Samy Laghouati, Partner, Gide: Interview

Interview: Samy Laghouati

How will the new investment code affect the business climate in Algeria for foreign investors?

SAMY LAGHOUATI: The Algerian government is constantly working to increase the attractiveness of Algeria and its brand to foreign investors. The new investment code, which was released in August 2016, combined with the Finance Law for 2016, is the concrete manifestation of this government’s attempt to simplify existing rules and remove regulations that are no longer relevant. The new investment regulations have been warmly welcomed by key international experts and organisations, including the UN Conference on Trade and Development.

What are the main breakthroughs that have come about as a result of this legislation?

LAGHOUATI: The new investment regulations have removed certain mechanisms that have proven to be non-essential in regulating foreign investments in Algeria. For instance, the obligation that any foreign investment has to generate a positive balance of foreign currency has been removed, as well as the annual information obligation regarding the shareholding of foreign legal entities owning shares in Algeria-based companies.

In addition, significant adjustments have been made to the investment incentive regime. These changes reflect the will of the government to implement one of the most attractive investment incentive regimes in the MENA region.

One of the most remarkable improvements is the fact that benefits that derive from investment incentives have now become automatic, without any prior formal approval from the National Agency for Investment Development, as long as the amount of the investment in question does not exceed €45m.

In addition, the share of profits to be reinvested, which corresponds to specific tax exemptions or rebates obtained in the context of investment incentives mechanisms, has now been reduced from the current 100% to 30%.

The new regulations provide for a modification of the investment proceeds transfer guarantee. Eligibility for the transfer guarantee will now be subject to a capital contribution in cash, which should be equal to or in excess of minimum thresholds. These thresholds will be defined according to the project’s global cost, under terms and conditions that will be set out by the upcoming regulations.

The reinvestment of capital in transferable profits and dividends is now considered to be an external contribution, which benefits from the transfer guarantee. Contributions in kind are eligible for the transfer guarantee under certain conditions.

Have there been any important amendments to the 51:49 rule in the new code?

LAGHOUATI: The principle of the 51:49 rule has been clearly restated in the Finance Law of 2016. The law sets forth a 51% local shareholding requirement for all newly formed companies operating in the goods and services sector, and also those companies that act as importers. The new finance law has also confirmed the obligation for companies that were set up prior to the passage of 51:49 rule in 2009. The rules apply in specific circumstances to companies that are majority-owned by foreign investors and are subject to the 51:49 rule.

Nevertheless, one can question why the 51:49 rule was not codified in the new investment regulations. The fact that the Algerian government did not include the rule may foreshadow easier modifications to the 51:49 rule in future finance laws and complementary finance laws.

This decision should be seen as a positive and important development – as it could mean that there will be greater potential for the law to be modified or further improved upon in the future.