Would it be still possible to open a Rep Office in Algeria?

Would it be still possible to open a Rep Office in Algeria?

During the last few years, we assisted to a process where Algeria is progressively limiting the scope of the representative office.

This is a road followed by several Countries in and outside the North Africa Area, mainly because this device is considered to be used by several foreign operators for concealed commercial purposes, even if this possibility is explicitly set aside by the law. 

Now, with the foreigners being granted to own up to 100% of a local company, due to the Budget Law 2020 and Complementary Budget Law 2020, it is likely that the scrutinization on the request of opening or renewing of the representative offices will be even more strict and lead potentially to rejection, unless in very special cases.

Here it is worth to note that the Ministry of Trade has the right to assess discretionary whether to approve or not the request of renewal or establishment of a representative office, based also on the requirements of the Country and the presence on the market of other companies active in the same filed.

Therefore, we highly suggest to promptly proceed with the request of renewal for the company that are interested in having a representative office, before the new policy will be enforced.

What are the conditions for renewing a representative office?

These offices are temporary representative structures, allowed to perform scouting, marketing, collecting information and promoting products for the benefit of foreign commercial companies. 

More so, it is mentioned that the representative offices do not have legal personality and cannot carry out any business or economic activities. However, how is the renewal of such Office done?

The renewal of representative office follows the same procedures as the opening which is subject to the issuance of the Authorization by the Ministry of Trade whose duration is 2 years, renewable. But, what are the fees to be paid?

A deposit bond equal to 30,000.00 USD is opened and 5,000.00 USD is deposited on a “CEDAC” bank account. Registration taxes amount to 1, 5 Million DZD. So, are there other conditions?

The legal representative of the foreign commercial company must undertake in written to respect the laws and regulations in force in Algeria, in particular not to carry out direct or indirect economic activities. Thus, the foreign company must respect the deadlines and conditions of the renewal of its representative office otherwise it will be held liable.

startup algerie

Would it be still possible to open a Rep Office in Algeria?

Which entities are prevented from registering a representative office?

The Order of October 2015 regarding representative offices excludes some activities while some corporate forms are set aside. On one hand, which activities are not permitted?

Article 9 of the Order stipulates that the exercise of commercial activities by the representative office for and on behalf of the foreign commercial company is strictly forbidden. On the other hand, which corporate forms are excluded?

The order specifies the categories that cannot claim the opening of a representative office. These are natural persons, agencies, branches, commercial representations or any other establishment belonging to a company established abroad.

 Also, companies engaged in consulting activities, customs declarants, as well as legal entities engaged in activities not subject to registration in the commercial register are expressly excluded.

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Which company is considered as a Start-up in Algeria?

Which company is considered as a Start-up in Algeria?

Both the finance law 2020 and its complementary law have provided for new incentives for start-ups in the form of tax reliefs and new sources of financing.

However, the regulatory framework remains unclear as no legal definition of start-ups has been fixed in Algeria.

Nevertheless, the decree N° 20-254 of September 15th, 2020 clarified the criteria and conditions for a company to enjoy the status of start-up. Indeed, the new decree sets the conditions of the eligibility criteria and resolves to establish a committee whose purpose is to assess each project.

Which are the conditions to enjoy the status a Start-up ?

The aforementioned decree provides for several concurring eligibility criteria in order to obtain the status of start-up.

First of all, the operator must justify that its business model is innovative. In other words, the aim is to promote young companies with strong technological and digital potential. In addition, according to article 11 of the same decree, the company must have been registered in the commercial register for less than 8 years and employ less than 250 employees. 

Therefore, any already existing company with an innovative business model and whose eligibility criteria are met, is entitled to benefit from the incentives provided by the law.

startup algerie

Which company is considered as a Start-up in Algeria?

What is the procedure in order to be considered as a start-up ? 

The eligibility criteria are assessed by a national committee.

This committee is chaired by the minister in charge of start-ups or its representative, but also by the representatives of each sectorial ministry.

In addition, the committee has the role of assessing the innovative extent of the projects.  The procedure consists of the submission of documents and other evidences via a web platform to be created later.

In addition, the committee has 30 days to grant the start-up status for a period of four (4) years, renewable once.

In conclusion, the new system provides for eligibility criteria that will be assessed on a case-by-case basis by a national committee with broad discretionary powers and for the moment it is possible to set up the file that will be submitted once the ad hoc web platform will be launched.

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The issuance of the new Automotive Guideline in Algeria

The issuance of the new Automotive Guideline in Algeria

Indeed, the decree is designed mainly to regulate the Automotive industry and to prevent the backdoor importation through two main levels.

On the one hand, the increase of the integration rate to 30% instead of the 15% rate that was initially set by decree No. 17-344, now repealed.

On the other hand, the lifting of customs advantages relating to assembly kits. As a result, assemblers can continue their activity but without being able to benefit from custom advantages. 

Thus, the new specifications are more restrictive but do not prevent 100% foreign investment in the sector even if the automotive assembly and distribution activity is subject to compliance with certain criteria and conditions and subject to the control of the Ministry of the industry.

What are the eligibility criteria for exercising the automobile assembly and distribution activity?

The exercise of the automobile assembly activity is subject to financial and technical criteria laid down by the new decree. Regarding financial criteria, a minimum financial contribution of 30% is required for local investors as well as foreigners.

As for the technical criteria, the local investors have to prove an experience of 5 years in the field of the production, while foreign investors must prepare the detailed technical status of the project and provide the project with their know-how. 

On the other hand, they are no longer required to associate with local partners and they may benefit from tax advantages and reliefs for a period up to 10 years.

 In addition, they are exempted from both customs duties for imported goods entering directly into the implementation of the project and from the VAT for goods and services imported or acquired locally, entering directly into the realization of the investment.

 Thus, these specifications provided in the guideline open a door to foreign investors.

The issuance of the new Automotive Guideline in Algeria

The issuance of the new Automotive Guideline in Algeria

What are the conditions and clauses required for the conclusion of the concession contract?

In order to conclude the Concession Contract, the dealer is subject to certain conditions. 

First of all, it can only claim a single license allowing it to exercise the activity and represent up to two (02) vehicle brands in the national territory.

 In addition, the dealer will not be able to import the vehicle without first having an order from a customer. 

As for the terms of conclusion of the Contract binding the dealer to the grantor, it must be concluded for a fixed period of 05 years minimum and must not be exclusive. 

In fact, Algerian law prohibits any exclusivity and considers it as a practice aimed at limiting the competition, unlike European Competition Law, which adopts a much more nuanced position by authorizing exclusivity. 

Thus, in Algeria, the freedom of the contracting parties is framed by texts governing the activity of automobile assembly and distribution and the conformity of the Contract is checked by experts. 

However, unlike the repealed decree, the dealer is no longer required to invest in an industrial or semi-industrial activity in order to maintain its license.

Which are the procedures to follow in order to carry out the automobile assembly and distribution business?

Regarding the procedures for carrying out the automobile assembly and distribution activity, no significant change has been made compared to the repealed decree.

 Indeed, the investor willing to operate such an activity is subject to the obtaining of a provisional authorization of 36 months, renewable one year, issued by the Ministry of Industry and certain documents will be required. 

It is worth to note that the authorization makes it possible to take the necessary steps to carry out the project without authorizing the exercise of the activity. 

In fact, article 09 of Decree 20-226 requires the award of a final approval for the effective exercise of the activity of assembly and distribution of automobiles. Thus, this approval is considered as the key to launch the project.

Finally, the main objective of the Automotive Guideline is the establishment and boost of a mechanical industry based on an industrial approach in line with international standards in Algeria.

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International e-commerce entering the Algerian market

International e-commerce entering the Algerian market

International e-commerce entering the Algerian market

The transition to international e-commerce is the perfect opportunity for the foreign e-provider to grow and expand its business as well as to provide its goods and services worldwide.

However, knowing the various rules and regulations governing foreign businesses is essential. The foreign e-provider is any natural or legal person who wants to provide goods or services through an electronic platform from abroad to Algeria.

 Since the Algerian government issued the law 18-05 relating to e-commerce, its rules are applicable if one of the parties is an Algerian citizen; resident in Algeria, or if the contract is formed / executed in Algeria.

More so, the mentioned law provided for international e-commerce and investments supporting e-commerce incentives.

 Thus, what are the conditions and procedures for the foreign e-provider to supply its goods and services in Algeria?

What are the conditions for a foreign e-provider to supply its goods and services in Algeria?

According to the article 07 of the above-mentioned law, the supply of products and services by a foreign e-provider in Algeria is allowed.

On one side, the foreign e-provider looking to establish e-commerce in Algeria is subjected to registration in the trade register CNRC, plus publication of a domain hosted in Algeria.

On the other side, foreign e-provider established abroad must be clearly identified and registered according to its country’s regulation as an e-provider regardless if it was the producer or the retailer or an intermediary.

 The latter must indicate the information relating to its identity and its contact details on the website.

Therefore, foreign e-provider should be in a good standing in regard to its jurisdiction and comply with the provisions of the Algerian e-commerce law.

International e-commerce entering the Algerian market

How are the e-commerce transactions conducted?

The e-commerce transactions are regulated by the law 08-15 concerning e-commerce.

On one hand, it contains provisions of the Commercial Code, such as the necessity for the transaction to be conducted through an e-commercial offer and formalized by an e-contract. On the other hand, it provides some provisions addressing competition and consumption. 

Mainly, the detailed specifications of the goods or services, the terms and conditions of delivery, the warranty and after-sales service conditions, the conditions for terminating the e-contract, the terms and conditions of payment, the terms and conditions for returning the product and the pre-order conditions and modalities.

What about terms of payment and custom clearance?

Payment and customs tariff are vital points for any international e-commerce transaction.

On one hand, the e-provider is responsible for the delivery of its goods/services within the specified deadlines. As for the buyer its responsibility is to assure the payment of the price as agreed upon. More so, the law has allowed the e-payment as a way of executing the buyer’s duty.

The e-payment is done via secured and authentic platforms that are put under the authority of Algerian bank.

On the other hand, the customs tariff is established in compliance with the Nomenclature of the International Harmonized System provided by the Brussels Convention which sets out customer’s duties and the VAT.

It has to be noted that a postal shipment is up to 30kg. Moreover, personal postal shipments, unlike commercial ones, are not subject to custom clearance and free of tax duties provided that their value does not exceed a certain amount.

The same rule applies to free commercial samples.

At the end, Fares Group focuses on providing the best service possible and will insure the implementation of all the above mentioned procedures with efficiency.

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Clearance Authorization for renovated production lines

Clearance Authorization for renovated production lines

Clearance Authorization for renovated production lines

Now that the complementary finance law 2020 (CFL2020) is issued, the prohibition of import of used products has been lifted.

Indeed, this will allow investors to resort to this means of financing and take advantage to develop their business. 

Moreover, according to article 57 of the said law, investors are granted a derogation in order to import renovated production chains essential to the functioning of their businesses.

What are the equipment concerned by the article 57?

According to article 57 of CFL2020, that the equipment constituting a homogeneous production chain, renovated and in working order are the concerned ones. 

In fact, by production chains it is meant those consisting of the extraction, manufacture or, packaging of products.

Those production chains must have been subject to a renovation confirmed by an independent authorized inspection and control body.

Therefore, the investor should integrate these production chains into consumption for the specific needs of his activity, and within the strict deadlines necessary for his proper functioning.

Who can benefit from this disposition?

The CFL2020 has not provided an updated definition of the beneficiaries. Nevertheless, article 54 of financial law of 2010 provided that investors duly registered in the commercial register whose activity is directly linked to the production chain purpose, are eligible for this authorization.

Indeed, beneficiaries should also justify having an infrastructure suitable for operating the imported production chain. 

Thus, the ratio of this provision is to be read in the framework of the politics aimed to promote the investments and it does not cover trading transactions.

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