The 2021 Finance Law was passed in a very difficult economic context, due to COVID-19 impacts on investment, production, consumption, and exports. Tax changes introduced by this law were part of the government efforts to reduce the impact of this economic crisis and improve the business climate.
We summarise below the most important corporate tax measures.
Modification of corporate income tax rates
As part of the continuous implementation of the tax reform programme , the 2021 Finance Law abolished the corporate tax rates of 25%, 20% and 13.5% and replaced them by a single rate of 15% applicable to FY 2021. This measure is fully consistent with the tax reform launched in 2014, which aims to reduce the tax burden.
The corporate income tax rate of 10% applicable for investment in agriculture, fishing, handicrafts, fighting against pollution, etc., and the rate of 35% applicable to the financial sector, oil and gas, telecommunications, etc., have been maintained unchanged.
Reduction of withholding tax rates
Following the reduction of the corporate income tax rate, the Finance Law for 2021 has reduced the withholding tax rates applicable for payment to individuals and legal entities resident or established in Tunisia, as well as to capital gains realised by legal entities that are not resident and not established in Tunisia. The main changes are as follows:
- A reduction of the withholding tax rate from 15% to 10% on fees, commissions, brokerage, rent, and remuneration for non-commercial activities;
- A reduction of the withholding tax rate from 1.5% to 1% for amounts higher or equal to TNG 1,000 including VAT, related to acquisition of goods, materials, equipment and services paid to companies taxable on income at the rate of 15%;
- A reduction of the withholding tax rate from 15% to 10% applicable on the sale price related to capital gain on sales of buildings located in Tunisia, or social rights in real estate civil companies not attached to establishments located in Tunisia, carried out by non-resident and non-established legal entities.
- A reduction of the withholding tax rate from 25% to 15% applicable to capital gains (without exceeding 5% of the sale or resale price) resulting from sales or resales of shares, membership shares or shares in funds, carried out by non-resident & non-established legal entities.
Harmonisation of transfer pricing regulations with international standards
Following the adoption by Tunisia of the minimum OECD standards relating to the BEPS (Base Erosion and Profit Shifting) Project, and following the implementation of Action 13 relating to the documentation of transfer pricing and country-by-country reports, the 2019 and 2021 Finance Laws have introduced declarative and documentary transfer pricing obligations for cross-border controlled transactions applicable to Tunisian companies having a dependency or control relationship with other entities established abroad.
It should be noted that companies are considered to have dependency or control relationships with other companies if one of them owns more than 50% of the share capital or voting rights in the other company, or has an effective decision-making right, or are controlled by the same company/person (control is defined under the same conditions).
This new regulation is applicable for fiscal years starting on 1 January 2020 and the obligations are summarised as follows:
- An obligation to file an annual transfer pricing declaration within the same deadlines as the corporate tax return, for established companies in Tunisia, having a dependency or a control relationship with other entities established abroad and which have an annual non-consolidated turnover excluding VAT higher or equal to TND 200 Million (approximately EUR 60 million).
The transfer pricing annual declaration includes, in particular, transfer pricing policy information applied by the group, and information relating to transactions with companies having a dependency or control relationship.
Sanctions: Administrative tax fine equal to TND 10,000 (approximately EUR 3,000). Any information not provided, or provided in an incomplete or inaccurate manner, gives rise to the application of a fine equal to TND 50 (approximately EUR 15) per item, up to a maximum of TND 5,000 (approximately EUR 1,500).
- An obligation to present, if subject to a Tax audit, supporting documents, the local file and the Master file (if applicable), justifying the transfer pricing policy applied for cross-border transactions higher than or equal to TND 100,000 dinars (approximately EUR 30,000).
Sanction: Administrative tax fine equal to 0.5% of the amount of transactions, with a minimum of TND 50,000 (EUR 15,000) per fiscal year.
- An obligation to file, within twelve months of the fiscal year end, a country-by-country declaration (CbCR), according to a model established by the Tunisian tax authorities. This obligation applies to any company that :
- Is required to prepare consolidated financial statements;
- Owns or controls one or more companies established abroad, or has direct or indirect subsidiaries abroad;
- Has in the previous year a consolidated annual turnover excluding taxes higher or equal to TND 1,636 million (approximately EUR 750 million);
- Is not owned by a company resident in Tunisia having to file this declaration, or by a company resident or established abroad having to file a similar declaration under foreign legislation.
Sanctions: Administrative tax fine equal to TND 50,000 (EUR 15,000). Any information not provided, or provided in an incomplete or inaccurate manner, gives rise to the application of a fine equal to TND 100 (approximately EUR 30) per item, up to a maximum of TND 10,000 (approximately EUR 3,000).
- Companies having a dependence or a control relationship with other entities established abroad may ask the Tunisian tax authorities to conclude an Advance Pricing Agreement (APA) on the Transfer pricing method relating to specific cross-border controlled transactions for a period ranging from three to five years.