Tunisia: Global Tax Guide

Legislation

Residence/Territorial Scope

Article 45 of the General Tax Code provides that corporate income tax applies to companies and other legal persons, regardless of their purpose, carrying on their activity in Tunisia.

Corporate income tax is also payable by legal persons not resident in Tunisia that earn income from Tunisian sources or a capital gain from the sale of real estate located in Tunisia.

Entities Within Scope

Article 45 of the General Tax Code provides that corporate income tax applies to the following companies and other legal persons, regardless of their purpose, carrying on their activity in Tunisia:

• companies referred to in Article 7 of the Commercial Companies Code;
• production, consumer or service cooperatives and their unions;
• public establishments and bodies of the State, governorates and municipalities of an industrial and commercial nature enjoying financial autonomy;
• civil-law companies if they in fact have the characteristics of capital companies;
• joint ventures, members of economic interest groupings and co-participants in common debt funds when they are legal persons subject to corporation tax;
• certain associations that do not carry out their activities in accordance with the provisions of the legislation governing them;
• the members’ fund provided for in the Insurance Code.

Corporate Income Tax Rates

Article 49 of the General Tax Code provides that the standard corporate income tax rate, is 15%.

Corporate income tax on capital gains on Tunisian real estate by non-residents is also taxed at 15% of the gain. However, they can elect to be subject to tax on the capital gain at the rate of 10% of the sale price.

However, the rate of corporation tax is 10%, for:

• businesses carrying out a craft, agricultural, fishing or fishing boat armament activity,
• profits from investments in the agricultural and fishing sector,
• profits from investments made in regional development areas,
• profits from investments in pollution control activities,
• central purchasing bodies of retail undertakings organised in the form of service cooperatives governed by the General Statute of Cooperation,
• service cooperatives formed between producers for the wholesale sale of their production,
• consumer cooperatives governed by the general statute of cooperation,
• profits made in the context of commercial or industrial projects benefiting from the youth employment programme or the national fund for the promotion of crafts and small trades.

A 35% rate applies to:

• banks and financial institutions provided for by Law No. 2016-48 of 11 July 2016 on banks and financial institutions,
• banks and non-resident financial institutions operating under the Code for the provision of financial services to non-residents,
• investment companies provided for by Law No. 88-92 of 2 August 1988 as amended
• insurance and reinsurance companies, including mutual insurance companies,
• debt collection companies provided for by Law No. 98-4 of 2 February 1998 on debt collection companies,
• telecommunications network operators provided for in the Telecommunications Code promulgated by Law No. 2001-1 of 15 January 2001.

Minimum tax

The corporate income tax must not be less than a minimum tax equal to:

• 0.2% of the gross turnover with a minimum equal to 500 dinars payable even in the event of no of turnover for companies not subject to corporate tax at the rate of 10%.

• 0.1% of the turnover whose profits are subject to corporate tax at the rate of 10% or of the turnover achieved from the marketing of products or services subject to the administrative approval of prices and whose gross profit margin does not exceed 6% with a minimum equal to 300 dinars payable even in the event of no turnover.

The minimum tax does not apply to new enterprises during the period of implementation of the project, provided that this period does not exceed three years from the date of submission of the declaration of existence.

Taxable Income and Allowances

Article 10 of the General Tax Code provides that the total income used as a basis for corporate income tax is the net profit made by each taxable person during the preceding year or during the twelve-month period the results of which were used to draw up the last balance sheet, where that period does not coincide with the calendar year.

If the financial year ended in the preceding year extends over a period of more or less than twelve months, income tax is established on the basis of the results of that financial year.

If no balance sheet is drawn up in any year, income tax is established on the basis of the profits of the period elapsed since the end of the last taxable period, or, in the case of a new enterprise, from the commencement of its activities until 31 December of the year in question.

Under Article 11 of the General Tax Code, the net result is determined on the basis of the overall results of operations of all kinds carried out by the company, including the disposal of assets.

The net result is made up of the difference between the values of the net assets at the end and at the beginning of the period the results of which are to be used as the basis for income tax, less any additional contributions and increased by the deductions made during this period by the operator or by the partners.

Net assets are defined as the excess of asset values over the total liabilities of third-party receivables, depreciation and provisions allowed for deduction.

Stock and work in progress is valued at cost price.

A capital gain resulting from the contribution of shares to the capital of the parent company or holding company is deductible from taxable profits, provided that the parent company or holding company undertakes to list its shares on the Tunis Stock Exchange at the latest by the end of the year following that of the deduction.

Article 46 provides that the following are exempt from corporate income tax:

• inter-professional groups that do not carry out profit-making activities as their main activity;
• savings and provident banks administered free of charge;
• public establishments, State bodies or local non-profit public authorities;
• service cooperatives whose activity contributes to the marketing of agricultural or fishery products and operating within the wholesale markets;
• mutual agricultural service companies;
• workers’ production cooperatives;
• the Caisse des Prêts et de Soutien des Collectivités Locales;
• investment companies with variable capital.

Regime for mergers and demergers

Article 49 decies provides that capital gains on the contribution of assets (except inventory) in the context of a merger of companies or demerger is allowed as a deduction, however they are reintegrated into the taxable results of the company that received the assets up to a limit of 50% of the amount, over 5 years from the date of the merger or demerger.

Deductions

Under Articles 12 and 48 of the General Tax Code, taxable profits are determined after deduction of all expenses incurred for trade, which include in particular:
production or operating costs and charges of any kind, and in particular staff, labour and rent expenses.

Doubtful debts whose nominal value per customer does not exceed one hundred dinars, provided that the company does not continue to maintain business relations with the debtor, that their maturity dates back more than one year and that the company submits to the administration a statement of the debtors concerned attached to the income tax return.

Provisions for doubtful debts, including indirect taxes that they have suffered, for which legal action is initiated, provisions for the depreciation of stocks intended for sale and for the depreciation of shares listed on the stock exchange, up to a limit of 50% of taxable profit.

The amount of deductible provisions in respect of a provision for inventory is the difference between the cost price recorded in the accounts and the net realizable value at the balance sheet date of the financial year in respect of which the provisions are made without taking into account the costs not realized at that date and without this amount exceeding 50% of the cost price.

Provisions made during a year are included in the taxable profits of the 3rd year following that in which they are set up, if the legal action concerning the debt is still ongoing.

Donations and subsidies made to works or organisations of general interest, of a philanthropic, educational, scientific, social or cultural nature are deductible up to 2% of turnover.

However, the following are deductible in full:

• donations and subsidies granted to the State, local authorities and public enterprises,

• the cost of acquiring or building housing granted as a gift for the benefit of the spouses, ascendants and descendants of the martyrs of the nation, the army, the internal security forces and customs,

• donations and subsidies granted to associations working in the field of the advancement of persons with disabilities and to associations working in the field of protection and supervision of persons without family support and which carry out their activities in accordance with the legislation governing them,

• sponsorship allocated to the creation and maintenance of green spaces and family and rural parks within the framework of agreements concluded for this purpose with the Ministry of the Environment or the Ministry of Equipment and Housing, up to a limit of 150 thousand dinars per year.

An enhanced deduction of 150% applies for research and development expenses incurred by a company within the framework of agreements concluded with public scientific research establishments, public higher education and research establishments or with other public establishments and companies authorised to carry out research.

This is provided that the company’s contribution to the total research and development expenses covered by the agreement is not less than 10% and without this additional deduction exceeding a ceiling of 200 thousand dinars annually.

Depreciation

Article 12 bis of the General Tax Code provides that provides that depreciation is deductible in accordance with the rules laid down by accounting rules without the deductible amount exceeding the straight-line depreciation annuities calculated on the basis of maximum as set by Decree. However, the depreciation of fixed assets of low value not exceeding 500 dinars is fully deductible.

Article 13 of the General Tax Code provides that companies that build, have built or purchase residential buildings intended for the accommodation of their staff free of charge, may, qualify for an exceptional depreciation equal to 50% of the cost price.

Under Article 15 of the General Tax Code, depreciation is not allowed as a deduction for:

• land;
• goodwill;
• aircraft and pleasure boats made available to the company’s directors or employees and whose use does not directly concern the purpose of the company, as well as second homes;
• passenger vehicles with a fiscal power of more than 9 horsepower, with the exception of those constituting the main purpose of the operation.
• assets whose acquisition cost is greater than or equal to 5,000 dinars, paid in cash.
• assets acquired from persons resident or established in a State or territory whose tax regime is privileged.

Non-deductible expenses

Article 14 of the General Tax Code provides that the following is not be allowed as a deduction for the determination of taxable profit:

• gifts of all kinds, reception expenses including catering and entertainment expenses that exceed 1% of the gross turnover achieved by the company with a deductible maximum of twenty thousand dinars per financial year;
• income tax or corporation tax, including the related withholding tax;
• any charges relating to second homes, aircraft and pleasure boats;
• rents, maintenance, supplies, fuel and vignette expenses incurred in respect of passenger vehicles with a fiscal power of more than 9 horsepower, with the exception of those constituting the main purpose of the operation.
• interest paid to the operator or to the partners of partnerships or joint ventures in respect of the sums paid by them into the company’s cash in addition to their capital contribution;
• transactions, fines, and penalties;
• amounts greater than or equal to 5,000 dinars excluding value added tax paid in cash.
• expenses relating to amounts paid to persons residing or established in a State or territory with a preferential tax regime.

Persons are considered to be resident or established in a State or territory whose tax regime is privileged, when the tax due in that State or territory is less than 50% of the income tax or corporation tax due in Tunisia in respect of the same activity.

Interest

Interest on shareholders current account is deductible up to the rate of 8% provided that the amount of the interest-bearing sums does not exceed 50% of the capital and that the latter is fully paid up.

Tax Losses

Article 48 of the General Tax Code provides that unutilised tax losses can be carried forward for offset against future financial years up to and including the fifth year.

Withholding Tax

Article 52 of the General Tax Code provides that withholding tax applies at the following rates:

• 10% in respect of fees, commissions, brokerage, rents and remuneration for non-commercial activities, whatever they may be called, paid by the State, local authorities, legal persons as well as natural persons subject to income tax under the actual regime;

• 10% on remuneration paid in return for performance in the provision of services on behalf of others.

This rate is reduced to:

• 3% in respect of fees and 5% in respect of hotel rents when these fees or rents are paid to legal persons subject to corporation tax, to natural persons subject to income tax under the actual regime and

• 5% in respect of remuneration paid to artists, creators and legal persons subject to corporate income tax, in respect of the production, distribution and presentation of theatrical, stage, musical, literary, plastic and cinematographic works, and in respect of the remuneration paid to holders of copyright and related rights in the context of the collective management of literary and artistic property rights.

A 15% withholding tax rate applies to remuneration and income paid to non-domiciled or established persons who are not established in Tunisia.

A 20% withholding tax rate applies in respect of income from movable capital, with the exception of interest on deposits and securities in foreign currencies and convertible dinars and in respect of remuneration and bonuses awarded in accordance with the laws and regulations in force to the members of the boards, management boards and committees of public limited companies and partnerships limited by shares.

A 25% withholding tax applies in respect of sums derived from betting, games of chance and lotteries.

A 10% withholding tax applies to interest on loans paid to banking institutions not established in Tunisia.

A 2.5% withholding tax applies to the sale price of real estate, shares in real estate companies and business assets declared in the deed, paid by the State, local authorities, legal persons and natural persons subject to income tax according to the actual regime.

A 1.5% withholding tax applies to amounts equal to or greater than D 1000, including value added tax, paid by the State, local authorities, legal persons, natural persons subject to income tax under the actual regime in respect of their acquisition of goods, materials, equipment and services.

This rate is reduced to 1% for amounts whose profits are subject to corporation tax at the rate of 15% and to 0.5% when profits are subject to corporate income tax at the rate of 10%.

Transfer Pricing

Article 48 septies of the General Tax Code provides that for the purpose of determining the tax payable by enterprises resident in Tunisia and which are dependent on or control other enterprises resident or established abroad belonging to the same group any profits indirectly transferred either by increasing or reducing the prices of the transactions charged, or by any other means, are incorporated into the taxable profits of these companies.

Indirect pass-through profits are determined by comparison with those that would have been realized in the absence of any arm’s length or control.

The condition of dependence or control is not required when the transfer of profits is carried out with companies resident or established in a State or territory whose tax regime is privileged.

Arm’s length or control relationships are deemed to exist between businesses when:

• one holds, directly or through an intermediary, more than 50% of the share capital or voting rights of another company or in exercises decision-making power, or

• the entities above are subject to the control of the same undertaking or the same person.

CFC Rules

None