.
Taxation on Dividends
Under Algerian law, in the absence of any tax treaty providing for no double taxation, dividends distributed by an Algerian company to a foreign shareholder are subject to a 15% withholding tax. Exploration and production activities in the hydrocarbon sector are subject to a specific tax regime.
Regulatory Environment
Since 2016, Algeria has initiated a process to reform its investment law taking into account the competition between Mediterranean countries, particularly within the Maghreb, to attract quality Foreign Direct Investment and Algeria’s longstanding need to diversify its economy away from hydrocarbons. On 28 July 2022, a new Investment Law No. 22-18 dated 24 July 2022 (the “Law 22-18”) was issued. Eight texts implementing Law 22-18 were published in the Official Gazette on 18 September 2022. Certain provisions relevant to foreign investment (such as the so-called 51/49 rule) are also contained in finance laws and supplementary finance laws. These new laws are positive signs for investors, especially foreigners, to increase the attractiveness of the country.
End of the Obligation for Foreign Investors To Set Up a Joint Venture With a Local Partner Holding at Least 51% of Its Share Capital
Before the publication of the Supplementary Finance Law for 2020, foreign investors had to find one or more Algerian partners in order to set up a joint venture. Algerian national resident(s) had to hold at least 51% of the share capital in the joint venture company regardless of the market sector in which the company planned to operate. In the decade following the introduction of the 51/49 rule the level of foreign direct investment drastically decreased, leading the Algerian Government to limit the 51/49 rule to a restricted list of activity sectors. The Supplementary Finance Law for 2020 repeals the 51/49 rule except for the importation of goods in order to resell them in the same condition and for certain strategic sectors.
Pursuant to the Supplementary Finance Law for 2020 (as amended), the strategic sectors subject to the 51/49 rule are defined as follows:
- The military industry and related activities placed under the authority of the Ministry of National Defence
- Railways, ports and airports
- The pharmaceutical industry except for investments related to the manufacturing of essential, innovative, high value-added products which require complex and protected technology and are intended for domestic market and export.
Pursuant to separate sets of laws and regulations, the following important sectors are also subject to the 51/49 rule:
- The exploitation of the national mining domain as well as all underground or surface resources relating to an extractive activity, except for quarries and sandpits of non-mineral products
- The upstream sector as well as operating the distribution network and transportation of electrical energy by cable and transportation of hydrocarbons (liquids and gas) by overhead or underground pipelines.
Executive Decree No. 21-145 of 17 April 2021, published in the Official Gazette of 22 April 2021, has defined a list of 44 “strategic” activities (“Decree 21-145”). As a general comment, Decree 21-145 marks an opening of the energy sector to foreigners. Foreign investment will be unlimited in (i) electricity production from renewable energies and (ii) downstream of the hydrocarbon sector (except transport by pipeline) such as oil services, refining or oil drilling.
In contrast, most of the activities in the pharmaceutical industry sector are qualified as strategic, thus restricting the participation of foreigners in the project companies to 49%. The 51/49 rule is also maintained for activities of importing raw materials and finished goods for resale in the same condition is to discourage the development of these costly activities for the Algerian external balance and to limit the transfers of foreign currencies outside Algeria.
All other activities associated with producing goods and services (including the telecommunication, banking and insurance, agri-food, and construction sectors) are now open to foreign investment without any obligation to create a partnership with a local party.
End of the State’s Preemptive Rights
The Supplementary Finance Law for 2020 repeals the preemptive right of the Algerian Government over:
- Any direct transfer of shares by or to a foreign investor
- Indirect transfers of shares in an Algerian company of up to 10% or more, provided that the Algerian company benefited from advantages or incentives.
Such pre-emptive right has been replaced by the requirement that authorisation must be obtained from the “competent authorities” before any direct transfer of shares in an Algerian company is made to foreign parties where strategic activity is carried out by the Algerian company. The Supplementary Finance Law for 2020 is silent on the way this authorisation can be obtained and refers to further regulations. It is desirable that any implementing legislation be adopted swiftly to avoid delays, clarify the law and provide a uniform approach for supplying authorisation.
Transfer Guarantee
Law 22-18 reaffirms the transfer guarantee in favour of foreign investors, namely the right to transfer in foreign currency the capital invested, the income derived from it as well as the proceeds from selling and liquidating the investment. In order to benefit from the transfer guarantee, foreign investors must make capital contributions in cash imported through banking channels and denominated in a freely convertible currency (the amount of which must be equal to or higher than minimum thresholds defined according to the total cost of the project). In addition, contributions in kind (contributions of new assets, assets transferred to Algeria or imported assets duly valued by a judicial expert) and reinvestments of profits and transferable dividends are also treated as external contributions.
Legal Stabilisation
Law 22-18 provides for a legal stabilisation mechanism; The effects of any future revisions or repeals of Law 22-18 will not apply to investments made under Law 22-18 unless the investor expressly requests otherwise. The legislator’s intention to create a positive environment for investment is reflected in such a “freezing clause”.
Recourse to International Arbitration
Like the previous law, Law 22-18 allows for recourse to international arbitration in the event of a dispute between the foreign investor and the Algerian State, provided that an international convention on arbitration exists. In the absence of an international convention, arbitration remains possible within the framework of a compromise between the Agency (acting on behalf of the State) and the investor (an innovation of the new law).
These reforms together define Algeria’s investment law framework and are central to structuring foreign investment projects.
Intellectual Property
In Algeria, the protection of a trademark can be ensured through two systems of registration:
- Registration with the national trademark office, the Algerian Institute of Industrial Property (“Institut National Algérien de la Propriété Industrielle”, “INAPI”).
- Registration on an international basis with the World Intellectual Property Organization (“WIPO”) given that Algeria is a party to the Madrid Arrangement.
Likewise, an invention may be protected by a patent, which can be filed at a local or international level. The scope of protection of the invention depends on whether the related patent has been delivered by a national patent office (INAPI) or the WIPO under the Patent Cooperation Treaty procedure.
Tariffs and Trade
Exports mainly comprise hydrocarbons products (natural gas, crude oil and fuel), derivatives of oil and gas industries (fertilizers, ammonia, oils from the distillation of tars) and food products (dates, sugar). Algerian imports are represented by purchases of industrial equipment goods, foodstuffs (mainly cereal and dairy products), and semi-finished products composed mainly of steel products.
European countries are currently Algeria’s largest trading partners, especially France, United Kingdom, Italy, Germany and Spain. Asian countries (China, India, Korea) occupy the second position in Algeria’s trade. Algeria has entered into the following trade agreements:
- Euro-Mediterranean Agreement establishing an Association between the European Union and its Member States, and the People’s Democratic Republic of Algeria
- Greater Arab Free Trade Area (GAFTA)
- Algerian-Tunisian Preferential Trade Agreement
- Commercial Cooperation Convention between the Government of the People’s Democratic Republic of Algeria and the Government of the Hashemite Kingdom of Jordan.
Negotiations concerning Algeria’s accession to the World Trade Organization (WTO) are ongoing. Algeria has ratified several conventions on mutual assistance in customs matters, for example with France and the World Customs Organization.
Investment Incentives
Whereas the previous law (and its implementing decrees) were unclear as to the investment incentive schemes, Law 22-18 provides for only three schemes. Investments must first be registered with a one-stop shop in order to benefit from these incentives. These incentives essentially consist of an exemption from customs duties, value added tax and real estate tax during the investment phase and an exemption from taxes on profits and taxes on professional activities for a period of 5 to 10 years during the operating phase.
Sectoral Regime
Certain sectors listed by law are eligible for this regime, in particular renewable energy, pharmaceuticals, petrochemicals, agriculture, mining and quarrying, tourism and information technology.
Zone Regime
This regime applies to investments made in certain regions (the Highlands and the South) and in localities where the State intends to develop certain resources or encourage them to be developed.
Investment Structuring Regime
The favourable “structuring investment” regime applies to projects that create at least 500 jobs and are worth at least DZD 10 billion (approx. EUR 75 million).
Legal System
Algerian law is mostly based on the French civil law system. Accordingly, it is a codified system of law where the legislation is divided into codes which contain the primary legislation. Furthermore, the Algerian Constitution dated 8 December 1996 and amended several times, contains, amongst others, provisions on division of powers, the tasks and the election procedure of institutions, and values of the Algerian society.
Membership of International and Regional Organisations
Algeria is, amongst others, a member of several international and regional organisations including the United Nations, World Bank, African Union, Arab League, Arab Zone of Free Trade and Organisation of Petroleum Exporting Countries. On 5 May 2021, Algeria joined the European Bank for Reconstruction and Development membership (EBRD), becoming its 73rd shareholder. On 16 May 2021, Algeria ratified the agreement establishing the African Continental Free Trade Area (AfCFTA), signed in Kigali on 21 March 2018, between 44 out of the 55 Member States of the African Union. The AfCFTA aims to create a single continental market for goods and services.
Labour Relations
The weekly legal duration of work is 40 hours over at least 5 business days. Weekend in Algeria is on Friday and Saturday. The daily period of effective work must not exceed 12 hours. The guaranteed national minimum wage amounts to DZD 20 000.
The recruitment of foreign workers is highly regulated. Foreigners must hold a work permit and a resident card in order to work and live in Algeria. Foreign employees wishing to work in Algeria are required to have a level of qualification at least equivalent to that of a technician. It is also necessary that the position offered cannot be filled by an Algerian.