With the adoption of Article 119 of the 2026 Finance Law, Algeria introduces an unprecedented mechanism in its economic policy: making investment in innovation a formal obligation for certain companies. From now on, innovation is no longer merely a voluntary strategic choice; it becomes a measurable, regulated requirement, coupled with a financial compensation mechanism in case of non-compliance.

Much like the apprenticeship tax applied to vocational training, the legislator establishes a simple principle: a company must invest in innovation, or contribute financially if it does not.

A Logic Inspired by the Apprenticeship Tax

The comparison with the apprenticeship tax helps clarify the philosophy behind this new mechanism. That system requires companies to contribute to training funding when they do not directly train their employees. The 2026 Finance Law applies a similar logic to innovation.

Companies are now faced with a clear economic alternative: either they effectively spend on research, development, and innovation, or they pay a compensatory contribution corresponding to the unmet effort.

This shift marks a significant evolution in public policy: innovation becomes an economic responsibility, on par with training or employment.

Who Is Concerned and at What Level?

The mechanism mainly applies to companies with annual turnover equal to or exceeding 2 billion Algerian dinars.

For these companies, the 2026 Finance Law sets a minimum investment threshold of:

1% of annual taxable profit

Thus, a company declaring a taxable profit of 5 billion dinars must allocate at least 50 million dinars to recognized innovation expenditures.

If this threshold is not met, the difference is converted into a compensatory contribution paid to the tax authorities.

The mechanism is deliberately incentive-based: it is economically more rational to invest in innovation than to pay a tax with no productive return.

From Regulatory Constraint to Open Innovation

The main value of this reform lies not only in its mandatory nature, but also in the type of expenditures now recognized as eligible. The 2026 Finance Law expands innovation efforts to include partnerships with the national ecosystem: startups, accredited incubators, universities, and research centers. This choice legally enshrines the principle of open innovation, where innovation becomes a collaborative dynamic rather than a closed internal process.

While the 2026 Finance Law introduces a new obligation, it can also be seen as a strategic opportunity for companies. Rather than viewing innovation spending as an additional burden, some will see it as a way to turn a fiscal constraint into a productive investment.

In this context, open innovation programs offer concrete responses, notably through:

Calls for projects and collaboration programs with startups, in partnership with accredited incubators and innovation centers

Co-development contracts and pilot innovative projects

Acquisition of innovative solutions from accredited startups

The fiscal constraint thus becomes a lever for modernization, enabling companies to integrate innovative solutions and strengthen their competitiveness.

A Reform Based on Continuity and Complementarity

Article 119 of the 2026 Finance Law builds on measures introduced since 2023 to promote open innovation. Companies could already benefit from a tax deduction of up to 30% of taxable profit, capped at 200 million dinars per year, for expenditures incurred in R&D projects conducted with startups and accredited incubators, under conditions defined by interministerial decree.

The 2026 Finance Law takes this a step further by transforming this incentive into a structured and controllable obligation. The “Innovate or Pay” mechanism does not replace existing advantages—it complements them. A company can now meet its 1% investment obligation while still benefiting from tax deductions on open innovation expenditures. This combination strengthens the economic attractiveness of open innovation and positions it as a true lever for competitiveness and modernization.

As with the apprenticeship tax, not investing directly in innovation now has a measurable cost. But investing opens up opportunities for modernization, technological upgrading, and value creation.

Behind the phrase “innovate or pay” lies a broader ambition: to make innovation, particularly open innovation, a pillar of the country’s productive transformation. In a knowledge-based economy, innovation is no longer a luxury; it becomes an economic responsibility.

Within this dynamic, supporting companies becomes a key success factor. Drawing on its experience in designing and deploying open innovation programs that connect companies, startups, and universities, Leancubator fully aligns with this approach, helping transform regulatory obligations into concrete collaboration projects and value creation.