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BUSINESS FORMS & STRUCTURES
CURRENCY & BANKING
TAXATION INVESTMENT & TRADE LABOR LAW ENVIRONMENTAL LAW
The Tunisian tax system was entirely revised in 1990 and is contained in the Income Tax Act of 1989. The new tax laws include two direct tax regimes: income tax and corporate tax. The value added tax is an important indirect tax revenue regime. It should be noted that the tax laws should be considered in conjunction with the tax incentives available to investors and businesses (see, the Investment Incentives section below), in order to understand the tax system and a taxpayer's tax liability in Tunisia.
Income tax is imposed on individuals based on income, including a partner's share of profits in partnerships and profits derived by members of a joint venture. The marginal tax rates are:
Individuals, like companies, are subject to Tunisian income tax only on income arising in Tunisia. The tax law deems all income of a Tunisian, regardless of where his work was performed and where the income was paid, to have arisen in Tunisia. As a result, a Tunisian resident individual is subject to the Tunisian income tax on his worldwide employment income.
Dividends paid by companies to shareholders are not taxed, and investments made in certain companies may be tax-deductible.
A non-resident is subject to the Tunisian income tax at the normal graduated rates on income received in consequence of employment by a local employer (whether a resident employer or a Tunisian permanent establishment of a non-resident employer) as well as to the various flat rate withholding taxes.
Companies are subject to a flat tax rate of 35 percent on net profits. Profits generated from exports are deductible from taxable profits. Foreigners are exempted from taxes on transfer of dividends, the proceeds from the sale of shares and capital gains. Thus, dividends distributed by a company are not subject to tax. Furthermore, investments made by a company in an entity which enjoys tax incentives are deductible from taxable income, up to 35 percent of the investing company's taxable income. Since 1994, remuneration paid by a company to its directors is taxed.
Value added tax was introduced in Tunisia in 1988 to replace the turnover tax levied on production, consumption and services. Ordinarily VAT is levied at 18 percent; certain priority goods are, however, subject to a lower rate of 10 percent, and certain luxury goods are subject to a rate of 29 percent.
Employers and their employees are subject to a social security tax. In addition, various employees must pay a flat rate professional training tax on salaries paid to employees at the rate of 1 percent in the manufacturing industry and 2 percent in all other industries.
Another indirect tax levied in Tunisia is a land registration tax. This tax is levied at a rate of 5 percent of the value of real property acquired.
Relief from double taxation is available through tax treaties to which Tunisia is a signatory. Tunisia has entered into tax treaties with most Arab countries, European Union countries, the United States, Canada and some East European countries such as Romania, Bulgaria and Slovakia. Also, Tunisia has entered into a treaty with the United States, according to which Tunisian students who study in the United States, full-time or for specialized training, are exempt for not longer than five years from paying U.S. income tax on some amounts such as payments from abroad made in respect of their studies, or as grants or allowances.
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