Simple Tax Guide for Americans in Algeria
At Taxes for Expats we have been preparing U.S. tax returns for U.S. Citizens and green card holders working in Algeria for over 8 years. Our clients hail from all parts of the country - Algiers and Oran, Constantine and Batnah, Annaba and Setif.
As a U.S. Citizen or green card holder you are legally required to file a U.S. tax return each year regardless of whether you already pay taxes in your residence country.
We offer professional tax services. That means we figure out the best and most optimal way to file your U.S. tax return and avail you of all possible exclusions and deductions. But just as importantly - avoid the errors that would allow IRS to disallow your return and levy fines & penalties on top. You can also do them yourself - not that we recommend it. For more information please see IRS.
The expatriate Foreign Earned Income Exclusion can only be claimed if you file your tax return on a timely basis. It is not automatic if you fail to file and can even be lost.
We have many clients living in Egypt and know how to integrate your U.S. taxes into the local income taxes you pay. Any Egyptian income tax you already pay can be claimed as against the tax liability on your U.S. return on the same income.
As an expat living abroad you get an automatic extension to file until June 15th following the calendar year end. (You cannot file using the calendar year as is standard in Egypt for U.S. tax purposes). You must, however, pay any tax that may be due by April 15th in order to avoid penalties and interest. You can get an extension to file (if you request it) until October 15th.
There are other forms which must be filed if you have foreign bank or financial accounts; foreign investment company; or own 10% or more of a foreign corporation or foreign partnership. If you do not file these form or file them late, the IRS can impose penalties of $10,000 or more per form. These penalties are due regardless of whether you owe income taxes or not.
We have helped hundreds of expats around the world catch up with their past U.S. taxes because they have failed to file U.S. tax returns for many years. This is, in fact, our specialty and we offer a 10% discount to clients to wish to file multiple tax returns at once and get in full compliance with the IRS.
Work with a recognized expert to help you prepare your American tax return. We can also provide tax planning and advice with other expatriate tax; we look forward to working with you.
Below we include information on the Algerian Tax System for the American Expatriates.
Algeria personal income tax rates for 2010:
Taxable Income / Tax Rate %
DZD 0 - 60,000 0%
DZD 60,001 - 180,000 10%
DZD 180,001 - 360,000 20%
DZD 360,001 - 1,080,000 30%
DZD 1,080,001 - 3,240,000 35%
Above DZD 3,240,000 40%
With respect to the international taxation agreements, personal income tax is a direct tax levied on the income of an individual. Taxpayers are classified into resident and non-resident.
Income subject to tax is called assessable income. Assessable income is divided into seven categories:
1. Industrial profits, commerce and craft
2. Professional non-profit business
3. Income from agriculture
4. Income from rental properties built and unbuilt
5. Income from movable capital
6. Wages, salaries, pensions and life annuities
7. Gains from transfer for value of buildings or undeveloped and related rights.
For each category of income, certain deductions and allowances are allowed in the calculation of the taxable income. Taxpayer shall keep the books in compliance with the accounting legislation, in order to benefit from these deductions.
In general, a person liable to Personal Income Tax has to compute his tax liability, file tax return and pay tax, if any accordingly on a calendar year basis.
Married couples file tax returns as separate individuals. Income of children is reported on the tax return of the head of family. A spouse can report income of the children on his/her tax return in certain circumstances.
Basis – Residents are subject to tax on worldwide income; nonresidents are subject to tax only on Algeria-source income.
Residence – A taxpayer is considered resident by virtue of his/her right to reside or seek employment in Algeria or where it is shown that the individual's centre of vital interests is in Algeria.
Filing status – Spouses are required to file separate tax returns. Separate returns may be filed for dependent children in respect of their independent income.
Taxable income – Employment income is generally defined as income from all sources.
Capital gains – For business assets, the same rules apply as for corporations, above. Gains on the disposal of a principal private residence and other personal effects are exempt.
Deductions and allowances – Allowable deductions include travel expenses, amounts deducted by the employer to pay pensions and mandatory social insurance contributions.
Algeria Tax Rates – Individual income tax is imposed at progressive rates up to 35% on amounts exceeding DZD 1.44 million per annum. A 15% withholding tax on dividends is a final tax for individuals.
Other taxes on individuals:
Capital duty – See under "Other taxes on corporations".
Stamp duty – See "Stamp duty" and "Capital duty" under "Other taxes on corporations".
Capital acquisitions tax – There is no Capital acquisitions tax in Algeria.
Real property tax – An annual property tax is imposed on all developed and undeveloped real estate in Algeria.
Inheritance tax / estate tax – Inheritance and gift tax is imposed on the recipient with respect to property located in Algeria that is acquired by inheritance or gift. The rate is 3% for transfers between spouses, offspring or parents; otherwise, the rate is 5%.
Net wealth tax / net worth tax – Wealth tax for residents is assessed on a worldwide basis.
Wealth is taxed on a progressive scale up to 1.5%. Where an individual has paid a similar tax on non-Algerian assets, it may be deducted from the tax due in Algeria.
Nonresidents are subject to wealth tax with respect to property deemed or actually located in Algeria.
Social security – Employees contribute 9% of their pre-tax salaries to fund social security benefits.
Algeria Corporate Tax Rates
Algeria corporate income tax rate for 2010 is 25%.
Corporations in Algeria are subject to taxes below:
1) 'Tax on corporate profits' (impôt sur les bénéfices des sociétés - IBS) on all income earned in the part of your operations, including gains;
2) 'Tax on professional activity' (taxe sur l'activité professionnelle - TAP);
3) 'Land tax' (taxe foncière - TF);
4) 'Value added tax' (taxe sur la valeur ajoutée - TVA)
All companies, except partnership and joint ventures under the Commercial Code, are liable for corporate income tax on their profits arising from any business they carry on in Algeria. Companies are liable for corporate income tax at the rate of 25%. Reinvested earnings are subject to reduced rate of 12.5% under some conditions. Industrial, construction and tourist activities are subject to a reduced rate of 19%.
Foreign companies not established in Algeria and foreign companies with no permanent establishment in Algeria are subject to the company tax or personal income tax based on their legal status and any tax must be withheld by the company or client institution established in Algeria.
FRINGE BENEFITS TAX
As fringe benefits are considered to be a part of the salary paid to an employee, they are subject to social security and income taxes. Fringe benefits taxable are evaluated on the basis of their market value.
OTHER TAXES AND LEVIES
The property tax on developed properties: The tax base of TFPB consists of the tax value of rental property tax. This base is determined by applying a rate rebate of 2% per year, without exceeding 40%. However, for plants the turnover rate is 50% and the rate of property tax on property is built of 3%.
The property tax on non-built properties: The rate of property taw on undeveloped land located in non-urbanized is 5%. In urban areas, this rate varies depending on the surface considered: 5% (less than 500 m²), 7% (500 m² to 1000 m²) or 10% (over 1000 m²)
A domestic consumption tax is imposed on various products: on beer tobacco and matches with a rate defined by hk or kg Salomon, coffee, certain fruits, alcohol, ect…, with a rate ranging between 10 and 100%.
SOCIAL SECURITY TAXES
The social security rate is 9% on behalf of the employee and 26% on behalf of the employer.
VOCATIONAL TRAINING TAX
Companies that employ more than 20 employees are subject to a tax of 1% of annual payroll for vocational training and an additional tax of 1% of annual payroll for learning. The government is excluded from theses taxes.
Principal business entities: These are the public limited liability company (Société Par Actions, SPA), private limited liability company (Société à Responsabilité Limitée, SARL) and branch of a foreign company.
Administration and compliance:
Tax year in Algeria – Algeria tax year is the calendar year that ends on 31 December.
Filing and payment of tax – Individual tax returns are due by 1 April following the close of the tax year. The balance of tax is generally payable on 1 February and 1 June. Tax returns are not required to be completed if a taxpayer's only source of income is employment income.
Tax Penalties – Penalties apply for late filing, failure to file or filing an incorrect tax return.
Algeria Value Added Tax (VAT) Rates
The standard rate of Value added tax (TVA) in Algeria is 17%
VAT is an indirect tax, in that the tax is collected from someone who does not bear the entire cost of the tax. All economic activities conducted in Algeria, including industrial and handicraft activities, liberal or commercial professions, are subject to value-added tax. Exports by definition are consumed abroad and are usually not subject to VAT and any VAT charged under such circumstances is usually refundable. This avoids downward pressure on exports.
TWO DIFFERENT VAT RATES APPLY IN ALGERIA
- A special reduced rate of 7% applies to products, commodities, wares,
merchandise and operations related to printing , material for agriculture,
products of traditional crafts, plants and domestic animals ( aquaculture
products), excluding fish and other edible products of sea and various other
- 17%; operations related to services and goods not subject to another rate.