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Tunisia Corporate - Tax credits and incentives

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Two laws have been promulgated in order to promote investment in Tunisia, the Investment Law and the Tax Incentives Law.

Investment Law n° 2016-71 of 30 September 2016

Objectives of the Investment Law

The purpose of the Investment Law is to promote investment and to encourage the creation of enterprises, notably through:

  • Increasing the added value, competitiveness, and export capacity of the national economy, and technological development at the regional and international levels.
  • Job creation and promotion of human resources competence.
  • Achieving an integrated and balanced regional development.
  • Achieving sustainable development.

Main features of the Investment Law

The Investment Law defines the legal regime for investment promoted by persons, resident or non-resident, in all sectors of economic activities, fixed by decree.

Under the Investment Law, investors benefit from the following incentives:

  • Right to acquire, lease, or operate non-agricultural immovable property.
  • Possibility of recruiting executives of foreign nationality for up to 30% of the total number of managers; this rate is reduced to 10% as of the fourth year. In all cases, the company can recruit four executives of foreign nationality (even if the limit of 30% or 10% is less than four).
  • Free transfer of the profit, dividends, and capital abroad in foreign currency, in accordance with the applicable foreign exchange legislation. Indeed, the Investment Law specifies that the investor is free to transfer one’s capital and profits abroad in foreign currency (in compliance with the applicable foreign exchange legislation). In case the transfer requires authorisation from the Tunisian Central Bank, any refusal must be in writing. The failure to reply within the time limit to be set by decree is considered as an acceptance (except for activities excepted to be defined by decree).
  • Investment subsidies for direct investment operations, as follows:
    • Subsidies for the increase in value added and competitiveness.
    • Subsidies for the development of employability capacity.
    • Subsidies for regional development.
    • Subsidies for sustainable development.

    Conditions and modalities to benefit from subsidies are defined by decree.

  • Possibility to benefit from arbitration in case of dispute with the Tunisian State. The Investment Law provides rules for settlement of disputes between the Tunisian State and foreign investors. These shall be settled by conciliation; otherwise, the dispute may be submitted to arbitration under a specific agreement between the two parties. In case the dispute is not settled through conciliation and in the absence of an arbitration agreement, the dispute falls within the jurisdiction of Tunisian courts.

Also, as per the Investment Law, foreign investors have the same rights and obligations provided for by the Investment Law as Tunisian investors in comparable situations.

The Investment Law provided for the need to comply with response deadlines for each authorisation requested by the investor and the obligation to justify each refusal in writing. Failure to reply within the time limit constitutes acceptance under article 4 of the Law (except for activities excepted to be defined by decree).

Investors’ properties and intellectual property (IP) rights are protected in accordance with the legislation in force. Investor's property may not be expropriated except for public interest reasons, without discrimination between Tunisian and foreign investors, subject to fair and equitable compensation.

Tax Incentives Law n° 2017-8 of 14 February 2017

The major tax incentives provided for by the Tax Incentives Law are mainly relating to:

  • Export operations. 
  • Investments in regional development zones.
  • Agricultural development.
  • Support and depollution activities.
  • Newly created companies.

Wholly exporting activities

The following are considered as wholly exporting companies:

  • Companies with products manufactured in Tunisia, totally destined to be sold outside Tunisia.
  • Companies providing services totally used/exploited outside Tunisia.
  • Companies operating in agriculture and fisheries, manufacturing, and craft industries that sell all their products to wholly exporting companies, as well as companies established in business parks, provided that such products and goods constitute components of the final product to be exported (note that this condition no longer required as of 2021 for companies incorporated up to 2018 and as of 2019 for companies incorporated in 2019), and to international trade wholly exporting enterprises.
  • Companies that carry out all their services for the benefit of wholly exporting companies, companies established in the economic activity parks, and international trade totally exporting companies, in the subcontracting operations, within the same sector (note that this condition no longer required as of 2021 for companies incorporated up to 2018 and as of 2019 for companies incorporated in 2019) or within the framework of services directly linked to production (set by decree).

Note that wholly exporting companies may commercialise locally, during a given year, up to 30% of the turnover of the previous year without losing the status of a wholly exporting company. It is noteworthy that the turnover derived from the sales of waste to companies authorised by the Ministry of the Environment for the exercise of recovery, recycling, and treatment activities, as well as the services or sales realised within international public tenders, are not included in the rate of 30%.

Tax incentives at the exploitation phase

Profits derived from the exportation activity are subject to CIT at the rate of 10% (reduction of revenues derived from exports up to 2/3 for enterprises/individuals for personal income tax [PIT]), and all other revenues will be subject to CIT at the rate of 25%.

The rate of 10% is also applicable to the below auxiliary and exceptional profits related to operations:

  • Investment allowances granted under the legislation of investment incentives, allowances of upgrading granted under an approved upgrade program, and allowances granted to enterprises in the framework of the National Employment Fund.
  • Capital gains derived from the sale outside Tunisia or to other wholly exporting companies of tangible assets used to carry out the exportation activity, excluding constructions, lands, and goodwill (fonds de commerce).
  • Realised exchange profits in connection with the exportation activity.
  • Remission of debt for the benefit of the wholly exporting companies.

The wholly exporting company whose total deduction period (ten years) has not expired will continue to benefit from the said deduction until January 1st, 2021. 

It should be noted that the reduced CIT rate of 10% applicable to exports (as well as the deduction of 2/3 of revenues derived from exports from the PITable income) will no longer apply as of 1 January 2021. As of that date, the general CIT rate (PIT deduction regime) will apply, depending on the activity, notwithstanding whether the benefits are derived from exports or from local activities.

Hence, benefits derived from exports will be subject to the CIT rate of 10%, 13.5%, 20%, or 25% (PIT after deduction of 2/3 of revenues for activities subject to CIT at 10% and PIT after deduction of 1/2 of revenues for activities subject to CIT at 13.5%; PIT with no deduction for other activities subject to CIT at 25% or 35%) as of 1 January 2021 with a minimum of 0.1% (for companies subject to CIT rate of 10% or 13.5% and enterprises/individuals that deduct 1/2 or 2/3 of their revenues) or 0.2% (for companies subject to CIT rate of 20%, 25%, or 35% and to PIT with no deduction) of gross revenues (either local or derived from exports) with a ceiling of TDN 300 for companies subject to CIT rate of 10% and 13.5% (TDN 200 for PIT) or TDN 500 for companies subject to CIT rate of 20%, 25%, or 35% (TDN 300 for PIT).

The other tax incentives applicable to exports will still apply (e.g. VAT, registration fees). 

Tax incentives at the creation and capital increase phases

Profits/revenues invested in the subscription to initial capital or to capital increases of totally exporting companies are deductible from taxable profits/revenues at up to 100% of the taxable result, subject to the minimum tax of 15% of the taxable result before the said deduction for companies subject to CIT at the rate of 25% (20% for companies subject to CIT at the rate of 35%) and 45% for individuals. However, the deduction is subject to the conditions listed below:

  • The deposit of an investment declaration to the concerned authorities.
  • The annual tax return must be accompanied by a certificate issued by the competent authorities certifying the effective start of activity.
  • The status of the company must be compliant with regard to the National Social Security Funds.
  • The implementation of an investment financing scheme investment with a minimum rate of equity capital.

It should be noted that, as per the Finance Law 2019, tax incentives regarding the creation and capital increase of totally exporting companies will no longer apply for releases realised starting from 1 January 2019.

Other incentives

Wholly exporting companies also benefit from:

  • VAT exemption on the import operations and local acquisitions of goods, products, equipment, and services necessary for its operations.
  • Exemption from other indirect taxes, including customs duties.
  • Exemption from professional training tax, registration fees and stamp duties, and social lodging tax.

Also, foreign employees recruited by totally exporting companies may benefit from the payment of PIT at the reduced rate of 20% of gross revenues.

These tax incentives will still apply. Indeed, the changes implemented by the Finance Law 2019 applicable to exports covered just the tax incentives with regards to CIT and PIT, which will no longer apply as of 2021. 

Regional development zones activities

The Tax Incentives Law provides that investments in certain activities (except for some sectors listed by decree) carried out by entities established in regional development zones (fixed by decree) benefit from a number of tax incentives, detailed as follows:

Tax incentives at the exploitation phase

CIT

Profits derived from direct investments in regional development zones are totally deductible from the taxable income until the expiry of the period of five years (Group 1 zones listed by decree) or ten years (Group 2 zones listed by decree).

After the expiry of the exemption period, benefits derived from direct investment in development zones will be subject to CIT at the rate of 10% (PIT on revenues after deduction of 2/3).

It should be noted that, as per the Finance Law 2019, for newly created entities in regional development zones incorporated in 2018, 2019, and 2020 that could benefit from a total exemption from CIT during four years starting from the activity start date, the total deduction period of five years or ten years provided for companies operating in regional developments zones is counted as from the expiry of the four-year exemption period.

Taxation of exceptional or auxiliary revenues/profits

Enterprises that invested in development zones may also benefit from the deduction and taxation at the reduced rate (after the expiry of total deduction period) for other profits in connection, with the same limits and conditions. The profits in question are detailed as follows:

  • Investment allowances granted under the legislation of investment incentives, allowances of upgrading granted under an approved upgrade program, and the allowances granted to enterprises in the framework of the National Employment Fund.
  • The capital gain derived from the sale of fixed assets allocated to the main activity of enterprises, with the exception of buildings, unbuilt buildings, and goodwill.
  • Realised exchange profits in connection with the principal activity.
  • Remission of debt for the benefit of the companies.

Tax incentives at the creation and capital increase phases

Profits/revenues invested in the subscription to initial capital or to capital increases of companies located in development areas are deductible from taxable profits/revenues at up to 100% of the taxable result. However, the deduction is subject to the conditions listed below:

  • The deposit of an investment declaration to the concerned authorities.
  • The annual tax return must be accompanied by a certificate issued by the competent authorities certifying the effective start of activity.
  • The status of the company must be compliant with regard to the National Social Security Funds.
  • The implementation of an investment financing scheme investment with a minimum rate of equity capital.

Other incentives

Enterprises that invested in development zones may also benefit from the exemption from social lodging tax and vocational training tax.

Agricultural activities

The Tax Incentives Law provides that investments in the agricultural sector benefit from a number of tax incentives, detailed as follows:

Tax incentives at the exploitation phase

CIT

Profits derived from direct investments in the agricultural sector are totally deductible from the taxable income during a period of ten years.

After the expiry of the ten-year exemption period, benefits derived from direct investment in the agricultural sector will be subject to CIT at the rate of 10% (PIT on revenues after deduction of 2/3).

Taxation of exceptional or auxiliary revenues/profits

Enterprises that invest in the agricultural industry may also benefit from the deduction and taxation at the reduced rate (after the expiry of total deduction period) for other profits in connection, with the same limits and conditions. The profits in question are detailed as follows:

  • Investment allowances granted under the legislation of investment incentives, allowances of upgrading granted under an approved upgrade program, and the allowances granted to enterprises in the framework of the National Employment Fund.
  • The capital gain derived from the sale of fixed assets allocated to the main activity of enterprises, with the exception of buildings, unbuilt buildings, and goodwill.
  • Realised exchange profits in connection with the principal activity.
  • Remission of debt for the benefit of the companies.

Conditions for the benefit of the tax incentives:

  • The deposit of an investment declaration to the concerned authorities.
  • The annual tax return must be accompanied by a certificate issued by the competent authorities certifying the effective start of activity.
  • The status of the company must be compliant with regard to the National Social Security Funds.
  • The implementation of an investment financing scheme investment with a minimum rate of equity capital.

Tax incentives at the creation and capital increase phases

Profits/revenues invested in the subscription to initial capital or to capital increases of agricultural companies are deductible from taxable profits/revenues at up to 100% of the taxable result. However, the deduction is subject to the conditions for the benefit of the tax incentives listed above.

Other incentives

The direct investments in Agricultural activities give entitlement to the following tax incentives (conditions and equipment listed by decree):

  • Exemption from customs duties and taxes with a similar effect for imported equipment necessary for the investment.
  • Suspension of VAT and consumption duty for imported equipment and equipment acquired locally that are necessary for the investment.

Also, registration duties paid on the transfer of agricultural land used for direct investment in the agricultural industry could be refunded on request (to be submitted within a three-year period).

Support and depollution activities

The supporting investments activities are defined as being the following:

  • Child and elder care institutions.
  • Education, teaching, scientific research, and professional training institutions.
  • Cultural production and cultural industry establishments.
  • Youth entertainment and leisure facilities.
  • Health and hospital facilities.
  • Private accommodation projects for students.

The list of activities is set by decree.

The depollution activities are defined as being the collection, transformation, recovery, recycling, or treatment of waste and residues.

Tax incentives at the exploitation phase

CIT

Profits derived from direct investments in support and depollution activities are subject to CIT at the rate of 10% (PIT on revenues after deduction of 2/3) (subject to the below conditions).

Conditions for the benefit of the tax incentives:

  • The deposit of an investment declaration to the concerned authorities.
  • The annual tax return must be accompanied by a certificate issued by the competent authorities certifying the effective start of activity.
  • The status of the company must be compliant with regard to the National Social Security Funds.
  • The implementation of an investment financing scheme investment with a minimum rate of equity capital.

Other incentives

The direct investments in support and depollution activities give entitlement to the following tax incentives (conditions and equipment listed by decree):

  • Exemption from customs duties and taxes with a similar effect for imported equipment necessary for the investment.
  • Suspension of VAT and consumption duty for imported equipment and equipment acquired locally that are necessary for the investment.

Newly created companies

Tax incentives at the exploitation phase

Companies/enterprises newly created (except for those incorporated in the on-site consumption, trade, financial, energy other than renewable energy, and mining industries, telecommunication operators, and real estate developers) may benefit from the deduction of a portion of their taxable profits/revenues up the fourth year of activity as follows (subject to the below conditions):

  • 100% for the first year.
  • 75% for the 2nd year.
  • 50% for the 3rd year.
  • 25% for the 4th year.

Conditions for the benefit of the tax incentives:

  • The deposit of an investment declaration to the concerned authorities.
  • The annual tax return must be accompanied by a certificate issued by the competent authorities certifying the effective start of activity.
  • The status of the company must be compliant with regard to the National Social Security Funds.
  • The implementation of an investment financing scheme investment with a minimum rate of equity capital.

Newly created companies incorporated in 2018, 2019, and 2020 benefit from a total exemption from CIT during four years starting from the activity start date (that should not exceed two years) subject to the submission of an investment declaration as provided by the investment law and to the maintenance of accounts in accordance with Tunisian GAAP. This measure does not involve companies operating in the financial sector, energy sector (except renewable energy), real estate development, on-site consumption, trade sectors, and telecommunication operators. 

This measure does not cover:

  • Companies operating in the financial and energy sectors (with the exception of renewable energies), mining, real estate development, on-site consumption, trade sectors, and telecommunications operators.
  • Companies created as part of transmission operations or following the modification of the legal form of the company or formed between persons carrying out an activity of the same nature as the activity of the company created and concerned by the benefit.

Conditions for the benefit of this advantage:

  • The entry into effective of the activity in a period of two years as of the date of the investment declaration.
  • Keeping accounts in accordance with the Tunisian accounting system.

Foreign tax credit

In the absence of DTTs, CIT (or any WHT in connection with) paid outside Tunisia is not deductible from the tax due in Tunisia.

However, in the presence of DTTs, in cases where profits derived from outside Tunisia were subject to CIT in Tunisia, the foreign tax, if any, is deductible, but only up to the corresponding Tunisian tax on these profits.


Last Reviewed - 07 February 2020

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