By: Hana Saada
ALGIERS – Algeria and Japan signed, on Tuesday in Algiers, a tax treaty on non-double taxation, with a view to contributing to the development of economic relations between the two countries.
“Convention between Japan and the People’s Democratic Republic of Algeria for the Elimination of Double Taxation with Respect to Taxes on Income and the Prevention of Tax Evasion and Avoidance was signed in Algiers, the capital of Algeria by H.E. Mr. Kono Akira, Ambassador Extraordinary and Plenipotentiary of Japan to the People’s Democratic Republic of Algeria and H.E. Mr. Brahim Djamel Kassali, Minister of Finance of the People’s Democratic Republic of Algeria,” said APO Group on behalf of Ministry of Foreign Affairs of Japan.
For the purpose of eliminating double taxation arising between the two countries, this Convention clarifies the scope of taxable income in the two countries. In addition, it will enable the tax authorities of the two countries to consult each other on taxation not in accordance with the provisions of this Convention, to exchange information concerning tax matters and to mutually lend assistance in the collection of tax claims. It is expected that this Convention promotes further mutual investments and economic exchanges between the two countries while eliminating double taxation and preventing international tax evasion and tax avoidance.
In an address on this occasion, Mr. Kassali highlighted the “excellence” of bilateral relations, as well as “the very high quality of economic cooperation between Algeria and Japan, punctuated throughout several decades by the realization of several investment projects in various fields”.
“We hope that this legal instrument will contribute to increasing our trade in goods and services and will constitute a favorable and attractive framework for sustainable investments that create wealth and benefit both countries,” added the minister.
Mr. Kassali also indicated that through this agreement, the legal framework of bilateral cooperation will be strengthened “by giving new impetus to trade and economic exchanges between our two countries, linked by historical relations”.
This agreement also aims to “facilitate the development of economic relations between Algeria and Japan, particularly in terms of investment”, according to a press release from the Ministry of Finance.
This tax cooperation convention had already been initialed by the two parties on June 29, 2022 in Tokyo, following the 2nd round of negotiations, and will come into force after the completion of internal procedures by the two countries, noted the same source.
For his part, the Ambassador of Japan explained that this agreement will “clarify and simplify the procedures for taxation on companies operating in Algeria and Japan in order to eliminate double taxation”.
It will also contribute to “alleviating the burdens on businesses in terms of tax procedures, with a view to facilitating and promoting investment between the two countries”, added the Japanese diplomat.
Mr. Akira saluted, in this vein, “Algeria’s efforts to improve its business climate, under the leadership of the President of the Republic, Mr. Abdelmadjid Tebboune, in particular with the new law on investment”.
In this regard, he expressed his wish that this new legal framework, as well as the agreement on non-double taxation “could further facilitate and promote business relations between the two countries”.
The following are the key points of the New Convention (APO Group)
- Taxation on Business Profits
Where an enterprise of one of the two countries has in the other country a permanent establishment (such as a branch, including the furnishing of services by an enterprise through personnel over a certain period of time) through which the enterprise carries on business, only the profits attributable to the permanent establishment may be taxed in that other country.
- Taxation on Investment Income
Taxation on investment income (dividends, interest and royalties) in the source country will be subjected to the maximum rates or exempted as follows:
It is expected that this Convention promotes further mutual investments and economic exchanges between the two countries
Dividends 5% (holding at least 25% of shares* for 365 days) 10%(others)
Interest Exempted (received by the Governments, etc.) 7% (others)
Royalties 10%
[Note] voting power (where paid by a company of Japan) or capital (where paid by a company of Algeria)
- Mutual Agreement Procedure
Taxation not in accordance with the provisions of the Convention may be resolved by mutual agreement between the tax authorities of the two countries.
- Exchange of Information and Assistance in Collection of Tax Claims
In order to effectively prevent international tax evasion and tax avoidance, the exchange of information concerning tax matters and the mutual assistance in the collection of tax claims between the two countries are introduced.
- Prevention of Abuse of the New Convention
In order to prevent abuse of benefits under the Convention, any benefit under the Convention will not be granted if it is reasonable to conclude that obtaining such a benefit was one of the principal purposes of any transaction.
- After the completion of the domestic procedures in each of the two countries (in Japan, approval by the Diet is necessary), each of the two countries shall send through diplomatic channels to the other country the notification confirming the completion of its internal procedures. This Convention will enter into force on the thirtieth day after the date of receipt of the latter notification and will have effect:
(a) with respect to taxes levied on the basis of a taxable year, for taxes for any taxable years beginning on or after 1 January in the calendar year next following that in which the New Convention enters into force; and
(b) with respect to taxes levied not on the basis of a taxable year, for taxes levied on or after 1 January in the calendar year next following that in which the New Convention enters into force; and
(c) The provisions concerning the exchange of information and the assistance in the collection of taxes will have effect from the date of entry into force of this Convention without regard to the date on which the taxes are levied or the taxable year to which the taxes relate.
