VAT, GST and Sales Tax in Tunisia

Summary

Name of the tax Value-added tax (VAT)
Local name Taxe sur la Valeur Ajoutée (TVA)
Date introduced 2-Jun-88
Trading bloc membership None
Administered by Ministry of Finance (http://www.portail.finances. gov.tn)
VAT rates
Standard 18%
Reduced 6%, 12%
Other Exempt
VAT number format Tax ID Number/VAT Code A, B, P, D or N/number of establishments
VAT return period Monthly
Thresholds Registration for retail traders only TND100,000
Recovery of VAT by non-established businesses Yes

Scope of the tax

VAT is applicable mainly to the following transactions:

  • Supplies of goods and services made in Tunisia
  • Imports of goods and services

Industrial activities are generally subject to VAT except for the production of agricultural and fish products. Other activities subject to VAT include professional services, wholesale trade (excluding foodstuffs), and retail trade (for traders that make annual turn over of TND100,000 or more), excluding foods, medicine, pharmaceuticals and products subject to administrative approval tariffs.

Who is liable

A taxable person is an individual or legal entity that is registered for VAT in Tunisia and any other entity that engages in indepen­dently taxable transactions other than import sales.

In addition, a person (individual or legal entity) that supplies goods or services for consideration as part of the person’s busi­ness activities but is not required to register for VAT may opt for VAT registration if any of the following conditions are satisfied:

  • It carries out operations that are not within the scope of VAT.
  • It carries out export activities that are exempt from VAT.
  • It supplies products or services that are exempt from VAT to persons subject to VAT.

Group registration. The Tunisian VAT law does not allow VAT grouping. Legal entities that are closely connected must register for VAT individually.

Non-established businesses. Nonresident companies that do not have a permanent establishment in Tunisia but carry out taxable transactions are subject to VAT. Accordingly, Tunisian customers must withhold the entire VAT charge on payments for services supplied by nonresident entities. The nonresident must add Tunisian VAT to its invoice. The customer withholds the VAT amount, remits it to the Tunisian tax administration and pays the amount due for the services, exclusive of VAT, to the foreign provider.

The customer should also obtain a “discharge certificate” in sup­port of the VAT remittance and provide it to the bank transferring the amount due. Failing to be provided with such discharge, the bank performing the transfer could incur penalties of up to 20% of the amount of taxable revenues. However, Tunisian customers that are nonresident from an exchange regulation standpoint are exempted from the requirement to obtain such a discharge cer­tificate.

Non-established companies may register for VAT with the Tunisian tax administration. In such case, the VAT withholding procedure is not required.

Registration procedures. Each individual who would practice an industrial, commercial or non-commercial profession, and every legal entity must, before the initiation of the activity, file at the territorially competent tax control office a declaration of exis­tence according to the preset model required by the tax authori­ties. The declaration of existence must be accompanied by:

  • A copy of the Articles of Association for the legal entities
  • A copy of the agreement or the administrative authorization, if the activity or the place where the activity is performed are subject to a prior authorization

After filing the declaration of existence, the taxpayer obtains a tax identification card, which includes the Tax Identification Number.

The application for registration must be submitted by the tax­payer itself or its legal representative or by any other person with a power of attorney to register.

There is no online registration for VAT purposes.

Tax representatives. Current Tunisian tax legislation does not provide representation for tax purposes.

Nevertheless, where non-established businesses that are not VAT registered in Tunisia provide supplies to a Tunisian customer, this latter shall fully withhold the VAT due in Tunisia.

Alternatively, those businesses may opt to report the VAT with­held directly and deduct the VAT paid on the purchases of goods and services necessary to perform the transactions subject to VAT. To do so, they must:

  • Submit a declaration of tax existence by filing a prescribed form with the relevant tax office
  • File a VAT return

Late-registration penalties. In addition to the consequences of filing VAT returns late (see Section J), a fine that varies between TND1,000 and TND50,000 is applicable. However, this fine does not apply if the taxpayer regularizes the situation prior to a tax audit.

Reverse charge. The reverse charge applies when services or goods are used/consumed in Tunisia and supplied by nonresident entities.

Digital economy. There are no rules specifically applicable to the digital economy.

Deregistration. In the case of termination of activity, the taxpayer submits a termination application, with the tax identification card and declaration of existence, to the territorially competent tax control office.

In case of a deregistration following an optional VAT registration by a person or legal entity not subject to VAT (because its eco­nomic activities, the deregistration, or the renunciation of the status of a taxable person, would be made after 31 December of the fourth year which follows the year of the optional registra­tion. The deregistration in this case leads to the regularization of the VAT which has been deducted on the purchased inventories and assets during the period of the optional registration.

VAT rates

The VAT rates in Tunisia are as follows:

  • Standard rate: 18%
  • Reduced rates: 12% and 6%
  • Other: Exemption or exclusion from the scope of VAT

The standard rate applies on transactions within the scope of application of the VAT, unless laws and regulations provide for the application of a different rate, a suspension or an exemption.

Examples of supplies taxed at the 12% rate

  • Services rendered by lawyers, tax advisors and other experts
  • Sales of low-voltage electricity intended for domestic con­sumption, and the sale of medium- and low-voltage electricity used from the functioning of water pumping equipment for agricultural irrigation

Examples of supplies taxed at the 6% rate

  • Transport of goods
  • Activities carried out by doctors and analytical laboratories
  • Materials and supplies for pharmaceutical products
  • Tourism activities

The full roster of VAT at the rate of 6% is included within Appendix B (New) of the VAT code.

Examples of exempt supplies

  • Banking interest
  • Maritime air transport
  • Food products (milk, flour …)

The full roster of VAT exemptions is included within Appendix A (New) of the VAT code.

Starting from 2016, several goods, services and activities previ­ously exempt from VAT have become subject to the 6% VAT rate or to the 18% VAT rate. Furthermore, the Finance Law of 2017 brought VAT taxation at 6% for some services and goods (spe­cifically sugar, some vessels, scholar books, plastic waste collec­tion, etc.)

Examples of supplies outside the VAT scope Agriculture is positioned out of the scope of application of VAT

VAT suspension. VAT may also be suspended. A special authori­zation from the tax administration is required to obtain a suspen­sion of VAT on purchases.

A VAT suspension is available to entities engaged in exporting, to financial institutions working mainly with nonresidents, to entities governed by the Hydrocarbons Code and, in certain cir­cumstances, to entities engaged in activities described in the Investment Incentives Code.

Entities subject to VAT may be entitled to VAT suspension on their local purchases of raw materials and equipment to be used in their projects realized abroad exceeding TND3 million.

Other regimes suspend VAT as well, such as the regime for air transport companies in respect of domestic and international transport, the regime for companies responsible for the imple­mentation of social housing, the regime for Tunisian citizens resident abroad who realize projects in Tunisia, the regime for donations as part of an international cooperation, etc.

VAT suspension may be obtained by requesting a VAT suspension certificate from the tax administration. This certificate may be issued annually or for certain transactions. A copy of the certifi­cate and a copy of the original purchase order certified by the tax authorities are presented to the seller to ensure that the seller does not add VAT to the invoice. The tax administration approval is based on whether the company has the right to be eligible for such “incentive” regime and on whether the company’s tax return filings for the different tax heads are up to date.

Option to tax for exempt supplies. According to the tax legislation in force, there is a possibility to opt for the VAT regime regarding services, goods and activities exempt for VAT or positioned out of the scope of VAT.

Time of supply

The time when the taxable event is considered to have taken place and VAT becomes due is called the “time of supply” or “tax point.”

Goods. The time of supply for the sale of goods is when the goods are delivered to the customer.

Services. The time of supply for services is when the service is rendered or when the payment is made (fully or partially) if the settlement is made before the completion of the service.

Imported goods. The time of importation for imported goods is when the goods are cleared from customs.

Recovery of VAT by taxable persons

A taxpayer may recover VAT with respect to purchases of goods and services that are used for business activities and contribute effectively to the realization of taxable transactions. The VAT deduction is made on the basis of a valid invoice, customs docu­ment or withholding VAT certificate.

According to article 18 of the Tunisian VAT code, the invoice shall mention:

  • The transaction date
  • The customer identification, address and tax identification
  • The designation of the goods or services and tax prices
  • Rates and amounts of tax on value added
  • The terms “export sales” or “sales under suspension of VAT”

Other information may be required to be mentioned on the invoices, depending on the specificities of the activities (e.g., clinics).

Companies partially subject to VAT deduct VAT based on the following rules:

  • Full deduction is allowed for VAT on purchases used exclusively in a business activity that is subject to VAT.
  • No deduction of VAT is allowed for purchases used exclusively in a business activity that is not subject to VAT.
  • Deduction on a proportionate basis is allowed for purchases used in both a business activity subject to VAT and a business activity not subject to VAT.

VAT withheld at source by public and governmental bodies

A WHT with regard to VAT is due at the rate of 25% on amounts equal to or exceeding TND1,000 (including VAT) and must be paid by the state, local authorities, enterprises and public institu­tions in return of their acquisitions of goods, equipment, services, buildings and businesses.

Nondeductible input tax. Input tax may not be recovered on pur­chases of goods and services that are not used for business pur­poses and that are considered to be nondeductible expenses for corporate tax purposes (for example, goods acquired for private use by an entrepreneur).

Examples of items for which input tax is nondeductible

  • Passenger vehicles used for the transport of persons (other than those representing the purpose of the business such as taxi and car rental companies), cars used by hotels for tourist trips, and also the rental of passenger vehicles and any other expenses incurred in order to ensure their operation and their mainte­nance
  • Purchases made from individuals or legal entities that are out­side the scope of VAT but that have invoiced VAT incorrectly
  • Goods, properties and services fully paid in cash in amounts equal to or exceeding TND5,000 (excluding VAT)
  • VAT on goods and services acquired from residents in tax havens, the list of which has been fixed by the Decree n°3822 dated 3 October 2014 (starting from 1 January 2017)

Refunds. VAT liability (output VAT) is computed by multiplying all taxable sales by the applicable VAT rate. The enterprise sub­tracts the total VAT paid on purchases of goods (input VAT) from output VAT and pays the net amount to the tax administration. If the input VAT exceeds the output VAT, the resulting amount is refunded with a restitution claim made to the tax administration and, in the majority of the cases, after a tax audit has been com­pleted by the tax administration.

The regime of VAT credit refunds varies according to the source of the credit and the local tax authority.

The common regime, under which the VAT credit is fully refund­able, applies in the following circumstances:

  • The VAT credit will be refundable without a tax audit if the credit is due to:
    • Exports (refund in 7 days)
    • Withholding tax on VAT
    • Sales with the suspension of the VAT
    • Investments made according to the Investment Incentives Code (refund in 30 days)

If the VAT credit is due to:

  • The normal course of business (for example, the VAT on pur­chases exceeds the VAT on sales), then the VAT credit is refund­able, if it persists on six consecutive tax returns, as part of one of two processes:
    • For businesses that have the legal obligation to designate a legal auditor, if the financial statements are certified with an audit report that requires no modification that has an impact on the tax basis, an advance of 50% of the VAT credit is provided before a tax audit, and the remaining amount is refundable after a tax audit (refund in 60 days).
    • For other cases, an advance of 15% of the VAT credit is provided before a tax audit, and the remaining amount is refundable after a tax audit (refund in 120 days).
  • For companies under the control of the Directorate of Large Business (DGE), the VAT credit is fully refundable before a tax credit, in seven days, under the following conditions:
    • The report of the legal auditor does not contain an amend­ment affecting the tax basis.
    • The legal auditor certifies in a separate audit report that the VAT credit to be refunded is accurate.

If, after a tax audit, the tax authorities confirm the validity of a VAT credit, it is fully refundable notwithstanding the appeals procedures that may follow.

Partial exemption. Input tax directly related to making exempt supplies is generally not recoverable. If a taxable person makes both exempt and taxable supplies, it may not recover its input tax in full. This situation is referred to as “partial exemption.”

A Tunisian taxable person that makes both taxable and exempt supplies may calculate the amount of input tax it may recover in several ways. The standard partial exemption calculation method consists of the following two-stage calculation:

  • The first stage identifies the input tax that may be directly allo­cated to taxable and to exempt supplies. Input tax directly allocated to taxable supplies is deductible, while input tax directly related to exempt supplies is not deductible. Supplies that are exempt with credit are treated as taxable supplies for these purposes.
  • The second stage identifies the amount of the remaining input tax (for example, input tax on general business overhead) that may be allocated to taxable supplies and recovered. The amount of recoverable VAT is determined by making a pro rata calcula­tion based on the respective values of taxable and exempt sup­plies made.

Preregistration costs. The input VAT on preregistration costs appearing on invoices prior to the tax registration cannot be recovered by a future taxable person before having the status (under incorporation) since the deductibility of input VAT needs the issuing of an invoice that includes mandatory mentions per­taining to the payer (article 18 of the VAT code) and that cannot be provided during the incorporation stage (such as tax ID).

Recovery of VAT by non-established businesses. Nonresident trad­ers that do not have a permanent establishment in Tunisia but are registered with the VAT authority are allowed to recover VAT incurred. To register with the VAT authority, the nonresident tax­payer must be performing a contract in Tunisia.

Nonresident traders that have a permanent establishment in Tunisia but that are not registered for VAT purposes, are subject to a discharging WHT in terms of VAT at the rate of 100% of the VAT due.

Nonresident traders that are not registered with the VAT author­ity may not recover VAT incurred. In addition, such traders are subject to the VAT withholding system described in Section C.

Invoicing

VAT invoices and credit notes. Tunisian taxable persons must provide VAT invoices for all taxable supplies and services, including exports, made to other taxable persons. Recipients of supplies must retain copies of invoices.

A VAT credit note as such may not be used to reduce VAT charged and reclaimed on a supply of goods or services. Instead, the initial transaction must be voided and a new VAT invoice must be issued for the correction of genuine mistakes.

Proof of exports. Tunisian VAT is not chargeable on supplies of exported goods. However, to qualify as VAT-free, the exported goods must be documented by a customs declaration proving that the goods have left Tunisia. In addition, persons subject to VAT that are primarily or exclusively engaged in activities relating to exports may benefit from suspended VAT on their purchases of goods and services required for the production of exported goods.

Foreign-currency invoices. A VAT invoice for transactions per­formed between two resident entities according to the exchange legislation must be issued in Tunisian dinars, according to the exchange legislation. If one or both of the parties are nonresident, the VAT invoice may be issued in a foreign currency.

VAT returns and payment

VAT returns. Tunisian VAT returns must be filed on a monthly basis. Returns must be filed by the 28th day of the following month for legal entities and by the 15th day of the following month for individuals.

Special schemes. For sales and purchases under the VAT suspen­sion regime, the purchaser and the supplier must each make an electronic declaration, before the 28th day of the month that fol­lows the quarter of the calendar year.

Electronic filing and archiving. The electronic filing of a monthly VAT returns is mandatory for entities whose annual revenue exceeds TND1 million. Below this threshold, electronic filing is optional.

Annual returns. Not applicable.

Penalties

For late filing of VAT returns or underpayments of VAT, penalties are imposed at a rate of 0.5% per month or fraction of a month for which the return or payment is late.

The following are other penalties related to VAT:

  • 25% per month or fraction of a month for underpayments of VAT resulting from a tax audit
  • 5% per month or fraction of a month in certain other cases
  • 625% per month or fraction of a month when the taxpayer agrees to pay the tax due, as determined by the audit, and makes payment to the tax administration within 30 days of that acknowledgment (i.e., the penalties will be reduced by 50%)

For the sales and purchases under the VAT suspension regime, fines and penalties, which would be incurred by the purchaser and the supplier in case they do not comply with some formali­ties, are as follows:

  • The purchaser: In case of undeclared purchase orders, the tax­payer must pay a fine that amounts to TND2,000 per unde­clared purchase order for the first five purchase orders and TND5,000 each starting from the sixth purchase order.
  • The seller: If the seller makes sales without obtaining an origi­nal of a certified purchase order, he would be subject to a fine that amounts to 50% of the VAT that would have been invoiced if the sales had been made out of the exceptional VAT suspen­sion regime.

Starting from 1 January 2017, VAT credits unduly refunded under the full refund without a prior tax audit framework will be subject to an administrative tax penalty equal to 100% of the VAT credit:

  • Refund of the VAT derived from exportations of goods or ser­vices used or consumed out of Tunisia
  • Refund of the VAT for the profit of the enterprises under the control of the Directorate of Large Business (DGE)