Inventory is valued at cost.
According to the provisions of article 11 of the Income and Corporate Tax Code, “the net income of a company is determined as the result of all the operations undertaken by the company, including mainly the transfer of assets…” Consequently, capital gains, if any, arising from the transfer of assets will be considered as taxable income and will be subject to CIT.
Capital gains are calculated as the difference between the sale price, which is supposed to be equal to the fair market value, and the net book value.
In the particular case of goodwill (fonds de commerce) generated internally, capital gains will be equal to the total sale price, as goodwill, other than derived from acquisitions, has no value on the books of the company.
All tangible and intangible transaction assets have to be valued at their fair market value.
The goodwill (fonds de commerce) generated internally, even if not booked as an asset of the company, also has to be valued at fair market value.
Particular case of capital gains resulting from mergers
Capital gains arising from the transfer of assets, other than inventories, on the occasion of a merger operation are deductible from the taxable income of the merged company and are to be added back to the taxable income of the absorbing company at up to 50% of their amount, spread out over five years.
Particular case of revalued fixed assets (legal revaluation regime)
The Finance Law 2019 instituted the legal revaluation regime applicable to industrial companies. According to such regime, industrial companies are authorised to revalue their fixed assets included in their balance sheets for the year ended 31 December 2019 and the following years. The said fixed assets exclude:
- Buildings and lands.
- Assets that benefited from the additional amortisation at the rate of 30% as provided by the tax incentives law.
In addition, the following assets cannot benefit from the legal revaluation regime:
- Financial fixed assets.
- Intangible assets (goodwill, trademarks, patents, etc.).
- Assets other than fixed assets (inventories, trade receivables, investment securities, etc.).
The actual value of the revalued fixed assets cannot be greater than the value obtained by application at their cost/purchase price of revaluation indexes fixed by decree n°2019-971 of 28 October 2019. The Finance Law 2023 provides that the valuation can be performed according to the provisions provided for by the accounting system of companies and deletes the above cap (value not exceeding the value calculated using the revaluation indices fixed by presidential decree).
Revaluation gain or loss
The revaluation gain is not subject to CIT provided that it is booked in a special equity account (special revaluation reserve) that is undistributable and unusable by any means except in case of sale. Also, the revaluation loss is not tax deductible from the taxable income.
Any reallocation (capitalisation, distribution, etc.) makes the gain available and subject to CIT or tax on distribution for the reserves distributed directly.
Capital gain on the sale of the revaluated assets
The capital gain is not subject to CIT within the limit of the capital gain resulting from the revaluation of the sold asset. Also, the loss derived from the sale of the revalued assets is not tax deductible from the taxable income within the limit of the revaluation gain.
The Finance Law 2023 provides that the benefit of this revaluation regime is subject to the condition of non-transfer of the revalued assets for a minimum period of five years from 1 January of the year following that of the revaluation.
Deduction of additional depreciation post-revaluation
For assets subject to depreciation, accumulated depreciation deducted that is tax deductible is revalued by applying the same revaluation index applied to the historical cost of the corresponding fixed assets.
New provision provided by the Finance Law 2022 and 2023
The Finance Law 2022 has extended the legal revaluation regime to buildings and lands for legal companies subject to CIT. Hence, all companies (in all sectors of activity) can revalue buildings and lands (as defined by accounting legislation) that are in their balance sheet according to their real value without this value exceeding the value calculated through the revaluation of the purchase or cost price in application of the revaluation indices fixed by presidential decree. The Finance Law 2023 provides that the valuation can be performed according to the provisions provided for by the accounting system of companies and deletes the above cap (value not exceeding the value calculated using the revaluation indices fixed by presidential decree).
This revaluation applies to buildings and lands that are in the companies’ balance sheets for the financial year ended 31 December 2021 and subsequent years.
For the other fixed assets, the revaluation instituted by the Finance Law 2019 remains limited to companies, subject to CIT, operating in the industry sector.
The revaluation gain is not subject to CIT, provided that it is booked in a special equity account (special revaluation reserve) that is undistributable and unusable by any means except in case of sale. Also, the revaluation loss is not tax deductible from the taxable income.
The revaluation of buildings and lands does not give the right to additional depreciation, the latter continue to be applied on the basis of the cost price or the historical acquisition cost and at the rates applicable before the revaluation.
In case of sale (after ten years), the capital gain is not subject to CIT within the limit of the capital gain from the revaluation of the property sold. Also, the sale loss of revalued assets is not deductible from taxable income up to the revaluation gain.
The benefit of this revaluation regime is subject to the condition of non-transfer of the revalued buildings and lands for a minimum period of ten years from 1 January of the year following that of the revaluation.
Particular case of capital gains realised further to the assets disposal for the purpose of renewal of assets assigned to operations
According to the Finance Law 2019, all the companies (except for those operating in the financial, energy other than renewable energy, mining, trade, on-time consumption industries, telecommunication operators, and real estate developers) could benefit from the deduction from their taxable income, up to a limit of 50%, of the capital gain derived from the disposal of tangible fixed assets allocated to the main activity, provided that such disposal occurs after five years from date of possession. Such provisions will apply for disposals performed between 1 January 2019 and 31 December 2021, subject to the following conditions:
- Allocate the total amount of the capital gain to the acquisition of materials and equipment necessary for the operations.
- The registration of the capital gain in a special reserve investment account on the liabilities side of the balance sheet before the filing CIT due date related to the year of benefit of the deduction.
- The realisation of the investment and the incorporation of the reserve special reinvestment in the company's share capital (for legal entities) at the latest at the end of the second year following that of constitution of the reserve.
- Non-reduction of the share capital (for legal entities) for a period of five years as of the date of incorporation of the special reserve into the share capital, except in the case of the capital reduction for loss absorption.
- Attachment to the CIT return of the year of the capital gain deduction of a certificate of deposit of the investment declaration with the authorities concerned added to a commitment to realise the investment no later than at the expiry of the second year following that of constitution of the reserve.
Dividends distributed by Tunisian-resident companies to resident individuals are subject to CIT paid through a discharging WHT at the rate of 10% of its total amount.
Dividends distributed by Tunisian-resident companies to non-resident, non-established companies and non-resident individuals are subject to CIT paid through a discharging WHT at the rate of 10% of its total amount, subject to more favourable provisions/rates provided by a DTT.
Branch tax is also due on profits realised by a local PE of non-resident companies at the rate of 10% of the realised profit, subject to more favourable provisions/rates provided by a DTT.
Interest income arising from Tunisia or outside is part of the taxable results of the company, unless expressly exempt by the law (e.g. interests on deposits in foreign currencies).
Royalty income is part of the taxable results of the company.
Foreign income derived from services that are realised outside Tunisia are part of the taxable income (see the Tax credits and incentives section).