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CONTENTS Tunisia  Economic AnalysisLegal Information Info-Prod Country Guide  

Investment Incentives and Trade Issues

Investment Incentives

Tunisia has enacted several laws to encourage foreign investment in the industrial, agricultural and tourism sectors. Legislation promoting foreign investment in the service sector has been drafted and may be adopted by the Government.

Foreign investors wishing to invest in these sectors under the enabling legislation may do so through the form of a partnership (Association of Person) or as either a public or private company (Association of Capital).

In order to promote economic growth, narrow existing trade imbalances and increase exports, Tunisia offers extensive investment incentives. These incentives have been available since the 1970s. The Investment Incentives Code, which became effective in January 1994, promotes these goals. The Investment Incentives Code offers two types of incentives. The first kind of investment incentives is applied to all investment projects, except projects relating to mining, energy and finance. The second kind of investment incentives is reserved for projects engaged in specified fields or projects of a special nature.

All investment projects, except projects relating to mining, energy and finance are entitled to the following investment incentives:

  1. A deduction from taxable income, of up to 35 percent of net income or profits, for income or profits reinvested in share capital or invested in capital increase;
  2. A suspension of VAT and sales tax on locally produced equipment;
  3. A reduction of 10 percent from customs duties and the suspension of VAT and sales taxes on imported equipment for which there is no Tunisian manufactured substitute;
  4. An option to apply an installment method of depreciation for production plants and equipment, excluding offequipment, having a life expectancy of more than seven years.
  5. The second kind of investment incentives is available to investment projects in the field of exporting (whether in whole or in part), regional development projects, or projects engaged in agriculture, environmental protection, research and development and new small enterprises. The investment incentives are substantial and vary depending on the field in which the enterprise engages and the industry concerned. A brief overview of some of the incentives available follows:

  6. A full deduction of income or profits from taxable income or corporate taxable income for a period of ten years, and a reduction of up to 50 percent beginning in the eleventh year;
  7. A full tax allowance in respect of profits reinvested in share capital or in the increase of the company's registered share capital;
  8. A full tax allowance in respect of profits reinvested in the company;
  9. Financial support for amounts paid for social security levies;
  10. Investment bonuses equal to 8 percent of the cost of the investment made;
  11. The option to elect a flat-tax rate of 20 percent of gross earnings.

In addition to the incentives available under the Investment Incentives Code, non-residents enjoy the tax-free transfer of capital invested in the investment project and the profits arising as a result thereof. Also, non-residents may freely repatriate their profits and capital upon the sale of their holdings in such investment projects.

The High Commission for Investments is authorized to grant further incentives to investment projects deemed to be of special or significant importance. Such benefits may take the form of exemptions from income tax or corporate tax for a period up to five years, state funded contributions to the costs of infrastructure development, an investment bonus of up to 5 percent of the total investment in the project or the suspension of tariffs and taxes levied on equipment.

Trade Agreements

Tunisia prides itself on maintaining preferential trading-partner relations with African, Arab and Mediterranean nations. Tunisia has entered into trade agreements with forty-one developed and developing countries, which granted Tunisia most-favored-nation status. Tunisia has entered into bilateral and regional trade preference agreements with the European Union and the Arab Maghreb Union as well as certain agreements under the framework of the Inter-Arab Cooperation, the Inter-African Cooperation and the Organization of the Islamic Conference. Furthermore, Tunisia is a member of the world trade organization (WTO) and is a signatory to the Global System on Trade Preferences.

In 1995, the Tunisian government and the European Union negotiated a major economic agreement on free trade. The pact establishes the framework for free trade between Tunisia and the European Union. The agreement, which came into effect in 1997, has a twelve year phase-in period.

Free Trade Zones

Over 130 companies have submitted requests to invest in Tunisia's two free trade zones. Sixty companies, of which fifty are foreign, made requests to operate in the Bizerte Harbor Free Trade Zone, located sixty kilometers north of Tunis. Most of these companies are French, but requests have also come from American, German, British, Danish, Belgian, Japanese, Indonesian and Egyptian companies. These foreign companies are seeking to invest in the electronics, metals, pharmaceuticals and food industries.

The second free trade zone, in Zarzis Harbor, is 450 kilometers south of Tunis, near the Libyan border. Over seventy foreign companies have already submitted requests to invest in this zone, most of them French. The Zarzis zone spans over 380,000 square meters. Twenty million dollars have been invested to establish this zone, part of which will be utilized to expand the harbor facilities at Zarzis. The harbor is currently used to import oil from Libya, among other activities.


Since March 1994 and the enactment of Law No. 94-41, which embodies the policy of the free trade principle adopted in other liberalization measures, Tunisia has allowed the free importation and exportation of goods, with the exception of restrictions relating to national security, public order, health and hygiene and the protection of flora, fauna and natural heritage.

Tunisia's basic tariff rate ranges from 10 percent to 43 percent. In addition, several years ago Tunisia imposed a temporary supplemental duty on certain imports that compete with locally produced goods. This duty was originally scheduled to be phased out at the end of 1994, but remains in effect.


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