In Circular No. 01/MF/DGI/FL.2025 of 5 February 2025, Algeria clarifies adjustments introduced in the Finance Law for 2025 to capital gains derived from the transfer of shares, equity interests and similar securities. The circular addresses the place of taxation, application of the reduced 5% tax rate and reporting obligations in cases of capital loss.

Tax jurisdiction

According to Articles 8 and 12 of the Finance Law for 2025, modifying Articles 80-2 and 149 bis of Direct Tax Code, the Capital Gains Declaration (Form G No. 17 bis) and the Global Income Tax (IRG) associated with capital gains from the transfer of shares, equity interests and similar securities must be submitted to the tax office that corresponds to the registered headquarters (i.e., where the tax returns are submitted) of the company whose shares have been transferred, rather than to the tax office associated with the taxpayer’s residency.

This requirement applies to (1) individuals, whether resident or nonresident in Algeria, and (2) companies that do not have a permanent establishment in Algeria.

Reduced tax rate

Eligibility requirements

With regard to who is eligible for the reduced 5% tax rate, the circular provides more guidance on the amendments introduced by Article 8 of the Finance Law for 2025, modifying Article 104-II-5-b of the Direct Tax Code. It specifies the deadline for realizing the reinvestment as well as the applicable penalties if not respected.

Resident individuals in Algeria who generate capital gains may benefit from a reduced tax rate of 5% if the following three conditions are met:

1. Amounts equivalent to the capital gains subject to the reduced rate are reinvested through the purchase of shares and/or equity from one or more companies.
2. The reinvestment is accomplished before 31 December of the year following the deed signature date.
3. The engagement to reinvest the equivalent amounts to the realized capital gains is expressly formulated on documented paper and is attached to the Form G No.17 bis declaration.

Furthermore, supporting documentation evidencing these transactions must be submitted to the relevant authorities to validate the reinvestment.

The management services of the company selling its shares and equity are required to maintain a comprehensive register or electronic file containing the following information for each transaction:

• Full name and address of the seller
• Company name and associated NIF for which shares and equity transferred
• Realized capital gains amount from the sale
• Date of the sale/transaction
• Deadline for the reinvestment obligation
• Date of reinvestment realization
• Amount reinvested

The last two items must be updated as attestations from the beneficiary companies are received.

Penalties for noncompliance with reinvestment obligation

Taxpayers that have received the reduced 5% tax rate and not fulfilled their reinvestment commitment or provided the necessary supporting documentation with their Form G No. 17 bis declaration will receive a formal notice requiring them to produce and submit the engagement within 30 days or receipt.

Noncompliance with the reinvestment deadline

If there is a discrepancy between the amount of net capital gains that qualified for partial exemption and the actual amount reinvested, a surcharge of 25% may be imposed.

Declaration obligation in the absence of capital gains

The Finance Law for 2025 mandates that taxpayers must submit a declaration even in the case of capital loss.

This requirement is designed to allow tax authorities to verify the accuracy of reported prices by ensuring that all transactions are documented.