Algeria is set to transform its economic landscape with the introduction of Article 119 of the 2026 Finance Law, a groundbreaking policy that makes investment in innovation a formal obligation for large companies. As detailed by Algerian innovation hub Leancubator, this “Innovate or Pay” mechanism shifts innovation from a strategic choice to a regulated requirement, aiming to systemically embed research and development into the nation’s corporate fabric.
An Incentive-Based Obligation
Drawing a parallel with the established apprenticeship tax, the new law presents a clear choice for major economic players: either actively invest in innovation or contribute financially to a national fund. The mechanism specifically targets companies with an annual turnover equal to or exceeding 2 billion Algerian dinars.
These companies will be required to allocate a minimum of 1% of their annual taxable profit towards recognized innovation expenditures. Should a company fail to meet this threshold, the shortfall must be paid to the tax authorities as a compensatory contribution. The policy is designed to be deliberately incentive-based, making it more economically rational for a company to invest in its own growth and competitiveness rather than pay a non-productive tax.
Championing Open Innovation
A pivotal aspect of this reform is its broad definition of eligible innovation expenditures. The law explicitly encourages and recognizes partnerships with the national tech ecosystem, including startups, accredited incubators, universities, and research centers. This legally enshrines the principle of open innovation, pushing large corporations to look beyond their internal R&D departments and engage in collaborative projects.
For corporations, this fiscal constraint can be reframed as a strategic opportunity. Open innovation programs—such as co-development contracts with startups, pilot projects for new technologies, or the acquisition of innovative solutions from accredited tech ventures—now serve as a direct pathway to compliance, turning a regulatory requirement into a lever for modernization.
A Strategic Evolution of Policy
Article 119 is not an isolated measure but rather the next step in a series of policies designed to promote open innovation. It builds upon incentives introduced in 2023, which allowed companies to benefit from a tax deduction of up to 30% of their taxable profit for R&D projects conducted with startups and incubators.
The 2026 Finance Law elevates this from a voluntary incentive to a structured obligation. Importantly, the new mechanism complements existing advantages rather than replacing them. A company can now meet its 1% investment obligation while simultaneously benefiting from tax deductions on those same open innovation expenditures, significantly strengthening the business case for collaborating with the local startup ecosystem.
About Leancubator
Leancubator is an Algerian innovation hub and incubator specialized in supporting sustainable development projects through the design and implementation of innovation programs. It works to connect corporations, startups, and universities to transform regulatory obligations into concrete collaboration projects and value creation.
Source: Leancubator
