Doing Business in Tunisia AWT A UDIT & CONSEIL n 3, Avenue Louis Braille 1002 Tunis - Tunisie Tél : (+216) 70 90 40 40 Fax : (+216) 70 90 21 18 Messagerie : contact@awt.com.tn Société inscrite au tableau de l Ordre des Experts Comptables de Tunisie depuis 2005 et membre du réseau international IEC «FOF member». AWT Audit & Conseil opère dans divers domaines de services tels que: Audit et Certification, Expertise Comptable, Le conseil et Organisation, Corporate finance, Assistance Juridique et fiscale, Formation et Gestion Social
To many people, Tunisia presents itself as an excellent example of a Mediterranean country that is also part of the Arab and African world due to its political stability and the dynamism of its society. It is also a country that marvelously combines tradition and modernity. Finally Tunisia is a country which succeeds in combining its own indefinable charm with other, European-like qualities. Tunisia, called Mediterranean Pearl, gained rate on its economic competitiveness and attraction to foreign investors since it engaged in reforms in order to increase either the local and foreign investment volume and signed many trade and guaranty agreements. For more than 30 years, foreign companies have chosen Tunisia as a profitable investment site. As they are conscious of the importance of foreign direct investments 'FDI', the public powers have made FDI a major choice and an integral part of the country's economy. They have made numerous efforts to improve the business environment and the increase in FDI flows and the number of new companies that have invested crown these efforts. INVESTMENT OPPORTUNITIES TUNISIA S WORLDWIDE RANKINGS AND RATINGS GUARANTY AGREEMENTS PROTECTION OF INDUSTRIAL AND INTELLECTUAL RIGHTS, TRADEMARKS AND RELATED INDUSTRIAL FREE TRADE AGREEMENTS TAX SYSTEM MAIN TAX POINTS OVERVIEW CATEGORIES OF TAXABLE INCOMES TWO WAYS TO AVOID DOUBLE TAXATION INVESTMENT TAX INCENTIVES EXCHANGE CONTROL REGULATION 1
INVESTMENT OPPORTUNITIES 1 INVESTMENT OPPORTUNITIES A wide range of industry branches is opened to investments, including: Agriculture and agro-food Manufacturing and transformation industries Non-manufacturing industries Textiles, leather and footwear Pharmaceutical industry Industry of building materials Tourism Services Those opportunities are strengthened by the guaranty agreement, the protection of rights and properties and several other trade agreements. TUNISIA S WORLDWIDE RANKING AND RATING Appraisals and ratings granted to Tunisia by specialized agencies are getting better and better. Since 1994, Tunisia has received top investment grades from financial institutions and rating agencies The report on global competitiveness issued by the Davos World Economic Forum and Harvard University in the United States recognized as African leader on competitiveness. Besides, Global Peace Index 2007 placed Tunisia on the top of the countries most at peace in Africa and 39 th in the world. GUARANTY AGREEMENTS Tunisia is signatory of the New York Convention on the recognition and enforcement of foreign arbitrage decisions. On the bilateral level, Tunisia is signatory of the protection of investments conventions, in particular with the following countries: Germany, Algeria, Argentina, Austria, Belgium, Denmark, Spain, the United States, France, Great Britain, Indonesia, Italy, Luxemburg, Morocco, Pakistan, Netherlands, Poland, Portugal, Czech Republic, Romania, Senegal, Sweden, Switzerland, Turkey. The agreements of investment reciprocal protection and encouragement imply the implementation of the following principles: Granting the investors of each of the two countries a fair treatment, not less favorable than that local investors or investors of the most privileged nation. Very strict limitation of the possibilities of expropriation of investment. The option of resorting to international arbitration. 2
INVESTMENT OPPORTUNITIES 2 PROTECTION OF INDUSTRIAL AND INTELLECTUAL RIGHTS, TRADE- MARKS AND RELATED INDUSTRIAL PROPERTY This protection is ensured by International Conventions to which Tunisia is signatory, in particular: The Convention establishing the World Organization of the Intellectual Property The Convention of Paris on protection of industrial property The Hague Agreement on the registration of plans and industrial models The Agreement of Vienna establishing an international classification of the figurative elements of the trademarks The National Institute for Standardization and Industrial Property (INNORPI) is the Tunisian agency with which foreign patents, trademarks as well as drawings and industrial models should be registered. The duration of protection varies from 5 to 20 years. FREE TRADE AGREEMENTS Among the main directives that guide the economic policy in Tunisia is to set up an open economic environment to foreign markets and foreign investors thereby. Moreover, due to its recognized political stability, Tunisia has succeeded to access the European, Maghrebian (north Africa) and Arab markets by concluding free trade agreements. Tunisia is a member country of the World Trade Organization (WTO). It is the first country on the southern coast of the Mediterranean to have concluded a partnership and cooperation agreement with the European Union, the main component of which is the establishment of a free-trade zone. Tunisian-EU relations: Tunisia signed a Partnership Treaty with European Union in 1995 witch took effect in March 1 st, 1998. This first kind treaty engaging the EU and a south Mediterranean country come within the framework of the political process engaged by Barcelona Meeting in 1995. The statement issued from that Meeting identified three cooperation bases between the EU and south Mediterranean countries which are: Political and stability partnership; Financial and economic partnership; and Social, cultural and human based partnership. This agreement governs the phasing in of a free-trade zone giving access to the EU market for Tunisian manufactured products relief from duties and levies, with no quotas; and Agricultural products should enjoy preferential conditions. 3
INVESTMENT OPPORTUNITIES 3 Tunisian-USA relations: The Tunisian-American bilateral relations are governed by the following agreements: Framework agreement of economic and technical aid Agreement concerning the guarantees granted to investments (agreement in update process) Relief of double taxation agreement Treaty Concerning the Reciprocal Encouragement and Protection of Investment Trade and Investment Framework Agreement (TIFA) Scientific and technological agreement Frame work agreement on trade and investment signed with the aim of promoting economic bilateral cooperation Maghreb and Arab Markets: Tunisia is signatory of many preferential agreements with Arab Maghreb Union and Arab countries. Application of the regional agreement signed in 1998 to introduce an Arab free-trade zone has made good progress and the final phase will be completed soon. Trade with Egypt, Morocco, Jordan and Libya is governed by bilateral agreements that set up a free-trade zone. Other free-trade agreements are being negotiated with other countries in the region. Agadir agreement: The free trade agreement of Agadir concluded between Jordan, Egypt, Tunisia and Morocco represents a major step within the set up of the free trade Euro-Mediterranean zone projected in 2010. The European Commission is actively sustaining this initiative. Other markets: Tunisia benefits from reduced tariffs granted in the context of the General System of Preference (GSP), for manufactured and agricultural and handmade products with Japan, Canada, the USA, Switzerland and Australia. The country also benefits from a preferential access to certain African markets (Guinea, Senegal, Burkina Faso, and Niger). 4
TAX SYSTEM 1 MAIN TAX POINTS OVERVIEW General corporate tax rate of 30% reduced to 10% for companies engaged in handicraft activity, agricultural, fishing or co-operatives. Corporate tax rate of 35% for banks and financial institutions, insurance companies, telecommunication companies, companies engaged in petroleum activities. Dividends paid by a Tunisian company to its shareholders are exempted from any tax. Group of companies could benefits from integration corporate tax scheme. No capital duties or wealth taxes. Tax exemption of profits earned from companies transmission and sale of listed companies shares..refund of VAT supported by non-residents in Tunisia. CATEGORIES OF TAXABLE INCOMES In Tunisia there are two global categories of taxes: Personal Income tax and Corporation tax Income tax includes tax on professional and non-professional revenues as well as tax on securities, on immovable properties and on salaries. The chargeable amount of revenue is determined either on accounting system basis or by all-in based method and the payable amount of tax is calculated on a progressive rate grid basis. Corporation tax represents tax on companies chargeable income. Since few years, the Tunisian government is working on eliminating differences that appear between accounting system based income and tax system based income, so that giving the tax system an economic point of view. Local companies and companies established in Tunisia are submitted to income tax at a standard rate of 30% over their only local chargeable income. In fact, the benefits made on exportation are totally exempt from corporation tax during the 10 first years. TWO WAY TO AVOID DOUBLE TAXATION The first type of relief is included in the common law which stipulates that taxes supported by foreign incomes in another country are deductible from income tax payable according to the Tunisian tax system. The other relief of double taxation is ensured by bilateral treaties concluded between Tunisian government and governments of 35 other countries. 5
TAX SYSTEM 2 INVESTMENT TAX INCENTIVES Tunisian Law of Investment Incentives was adopted within an aim of encouraging national as well as foreign investments. The Law grants common incentives in all branches of industry, to the exception of a few sectors, which are subject to specific measures. Common incentives: The common incentives are of several types, in particular the reduced assessment of benefit or reinvested income, which takes place according to two methods: Subscription by the income or the profits of companies registered capital or its capital increase. This subscription gives the advantage of tax exemption up 35% of taxable incomes or reinvested incomes subject to income tax or to the corporation tax. The reinvestment of the profits within the company itself grants the following advantages: Partial reduction of the profits reinvested up to 35% of the taxable profits. Suspension of the VAT and reduction of customs duties to 10% upon the acquisition of equipments for which no equivalent is manufactured locally. Suspension of VAT and consumption duty taxes upon the acquisition of equipments necessary for the business manufactured locally. Specific incentives to export: The totally exporting companies are granted the following incentives: Full tax exemption for the first 10 years. For the years after, reduction of corporate tax rate to 10% and reduction of 2/3rds of taxable revenue. Full exemption on reinvested profits and revenues in share subscription or increases of the company s registered capital. Full tax exemption on imported equipments necessary for the business. Suspension of VAT and consumption duty taxes upon local acquisition. Possibility to sell in the local market up to 30% of the turnover. Totally exporting companies could recruit foreign management and executive staff. Under this scheme, foreign staff can: Opt for the flat rate taxation scheme of 20% of gross earning. Import their personal effects and one passenger car free of duty. Contribute to another social security schemes other than that operating in Tunisia. 6
TAX SYSTEM 3 INVESTMENT TAX INCENTIVES Specific incentives to regional development: These incentives are set up to encourage the investment in certain areas gathered in three groups. For the 1 st group of areas: 5 years personal or corporate income tax exemption for manufacturing industries, handicraft and certain services investments. Payment by the State of the employers contribution to the Social Security scheme during the 5 first years as follows: 1 st year 100%, 2 nd year 80%, 3 rd year 60%, 4 th year 40% and 5 th year 20%. For the 2 nd group of areas: 10 years personal or corporate income tax exemption for manufacturing industries, handicraft and certain services investments. Exemption from the contribution to the Employees Housing Fund during the first 5 years. Total payment by the State of the employers contribution to the Social Security scheme during the 5 first years. For the group of priority areas : 10 years personal or corporate income tax exemption for manufacturing industries, handicraft, certain services investments and tourism investments established in the regional development areas. Exemption from the contribution to the Employees Housing Fund during the first 5 years. Total payment by the State of the employers contribution to the Social Security scheme during the 5 first years and during the following 5 years as follows: 1 st year 80%, 2 nd year 65%, 3 rd year 50%, 4 th year 35% and 5 th year 20%. Other specific incentives: In addition to those advantages described above, the following fields benefit from various advantages relating to taxation rate reduction and investment advantages: Agricultural development. Environmental protection. Technology and research development. 7
EXCHANGE REGULATION 1 EXCHANGE CONTROLE REGULATION The Tunisian currency (Dinar) being non convertible, the foreign exchange regulation is based on the following mains principles: Free transfer of current transactions and net real proceeds as well as the value added from sale or liquidation of capital invested previously through foreign currency import. Assets movements between Tunisia and foreign countries have to be executed through the Central Bank of Tunisia or, on the authority of the latter, by chartered banks. Are considered as non-residents entities according to the exchange legislation are: Tunisian or foreign legal entities carrying out their activities abroad. Individuals of foreign nationality not residing in Tunisia. Foreign civil servants working in Tunisia whatever the duration of their stay is. Individuals of Tunisian nationality residing abroad for more than two years and carrying out their activity. These individuals may have the status of resident to execute a number of transactions in Tunisia (loans in dinars, opening accounts in Tunisia, purchase of real estate in Tunisia). As soon as they come back to Tunisia for good they reintegrate their resident status. Particularly, the non-resident exchange status is granted to: Financial and banking institutions working exclusively with nonresidents. Totally exporting companies whose capital is held by Tunisian or foreign non-residents by means of an import of convertible currency amounting at least or equal to 66% of the registered capital. Companies established in the economic free zones of Bizerte, Zarzis and Enfidha. International trade companies whose capital is held by Tunisian or foreign non-residents by means of an import of convertible currency amounting at least or equal to 66% of the registered capital. 8
AWT A UDIT & CONSEIL n 3, Avenue Louis Braille 1002 Tunis - Tunisie Tél : (+216) 70 90 40 40 Fax : (+216) 70 90 21 18 Messagerie : contact@awt.com.tn