Review of Tunisia's tax system

General Rules

Below is a description of the general rules for taxes in Tunisia. Specific elements of the tax code are described in more details later in the chapter.

Tax System

Tax laws are enacted through legislation and decrees. Amendments are usually introduced each year through the enactment of the annual finance law. The tax administration publishes memoranda interpreting the tax law. Tunisian tax legislation is mainly governed by the following laws:

• Personal and Corporate Tax Code (promulgated by law n°89-114);
• Investments Incentives Code (promulgated by law n°93-53);
• Value-Added Tax (VAT) Code (promulgated by the n°88-61);
• Stamp Duties and Registration Fees Code ( promulgated by law n° 93-53);
• Local Tax Code (promulgated by law n° 97-11); and
• Tax Rights and Procedures Code (promulgated by law n°2000-82).

Tax Authority

The Ministry of Finance manages the Tunisian tax system through four main bodies:

• The General Directorate of Taxes (Direction Générale des Impôts, DGI);
• The General Directorate of Studies and the Tax Legislation (Direction Générale des Etudes et de la Législation Fiscales, DGELF);
• The General Directorates of Tax and Financial Incentives (Directions Générales des Avantages Fiscaux et Financiers, DGAFF); and
• The General Directorate of Public Accounting and Debt Collection (Direction Générale de la Comptabilité Publique et du Recouvrement, DGCPR).

Self-Assessment System

Income taxes in Tunisia are self-assessed by taxpayers by filing their required tax returns. The DGI may follow up and review a tax position in depth with a tax audit. Moreover, a declaration of creation (a statement of existence) must be submitted to the DGI before performing any industrial or commercial activities, or engaging in a non-commercial profession. Associations are also subject to this requirement. The statement of existence must be accompanied by:

• A copy of the bylaws acts for the legal entities; and
• A copy of the agreement or the administrative authorisation, if the activity or the place where the activity is performed are subject to a prior authorisation.

By submitting the declaration of existence, the taxpayer obtains a tax identification card which includes a tax identification number.

The registration must be made by the taxpayer (the individual himself or by a legal representative of the legal entity) or by any other person, under the condition that he has a power of attorney to carry out the registration.

Annual Tax Returns

The Tunisian tax year is generally the standard calendar year. Companies must file annual tax returns by the 25th day of the third month following the end of their tax year. Consequently, for companies using the calendar year as their tax year, tax returns are due on March 25.

If companies are legally subject to a statutory audit and financial statements have not yet been approved by the shareholders by the due date for the returns, provisional tax returns must be filed by the due date, and final returns must be submitted two weeks after the annual meeting of shareholders and at the latest by June 25. Additionally, companies wholly dependent on exporting which are still on a tax holiday have to file tax returns without payment of penalties until the end of the third month following the due date of the filing of the tax return. Individuals are required to file annual income tax returns, at the below due dates, during the year following the tax year:

• Individuals earning incomes from transferable securities, movable capital, real estate and foreign-sources (other than wages, pensions and annuities): February 25;
• Individuals carrying out industrial and non-commercial activities as well as those earning an income from more than one source: May 25;
• Individuals carrying out artistic and crafts activities: July 25;
• Merchants/shopkeepers: April 25;
• Individuals carrying out agricultural and fishing activities: August 25; and
• Employees and individuals earning pensions or life annuities: December 5.

Tax Interim Payment

Companies and individuals are subject to an advance payment system and a withholding tax system. Under the advance payment system, companies and individuals must pay three instalments. Each instalment is equal to 30% of the income tax due from the previous tax year. The instalments are payable during the first 25 days of the sixth, ninth and 12th months of the tax year for individuals and first 28 days of the sixth, ninth and 12th months of the tax year for companies.

Monthly Tax Return

VAT (and all other collection-related taxes) as well as vocational training tax contributions to the Fund for the Promotion of Social Housing (FOPROLOS), withholding taxes, Insurance activities tax, hotel tax, tax on industrial, commercial and professional establishments, etc. are submitted through a monthly tax return (a unique form) by the 15th day of the month following the one for which the above-mentioned taxes are due for individuals, and by the 28th day for companies.

Electronic Submission

Taxpayers with an annual gross turnover of TD1m (€458,600) or more are required to file through electronic submission.

Tax Audits

Tax authorities may require additional information, review supporting documentation and/ or make on-site inspections. Based on the obtained results, they may adjust tax returns and assess additional taxes. Taxpayers may appeal the adjustments in accordance with a specific procedure.

Taxpayers may be subject to delay penalties for late payments and/or omissions. Penal sanctions, such as fines, may be imposed for certain offences, including tax evasion and/or fraud. For individual income tax and corporate income tax, the statute of limitations is four years for partial adjustments and 10 years for unreported taxes. However, for taxpayers condemned for smuggling or parallel trade, the statute of limitation is raised to 15 years. For stamp duties, the statute of limitation is 10 years.

Corporate Income Tax

Below is a description of laws and regulations pertaining to the corporate income tax (CIT) structure in Tunisia.

Companies Subject To CIT

Public and private limited companies and certain other types of companies (such as some public institutions) are subject to CIT. Companies that are tax exempt include: mutual insurance companies, free managed savings funds, non-profit public institutions and mutual funds. The tax exemption applies only to income derived from the core business of such companies.

Corporate Tax Rate

The standard CIT rate is 25% (30% for profits realised before 2014). A reduced rate of 10% applies primarily to companies engaged in agriculture and fishing, as well as profits coming from exportations realised effective January 1, 2014 for companies for which the 10-year tax holiday has expired. A CIT rate of 35% is applicable essentially to companies in the hydrocarbons, financial (banking, leasing and insurance) and telecommunications sectors. The minimum of the corporate tax payable is calculated on 0.1% of turnover, with a minimum of TD300 (€137) for profits subject to the corporate tax rate of 10%. The minimum of the corporate tax payable is calculated on 0.2% of the local gross turnover, with a minimum equal to TD500 (€229) for companies subject to the other corporate tax rates.

Income Subject To Tax

The taxable income includes the net profit realised during the previous year or during the 12-month period used for the issuance of the financial statements. Otherwise, it should be calculated according to the profits gained after the end of the last taxed period or, in case of a newly established enterprise, from the business starting date until December 31st of the concerned year.

Calculation Of The Taxable Result

The taxable result is calculated as follows: accounting result plus disallowance of non-deductible expenses; deductions related to exempted incomes and non-accounting deductions; deduction of provisions; deduction of tax loss carry forwards and deferred amortisation; deduction of exempted incomes not generating tax losses; and deduction of tax incentives (deduction of profits derived from the activity and deduction of exempted reinvestment). All ordinary and necessary expenses incurred in carrying on a trade or businesses are deductible, unless specifically disallowed by the tax regulation. To be deductible, expenses must be supported by relevant documents.

Non-Deductible Expenses

The followings are the main non-deductible expenses :

• Tax deals resulting from tax audit and penalties from any nature;
• Depreciations of lands, goodwill and exceeding depreciations to the maximum limits;
• Depreciation of assets acquired in cash and other expenses paid in cash (equal or higher than TD10,000 (€4590) starting from January 2015 and TD5000 (€2290) starting from January 2016;
• The expenses related to airplanes, pleasure boats and secondary residences;
• Donations and subsidies exceeding the limit of 0.2% of the gross turnover;
• Receptions, gifts, and restaurant and entertainment expenses exceeding the limit of 1% of the gross turnover, which is capped at TD20,000 (€9170) per year;
• Members of the board of directors’ fees other than ones corresponding to a reimbursement of active expense;
• Corporate income tax.

Exempted Incomes And Other Non-Accounting Deductions

They include mainly:

• Dividends (distributed by Tunisian companies : the exemption is applicable only for determining the CIT and not the personal income tax (PIT);
• Interests of deposits and instruments in foreign currencies and convertible dinars;
• Capital gains derived from listed shares within the Tunisian Stock Exchange acquired from January 1, 2011 and sold before the end of the year following the date they were purchased are subject to the PIT or CIT rates;
• Profits of permanent establishments located abroad;
• Reversal of non-deducted provisions;
• Deduction for offering a jobseeker his first job;
• Deduction at the rate of 5% of equity allocated to financing new investments covered by the Investments Incentives Code and declared in 2014 and 2015.

Depreciation

Depreciation is deductible in accordance with the rates provided under the Tunisian tax law. To be deductible, the depreciation should be recorded in the accounts.

For the calculation of the taxable profit, depreciations recorded by companies according to the accounting regulation are deductible. However, the deductible amount shall not exceed the amount of linear depreciation calculated on the basis of the maximum rates fixed by the Decree n° 2008-492 of February 25, 2008.

The costs of setting up a business (preliminary expenses) may be amortised at a rate of 33% if it is considered as material. Otherwise, 100% of the costs may be deducted in the year of expenditure. Assets worth less than TD200,000 (€91,700) can be fully depreciated in the year of acquisition.

If depreciable assets are used for less than the entire tax year, the rates are applied proportionately based on the period in which the assets were used.

Companies that use their equipment through more than one team in accordance with the legislation in force related to the organisation of work teams, can practice accelerated depreciation. In such cases, a coefficient of 1.5 is applied to the depreciation rate of 15%. However, if the equipment is operated by two teams doe 16 hours over 24 hours this results in a depreciation rate of 22.5%. The coefficient is two if the equipment is operated by three teams for 24 hours on, 24 hours off and it then results in a depreciation rate of 30%.

Provisions

According to the tax regulation in force, provisions are not deductible except for the following:

• Provision for doubtful debts if a legal action is being undertaken to collect the debts;
• Provision on finished goods, up to 50% of the cost of each item; and
• Provisions for the depreciation of certain securities (mainly listed company’s shares).

The total amount of the deductible provision may not exceed 50% of taxable income before the deduction of the provisions. Additional provisions are allowed for companies operating in some sectors such as banking, insurance and hydrocarbons.

Loss Carry Forward

Losses may be carried forward for five years. However, deferred amortisation may be carried forward for an unlimited period.

Deductions Related To Tax Incentives

Two types of tax incentives are possible:

• Deduction of profits derived from operations; and
• Deduction for reinvestment.

Tax relief is applicable on several operating incomes such as exports for operating companies whose tax holiday period (10 years) has not expired on January 1, 2014, regional development, agricultural development, anti-pollution and environmental protection, health, education, cultural activities, accommodation catering to academics and social housing.

Deduction for reinvestment relates to reinvestment of profits in the same companies as extensions (physical reinvestment), and also the subscription in the capital of companies covered by the Investments Incentives Code (financial reinvestment).

Withholding Taxes

Withholding taxes are applied to several payments made to resident and non-resident companies and individuals. For residents, withholding taxes represent advance payments of tax, which may be claimed as a credit on the annual income tax return. For non-residents, withholding taxes generally represent a final payment of tax. Residents are subject to the following withholding taxes:

• 15% for fees, commissions, brokerages, rents and remuneration of non-commercial professional activities. The rate is reduced to 2.5% if the income is related to exports;
• 5% for fees and hotel leases paid to entities subject to the corporate tax and to individuals subject to the progressive rate taxation system;
• 2.5% of the price for the sale of buildings or business goodwill;
• 20% of interests (except those derived from deposits in foreign currencies or convertible dinars) and for directors’ attendance fees;
• 5% for dividends from a Tunisian entity (excluding dividends paid to legal entities resident in Tunisia and excluding dividends from profits made before 2014); and
• 1.5% for amounts equal or exceeding TD1000 (€458) including VAT (subject to the higher above mentioned rates) except for some payments (such as subscription for telephone, water, electricity, gas, newspapers, magazines, amounts paid for leasing and insurance contracts).

The rate is reduced to 0.5% if the income comes from exports.

Treatment Of Groups Of Companies

A group of companies can opt for the consolidated results taxation system. This option is subject to the approval of the Ministry of Finance and the satisfaction of the following conditions:

• The parent company is listed on the Tunisian Stock Exchange. If not, it must commit to introduce its shares on the stock exchange before the end of the year following the application of the regime. The Minister of Finance may extend this period by one year upon the proposal of the Stock Exchange Committee;
• The parent company must hold, directly or indirectly, 75% of the share capital of each subsidiary in the group;
• The financial statements of the companies in the group must be certified by a statutory auditor;
• The companies in the group must all have the same opening and ending dates; and
• All the member companies of the group must be subject to corporate tax and located in Tunisia.

The consolidated results regime is granted for a five-year period, renewable automatically. If a company leaves the consolidated results system before the end of the five-year period, it has to pay any tax advantage saved through its adhesion to the consolidated system.

Mergers & Demergers

The capital gains derived from the transfer of all business assets in a merger or a demerger transaction would be tax exempt, under reserve of respecting some conditions. However, companies receiving the assets are taxed in respect of 50% of these gains over a period of five years.

Special Rules For Non-Resident Companies Double Taxation Treaties

Below is a description of the rules in Tunisia regarding non-residential companies and the taxes that apply to them and those that do not apply. The section also details double taxation treaties to which Tunisia is a signatory.

Tunisia has signed a number of bilateral and multilateral conventions in order to avoid double taxation and to prevent fiscal evasion. Currently, treaties cover countries from Europe (France, UK and Germany), Asia (China, Indonesia and India), Africa (Gabon, Côte d’Ivoire and Mali) and North America (US and Canada). These treaties may provide more favourable taxation (such as reduced rates, tax relief and exemptions) for eligible companies and individuals.

Payments To Non-Resident And Non-Established Companies

Subject to the provisions of the double taxation treaties signed by Tunisia, payments to non-resident and non-established companies are subject to a discharging withholding tax at the rate of 15% except for:

• Interests (other than those expressly exempted) are subject to the rate of 5% if the recipient is a non-resident banks, otherwise the rate is 20%;
• Dividends which are subject to a withholding tax are taxed at the rate of 5%.

The rates of the above-mentioned withholding taxes are raised to 25% if the recipient is located in a tax haven listed by Decree n° 3833 of October 3, 2014. Moreover, for capital gains resulting from the sale of shares by a non-resident company, a discharging withholding tax is due at a rate of 25% of the gain (with a minimum of 5% of the sale price), unless it opts for the payment of a CIT at the rate of 25%.

Capital gains derived from listed shares within the Tunisian Stock Exchange acquired from January 1, 2011 and sold before the end of the year following the date on which they were purchased, are subject to the PIT or CIT rates. Real estate gain is taxed through a withholding tax at a rate of 15% based on the selling price. The tax payer would opt to pay taxes on the capital gained amount at a rate of 25%.

Permanent Establishments Of Companies In Tunisia

According to the double taxation treaties, a foreign company is considered to have a permanent establishment in Tunisia if it operates from a fixed place of business in Tunisia. A fixed place of business includes a place of management, a branch, an office, a factory, a mine or a quarry.

Permanent establishments in Tunisia of foreign companies are treated as Tunisian resident companies. Consequently, they are generally liable to the same tax rules and legal commitments applicable to other Tunisian resident companies.

Double tax treaties allow permanent establishments to deduct expenses incurred by the head office under certain conditions.

The Financial Law for the year 2015 provides that the profits derived from a permanent establishment in Tunisia are liable to a branch tax of 5% (branch profits remittance tax) subject to the provision of double taxation treaties. The rate is raised to 25% if the company is established in one of the tax heavens listed by Decree n° 3833 of October 3, 2014. In addition, non-resident companies considered to be permanently established in Tunisia, whose activities do not exceed a period of six months in Tunisia, can be subject to withholding taxes at the following rates:

• 5% of the gross remuneration for building activities;
• 10% of the gross remuneration for assembly activities; and
• 15% in all other services. These companies may opt to be taxed on net profits.

VAT For Non-Established Businesses 

Non-resident companies that do not have a permanent establishment in Tunisia, but carry out taxable transactions, are subject to VAT. Accordingly, Tunisian clients must withhold the VAT charged on payments for services supplied from non-resident entities.

Thin Capitalisation Rules

Only one rule is provided by the Tunisian tax legislation. The shareholders’ current accounts can lead to a tax deductible remuneration (financial expenses) under the following conditions:

• The share capital must be previously fully paid;
• The amount eligible for financial expense is capped for all stockholders to 50% of the share capital;
• The interest rate does not exceed 8% per year.

Transfer Pricing Rules

An adjustment mechanism for transfer pricing between associated enterprises allows authorities to adjust the taxable base when the transaction price practiced by a concerned company differs from arm’s length price. Tax authorities must prove that the transfer of profits between these companies has led to a decrease of due tax.

Information Exchange

The double taxation treaties signed by Tunisia provide some provisions related to bilateral administrative assistance.

Tunisia has also ratified the Convention on Mutual Administrative Assistance in Tax Matters developed jointly by the OECD and the Council of Europe.

For the Foreign Account Tax Compliance Act (FATCA), Tunisia is on the Treasury list listing jurisdictions that have reached agreements in substance and have consented to being included on this list. In 2014, Tunisia extended the scope of the communication right of the tax administration to transactions with banks, insurance companies and brokers.

Foreign Tax Relief

Tunisia does not grant any relief for foreign taxes paid. However, double taxation issues are to some extent avoided through the double taxation treaties signed by Tunisia.

Personal Income Tax

Below is a brief description of personal income tax laws in Tunisia.

Residents & Non-Residents

Subject to the provisions of the double taxation treaties signed by Tunisia, individuals are considered tax residents of Tunisia if any of the following applies:

• They maintain their main home in Tunisia;
• They are present in Tunisia for at least 183 days of a calendar year; or
• They are civil servants or government officials performing their duties or assignments in a foreign country insofar they are not subject to personal tax on their global income in such country.

Individuals who are tax residents have to deposit an annual tax return on their worldwide revenue. Non-resident individuals are taxed only on Tunisian-source incomes.

Taxable Income

Taxable global income may result from several categories. For each category a net profit has to be calculated by deducting from its gross income the related incurred expenses. Income and expenses are determined in accordance with the rules applicable to the particular category. To compute the amount of income tax due, the following additional steps must be done:

• The net profits of all categories, that are not taxed separately, are added together;
• The additional deductions allowed for the resulting global income are subtracted to determine global taxable income; and
• The progressive tax rates are applied to the amount of global taxable income to determine the amount of income tax.

The following are the categories of income: industrial and commercial income; non-commercial activities’ income; agricultural and fishing income; wages, salaries and life income (pension income); real estate income; income from transferable securities; income from financial investments; and other income. The categories of income are described below.

Industrial & Commercial Income

This category concerns income derived from commercial activities as defined by the Commercial Law. Two tax systems are possible under this category: the progressive rate system (profit determined by bookkeeping) and the flat rate system for small businesses (annual turnover less than TD100,000 (€45,860) for trading, transformation and on-site consumption activities and less than TD 50,000 (€22,930) for other service activities).

Non-Commercial Activities Income

This income is related to professional activities (such as for doctors, architects, lawyers, accountants, etc.). Under the progressive rate taxation system, the rules for the calculation of the net profit are similar to the ones used for the industrial and commercial income. However, under the flat-basis taxation system, the taxable income is equal to 80% of the gross revenue earned during the tax year.

Agriculture & Fishing Income

Under the progressive rate taxation system, the net profit is calculated using the same rules as those for the industrial and commercial income, subject to compliance to bookkeeping requirements provided by the legislation in force. Otherwise, the taxable income is based on a lump assessment after consulting field experts. Another simplified tax system based on income and expenditure also exists.

Wages, Salaries & Life Income

Net income is calculated by deducting from the gross income (including benefits in kind) the contributions withheld by the employer (such as social security) and professional expenses fixed at 10% of the remaining amount. For life annuity/pension, a deduction of 25% of the gross income is allowed. Tax residents of Tunisia benefitting from foreign-source pensions, annuities or retirement funds may deduct 25% of such items from taxable income if they do not repatriate the income. This rate is increased to 80% for pensions, annuities or retirement funds repatriated into Tunisia. 

Real Estate Income

This category includes rents of buildings and lands as well as capital gains resulting from their sale (except for some cases exempted expressly by law). Under the flat-rate basis system, the net profit of renting buildings represents 70% of the gross income (which includes the rental income and the expenses normally due by the owner but paid by the tenant on its behalf). However, individuals may opt for the progressive rate taxation system subject to compliance to bookkeeping requirements provided by the legislation in force (in this case, the net profit is calculated using the same rules as those for industrial and commercial income).

Income From Transferable Securities

This includes dividends and capital gain resulting from the sale of shares or related rights. Special rules apply for dividends and the capital gains.

Income From Movable Capital

This includes mainly interests derived from loans, bonds, debts and bank accounts.

Other Incomes

They include foreign incomes and indemnification that have not been subject to taxation abroad.

Tax Rates

For individuals, the tax rate is determined according to an individual’s earnings: If any employee has an annual taxable income of less than TD 5000 (€2290), no tax is due.

Until December 31, 2015, a royalty for the compensation fund is due from tax-resident individuals whose net total annual revenues exceed TD20,000 (€9170). The royalty equals 1% of the revenues, net of personal income tax.

Family Allowance

Individuals can deduct TD150 (€69) for heads of families, in addition to TD90 (€41) for the first child, TD75 (€34) for the second, TD60 (€28) for the third, TD45 (€21) for the fourth, TD1200 (€550) for disabled children and TD1000 (€458) for children pursuing their studies at a university without any scholarship, plus 5% of net income per dependent parent, up to a combined maximum of TD150 (€69).

Taxation Of Dividends & Capital Gains

Dividends are subject to a discharging withholding tax of 5%. The capital gain of shares is subject to a 10% individual income tax. An allowance of TD10,000 (€4590) is annually awarded on the taxable base.

Real estate capital gains are subject to the individual income tax at the rate of:

• 15% when the sale occurs during a period of five years from the date of possession;
• 10% when the sale occurs after five years from the date of possession. This rate is also applicable for the sale of inherited property regardless of the holding period.

Taxation Of Expatriates

Subject to the provisions of the double taxation treaties signed by Tunisia, salaries of expatriates are taxable in Tunisia in the same way as Tunisian employees.

These wages can be taxed through a discharging withholding tax at the rate of 20% if their stay in Tunisia does not exceed 6 months. Otherwise, they are subject to the taxation according to the progressive rate taxation system.

Other incentives are provided by specific laws. Some of them are granted, under some conditions, to expatriates working for some encouraged sectors (such as wholly exporting entities, entities established in an economic park of activity, companies operating in hydrocarbons sectors, offshore banks and health institutions working mainly with non-residents). These incentives can be summarised as follows:

• payment of a flat-rate income tax representing 20% of the gross salary; and/or
• exemption from Customs duties and similar taxes due on the import of private goods and one private automobile.

Other Taxes

Below is a description of other key taxes relevant to businesses, Tunisian citizens and foreign residents in Tunisia.

VAT

The main indirect tax in Tunisia is the VAT. Taxpayers subject to VAT effectively act as intermediaries in collecting the tax. If they are required to invoice and collect VAT on their sales, they may deduct VAT paid on their purchases and acquisitions.

VAT applies to transactions conducted in Tunisia by individuals and enterprises in the industrial, handicraft and trade sectors, as well as by professionals, such as certain self-deliveries (for example, internal costs incurred by an entity to construct an asset); imports; resale of goods by wholesalers, except for food; sales of plots of land by property developers; sales of buildings; sales involving on-the-spot consumption; and certain retail activities.

Companies and individuals engaged in taxable operations, as well as those that choose to be subject to VAT or to invoice VAT, are subject to VAT.

Supplies of certain goods and services are exempt from VAT. These supplies include, but are not limited to, supplies of philanthropic associations, education, aircraft transport services and maritime transport. The appendices to the VAT Code specify the exempt transactions. Donation of goods and services delivered within the framework of international cooperation to all types of associations are exempt from VAT.

VAT may also be suspended. A special authorisation from the tax administration is required to obtain a suspension from VAT for purchases. VAT suspension is available to entities engaged in exporting, to financial institutions working mainly with non-residents, to entities governed by the Hydrocarbons Code and, in certain circumstances, to entities engaged in activities described in the Investments Incentives Code.

The standard VAT rate is 18%. Services and specific activities provided by appendices of the VAT Code are subject to reduced rates of 6% and 12%. VAT liability is computed by multiplying all taxable sales by the applicable rate. From this amount, the enterprise subtracts the total VAT paid on purchases of goods related to the main activity and pays the net amount.

VAT related to taxable activities undertaken by non-resident companies and individuals shall be withheld by their clients and reversed to the tax authorities. For resident companies and individuals, the VAT related to payments exceeding TD1000 (€458) performed by the state and public institutions including VAT are subject to a withholding tax at a rate of 50% except for some payments (such as fees for telephone, water, electricity, gas and magazines. A taxpayer can ask for a refund of the VAT credit.

Depending on the origin of the credit such as exporting activities or sales under the VAT suspension system), the relevant tax authority may provide a partial or a total refund within the legal deadlines without any review of the refund in question. However, this refund will be followed by a tax audit according to established Tunisian legal requirement to review the reality of the credit.

Registration Fees

Registration fees are levied according to the nature of the act or the transaction. There are proportional registration fees including 5% for commercial real estate, 2.5% for commercial goodwill, 1% for commercial lease, and 0.5% for procurement contracts, concessions and fixed registration fees. The stamp duty is levied on the majority of contracts, agreements and documents that are subject to registration, as well as on administrative and private documents relating to a business. The amount of the stamp duty varies depending on the nature of the act or document such as TD0.5 (€0.23) for invoices, TD3 (€1.38) per copy or paper for some contracts and TD80 (€36.69) for passports.

Tax Incentives

Tunisia offers incentives for several business activities. The main incentives are provided by the Investments Incentives Code and cover exporting activities, regional development, agriculture, anti-pollution and environmental protection, technology and research development, small and medium-sized enterprises, as well as support investments. Depending on the activity, the main incentives can be financial, partial or full tax relief, and/or partial or full deduction/exemption of revenues derived from the encouraged activity.

Social Security – CNSS

Employees pay (through withholding performed by employers) social security contributions on their salaries at a rate of 9.18%. The total rate for contributions paid by the employer is 16.57% (16.07% for companies wholly engaged in exports). No ceiling applies to the amount of wages subject to social security contributions. In addition, employers must pay a work accident contribution at a rate which varies from 0.4% to 4%.

Financial Reporting In Tunisia

Below is a detailed outline of the mechanisms for financial reporting in different sectors of the economy.

Sources Of Accounting Principles

Law n° 96-112, dated on December 30, 1996, regulates the accounting system for companies. Financial accounting components consist of a conceptual framework and accounting standards. The law provides bookkeeping and reporting requirements, and establishes the National Accounting Council as the accounting standards-setting body.

The conceptual framework, which was enacted by Decree No. 96-2459, provides the objectives and the fundamental concepts of financial accounting. It contains the guidelines used by the National Accounting Council in issuing accounting standards. The annual financial statements are composed of the following elements: balance sheet, income statement, cashflow statement and notes to the financial statements. The preceding year’s financial statements are provided for comparison purposes.

The annual financial statements, separate and consolidated if applicable, have to be reported within six months following the year’s end. In addition, public limited companies are also required to prepare a directors’ report, which includes management comments. Listed companies are required to publish semi-annual financial reports. The format of the semi-annual financial statements is generally similar to the format of the annual financial statements. The preceding year’s semi-annual and annual financial statements are presented for comparison purposes.

Accounting Standards

Accounting standards in Tunisia are prepared by the National Accounting Council and enacted by orders from the minister of finance. These standards provide the format and rules of financial reporting, as well as recognition, measurement rules of transactions, and events and disclosure requirements.

Up until the present, the Ministry of Finance has enacted 42 accounting standards providing several rules for industrial and commercial activities, financial services, mutual funds, insurance companies, business combination and related-parties disclosures, and consolidated financial statements. Moreover, the Financial Law for the year 2014 provided for the development of public accounts standards for public entities. These standards are based on international public accounting standards.

International Financial Reporting Standards

The Tunisian generally accepted accounting principles (GAAPs) were established in 1996 to be compliant with international accounting concepts and standards in force at that time.

Now, Tunisian GAAPs have differences in several areas in comparison with International Financial Reporting Standards (IFRS). The most significant differences concern the financial services sector as the Tunisian accounting standards have no equivalent rules to IAS 32, lAS 39, IFRS 7 and IFRS 9 regarding financial instruments.

Beyond financial services specific consideration, Tunisian accounting standards depart from IFRS in other areas, such as income taxes, segment reporting, employee benefits, fair value valuation of assets and foreign exchange transactions.

Currently, a proposal is being studied by the National Accounting Council in order to move to the full IFRS framework. This shift is likely to take place over the next few years.

Filing Requirements

Annual financial statements have to be filed with the annual income tax returns. They also have to be filed with the Registrar’s Office at the county court located in the city of the company’s head office within one month of approval by the annual shareholders’ meeting.

Public listed companies must also file their financial statements with the Financial Market Commission (Conseil du Marché Financier, CMF) and the Tunis Securities Exchange Market (Bourse des Valeurs Mobilières de Tunis, BVMT), and must also publish them in a local daily newspaper. Listed companies must also file their semi-annual statements with the CMF and the BVMT, and must publish them in a daily newspaper. Listed companies are required to publish activity indicators no later than 20 days after the end of each quarter of the financial year.

Audit Requirements

Companies must have their financial statements audited. However, audits for companies (other than stock ones) are not mandatory, provided that:

• They are in their first accounting year of activity;
• They do not satisfy two of the three limits related to the total balance sheet (TD100,000, €45,860), total revenues (TD300,000, €137,580) or number of employees (10);
• If they do not satisfy for two consecutive years in which they are audited, two of the three limits related to the total of balance sheet, total revenues or number of employees.

Statutory audits are performed by independent auditors who must be members of one of the two professional bodies: the Board of Chartered Accountants of Tunisia (Ordre des Experts Comptables de Tunisie, OECT) or the Accountants Board of Tunisia ( Compagnie des Comptables de Tunisie). The auditors are appointed by the shareholders’ general meeting for a three-year-period mandate The auditor must be member of the OECT if two limits relating to the balance sheet total (TD1.5m, €687,900),the total revenues (TD2,000,000, €917,200) or the average number of employees (50) are met. Some engagements are reserved for OECT members by specific texts (public companies, banks, investment funds, insurance companies and companies listed on the stock exchange).

There is also a requirement for the rotation of auditors after three mandates when the auditor is an individual and after five mandates for public accounting firms with at least three partners.

Listed companies, banks and insurance companies, companies having consolidated assets of more than TD100m (€45.8m) and companies with outstanding debts from banks and through public issue instruments of more than TD25m (€11.4m) are required to appoint two statutory auditors acting in a separate basis, meaning that it is a double audit rather than a joint audit.

Upcoming Amendments

Since 2013, Tunisia has started a programme for a deep overhaul of its tax system with the following targets: simplifying the tax system, fighting tax fraud and evasion, offering more equity to taxpayers, decentralising the local taxation, and modernising the tax administration. The implementation of this programme is performed notably through the annual Financial Law.

As a result of this effort, a draft of the Financial Law for the year 2016 is under review by the Assembly of the People’s Representative. The main proposed amendments are:

• Tax amnesty and exchange amnesty;
• Reduction of Customs duties and consumption duties to fight smuggling;
• Revision of the flat rate tax system for individuals.
• Easing the conditions for exercising the right of communication with regard to banking and postal institutions, brokers and insurance companies to answer the requirements of data exchange with foreign tax authorities (especially the FATCA law requirements);
• Introduction of new tax sanctions for falsification of invoices, non-submission of the declaration of existence and non-disclosure of software to the tax authorities during their audit;
• Creation of conciliation committees to decide on tax audit records before tax litigation;
• Strengthening invoicing obligations for professions and establishment of an obligation to use cash registers to fight tax fraud;
• Subordination of issuing insurance receipts to the payment of the road tax;
• Establishment of an electronic invoicing system.
• Strengthening the means of cross-checking by obliging municipalities to communicate lease contracts to the tax authorities;
• Revisions to the taxation of individuals such as extension of individual income tax scope, gambling, reduction from 30% to 20% of deductible amount for real estate income under the flat-rate basis system, and tax allowance of two-thirds of income for farmers and fishermen;
• A discharging withholding tax at a rate of 15% for permanent establishments which do not submit an existence declaration to the competent tax authorities.
• Extension of the VAT scope by submitting several previously exempted activities to VAT at a rate of 6%.

Moreover, a draft of a new Investment Incentives Code, which will be entitled the Investment Code, is also under review by the above mentioned assembly. The proposed amendments are targeted to encourage high value-added activities and job creation.

OBG would like to thank EY Tunisia for their contribution to THE REPORT Tunisia 2016