ALGERIA

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With a population of 40 million, vast hydrocarbon reserves and its proximity to Europe, Algeria has significant economic development potential, but its future outlook is subject to great uncertainties. In addition to the COVID-19 pandemic, Algeria will have to deal with large macroeconomic imbalances.  After a recession of 5% in 2020, the economy should post a modest rebound in 2021 (3.5%) before to decelerate again due to the necessity of consolidating public finances and external accounts. Algeria is fundamentally a state-driven economy that runs large twin deficits. The rebound in global oil prices will thus provide a short-term respite but this will not be sufficient to restore macroeconomic stability. 

The fragile socio-political context since the resignation of former President Bouteflika compounds these difficulties. Negligible external debt gives some room for manoeuvre, however, even if the rapid erosion of FX reserves is a source of concern. Furthermore, macroeconomic challenges have pushed the authorities to change their attitude towards foreign investors. Several reforms have been introduced since the beginning of 2020 with a view to improve the country’s attractiveness, in particular in the oil and gas sector as many years of under-investment and robust domestic energy consumption have affected the country’s ability to export hydrocarbon products.

Summary

BNP Paribas El-Djazaïr was launched in 2002 and is one of only a few international banks in Algeria. The bank has actively developed its capabilities, which include card issuing and acquiring, and has become a reliable and trusted partner both for corporations and retail customers, with 13 business centres supporting both Algerian companies operating internationally and foreign companies doing business in the country.

BNP Paribas is one of the top 3 retail banks in sub-Saharan Africa with a well-established African network across 9 countries: Algeria, Tunisia, Morocco, Senegal, Guinea, Ivory Coast, Burkina Faso, Gabon and Mali. The bank offers a full range of products and services, with experienced sales, support and product teams across 676 branches and 36 corporate business centres.

Currency

  • Algerian dinar (DZD)

Bank accounts

  • A company is considered resident in Algeria if it is incorporated in Algeria.
  • Branches of foreign companies and permanent establishments are also considered resident for tax purposes.

BNP Paribas Cash Management Capabilities

Cash collections
Cheque collections
Direct debit collections
Domestic incoming transfers
Virtual IBAN
Virtual accounts
International incoming transfers
Card acquiring

Payments & collections

Algeria is largely a cash-based economy. Payment card penetration rate is low but rising as consumers become more comfortable using cards as a payment method. For example, in Q1 2021, there were 1,782,213 internet transactions carried out by CIB and Edahabia cards, a 340.65% increase on the same period 2020. Value rose from DZD 634 million to DZD 2.2 billion.

The government is keen to encourage the use of electronic payments and as such in September 2020, made the use of all electronic payments free of charge. As of 31 December 2020, all merchants were required to set up infrastructure to enable cashless transactions. Merchants without the means to receive electronic payments are required to set up a remote payment service, i.e. the TPE QR Code, by end-2021.

Limited electronic banking services are available from some banks. These services are primarily used by larger companies. There is no national electronic banking system in Algeria, so companies use banks’ proprietary services.

Limited online and mobile banking services are provided by the country’s leading banks. The use of digital financial services is low: 16% of adults use digital payments.

 

Short term investments

Interest payable on credit balances

  • Interest-bearing accounts are permitted.

Demand deposits

  • Demand deposits denominated in DZD are available.

Time deposit money market instruments

  • Time deposits are available in DZD or major foreign currencies (USD, GBP, CHF and EUR). Minimum tenor is three months for DZD deposits. Foreign currency deposits have a minimum tenor of one month.
  • The minimum investment for DZD-denominated time deposits is DZD 10,000.
  • Interest rates are generally set by Banque d'Algérie.

Certificates of deposit

  • Domestic banks issue medium term notes with terms ranging from three months to four years. These are negotiable instruments.

Treasury (government) bills

  • The Banque d'Algérie issues Treasury bills for terms of 13 and 26 weeks.

Commercial paper

Money market funds

  • Money market funds are not popular short-term investment instruments.

Repurchase agreements

  • Repurchase agreements are available in Algeria.

Banker's acceptances

  • Banker's acceptances are not used in Algeria.

BNP Paribas Trade Finance Capabilities

Documentary credits
Documentary collections

International trade

  • As a member of the Greater Arab Free Trade Area (GAFTA), Algeria has eliminated most trade tariffs with GAFTA member states. GAFTA comprises Algeria, Bahrain, Egypt, Iraq, Kuwait, Lebanon, Libya, Morocco, Oman, Palestine, Qatar, Saudi Arabia, Sudan, Syria, Tunisia, United Arab Emirates and Yemen. 

Trade finance - Imports

  • The following documentation is required in order to import goods into Algeria:
    • customs declaration
    • commercial invoice
    • packing list
    • bill of lading
    • certified copy of the commercial registry
    • inspection report.
  • Payments for imports need a letter of credit. 
  • All importers are required to establish residency status by presenting a commercial contract or pro forma invoice to an authorised bank.

Trade finance - Exports

  • The following documentation is required in order to export goods from Algeria:
    • customs declaration
    • commercial invoice
    • packing list
    • bill of lading
    • certified copy of the commercial registry.

Regulatory requirements

  • All transactions between resident accounts and accounts held by non-residents must be reported to Banque d'Algérie.

Reporting method

  • Daily reports of fund transfers and repatriation transactions must be submitted to Banque d'Algérie within 24 hours of the transaction taking place.
  • Monthly reports of transactions must be submitted to Banque d'Algérie within ten days of the end of the month.
  • Banks submit information on behalf of their customers, although the resident entity is ultimately responsible for compliance.

Taxation

  • Tax residence is not legally defined in Algeria. Companies incorporated in the country are treated as resident.
  • Branches of foreign companies and permanent establishments also considered resident and taxed on their Algerian-sourced income.

Tax authorities

  • Direction Générale des Impôts (DGI).

Tax year/filing

  • The tax year is the calendar year ending 31 December.
  • Final tax payments are due by 30 April following the close of the tax year, along with the statutory return and the appropriate financial statements.
  • Large companies must make three provisional tax payments by 20 March,
    20 June and 20 November each amounting to 30% of the previous year's tax liability.
  • For new companies, 5% of paid-up capital is deemed taxable income. Any withholding tax incurred is treated as a payment of corporate tax.
  • Algerian companies may elect for group treatment where a parent company owns at least 90% of a subsidiary. The election is optional but once made, is binding for at least four years. A specific regime also applies to companies involved in the hydrocarbon sector.