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- Tunisia’s transfer pricing (TP) legislation was instituted in article 29 of law n°2018-56 of December 27, 2018, on the finance law for the year 2019 and it was applied to the 2020 financial year declared in 2021 (Article 59 §II bis and 38 bis of tax rights and obligations) and was based on the arm’s length and follows the OECD Guidelines.
- The filing of TP Tax Returns before the Tax Administration Service (DGI: Direction Générale des Impôts) is mandatory only for companies with transborder intercompany transactions achieving a turnover that exceeds 200 Million Dinars ( m E 62,5) and for transactions greater than 100,000 Dinars (E 31,250).
- In its guidance note n° 13 of the year 2020, the Tunisian tax Authority specified that within the framework of the implementation of the recommendations of the BEPS project (Base Erosion and Profit Shifting) which aims to fight against the erosion of the tax base and the transfer of profits, and more particularly the action 13 of the said project, the provisions of articles 30 to 32 and 34 of the finance law for the year 2019 have made declarative and documentary obligations for resident companies fulfilling certain conditions.
- In its guidance note No. 11 of June 17, 2020, tax Authority specified that the most frequently used transfer pricing methods are as follows:
- traditional methods, based on the transactions the comparable uncontrolled price, the cost plus, and the resale price;
- transactional profit methods: the transactional net margin method and the profit split method.
- Any method adopted by a company may be considered admissible by the tax authority provided that it is justified, consistent with the functions, the risks assumed and the assets employed, and that the prices charged by the company comply with the arm's length principle.
- It is specified that the aforementioned methods are recommended and applied by companies to determine their transfer price and by the tax authorities to check the corresponding price.
- However, companies may use other methods if it turns out that the aforementioned methods are not suitable for the transaction concerned or that the methods used are more applicable to the circumstances of the case, provided that the prices set meet the arm's length principle.
- The burden of proof is on the taxpayer to ensure that TP regulations are respected
In Tunisia there are 3 types of TP documentation:
Transfer pricing declaration (TP):
- The TP declaration is only compulsory for companies with cross-border inter-company transactions achieving a turnover of more than 200 million dinars (62.5 million euros) and for transactions greater than 100,000 dinars (€31,250).
- The TP Declaration has to be submitted no later than the same deadline of the CIT declaration i.e., 25 mars.
TP documentation (local file and master file) :
- TP documentation is only compulsory for companies with cross-border inter-company transactions achieving a turnover of more than 200 million dinars (62.5 million euros) and for transactions greater than 100,000 dinars (€31,250).
Country-by-country reporting (C.B.C):
- The principle is that the obligation to submit a CBC report is incumbent on any company established in Tunisia and having the quality of the ultimate parent entity of a group of multinational companies when it is required to draw up consolidated financial statements, in accordance with the company accounting legislation in force, or would be required to do so if its holdings were listed on the Tunis Stock Exchange and it achieved, for the financial year preceding the declarable financial year, a consolidated annual turnover, excluding taxes, greater than or equal to 1.636 million dinars. The country-by-country report must be filed within 12 months of the closing date of the reportable financial year, by electronic means.
- The country-by-country declaration filed with the Tunisian tax authorities is subject to automatic exchange with the States linked to Tunisia by an agreement and the list of which is fixed by a decision of the Minister of Finance of June 15, 2022 (JORT N° 69 of June 17, 2022).
- The country-by-country report applies to accounting years beginning on or after January 1, 2020.
- The TP documentation (master file and local file) have the same content as those of the OECD. The local file must be presented in Arabic or French. However, the Master file can be presented in English
- Limited risk distributor or industrial contractors.
- Low net margin or continuous losses in any entity.
- Transactions with low tax jurisdictions resident related parties.
- Business restructurings.
Penalty in case of failure to file the Annual PT Statement:
- The failure to file the annual transfer pricing report will result in the application of an administrative tax penalty equal to:
- 10,000 dinars in the event of failure to file the said declaration within the time limit
- in addition to 50 dinars per information not provided or provided in an incomplete or inaccurate manner, without this fine exceeding, in this case, 5,000 dinars.
Penalty in case of failure to file CBC Report:
- Any company that has not filed the country-by-country declaration, within the deadline, is sanctioned with an administrative tax fine equal to 50,000 dinars (from article 84 decies of the tax rights and procedures code) and any information not provided in the country-by-country declaration or provided in an incomplete or inaccurate manner is punished by an administrative tax fine equal to 100 dinars per piece of information, without this fine exceeding 10,000 dinars.
Penalty in case of failure to present the TP Documentation (Master file and local file)
- In the event of non-presentation by the company subject to an in-depth tax audit of the documents justifying its TP policy, on the date of the start of the audit, the tax administration notifies a formal notice to the company to present them within 40 days (38 bis of the code of tax rights and procedures).
- If the company does not comply within the aforementioned 40-day period, The tax authorities apply an administrative tax fine equal to 0.5% of the amount of the transactions concerned by the documents not presented with a minimum of 50,000 dinars per audited year (article 84 undecies of the tax rights and procedures code).
The application of the arm's length principle is based on a comparison of the terms of a transaction between affiliated enterprises and those of a transaction between independent enterprises. For such a comparison to be meaningful, the economic characteristics of the situations considered must be sufficiently comparable. This means that none of the differences, if any, between the situations being compared can significantly affect the item under review (e.g., price or margin) or that reasonably reliable comparability adjustments can be made to eliminate the impact of such differences.
Determining the degree of effective comparability and then making the comparability adjustments necessary to establish arm's length terms requires a comparison of the characteristics of the transactions or businesses that would affect the terms of the arm's length transactions.
The comparability factors that may be significant in assessing comparability are as follows:
Characteristics of the goods or services
The use of interquartile range is required and there is a methodology in ITL to perform this calculation.
Business databases, which are developed by publishers who compile company accounts and present them in an electronic format suitable for research and statistical analysis, can be a source of information for identifying external comparables. These databases must be used objectively, reflecting a genuine desire to identify information on reliable comparables.
The search for comparables is carried out using relevant selection criteria such as geographical area, economic activity, company size, degree of independence, availability of financial data, etc.
When commercial databases are used, the quantity of comparables should not take precedence over quality. The search for comparables can therefore be refined by means of other public information, depending on the facts and circumstances.
The company should be able to justify all the stages of the search for external comparables, specifying in particular the criteria used to carry out the search (search strategy) and providing a list of potential comparable companies selected, explaining for each potential comparable the reasons why it has been retained or excluded.
- Any company resident in Tunisia belonging to a group of multinational enterprises may apply to the tax authorities for an Advance Pricing Agreement (APA) in respect of its future transactions with companies.
- The company must submit an APA application to the DGI at least six months before the beginning of the first fiscal year concerned by the application.
- This application must be made in writing, specify its purpose and be sufficiently motivated and justified by the necessary documents.
- The company is invited to request preliminary meetings with the competent departments of the tax administration in charge of the said agreements, prior to submitting its application.
- The Order of the Minister of Finance of August 6, 2019, issued in application of the said provisions, has set the terms and conditions for the conclusion of such agreements and their effects.
- Notwithstanding the fact that the tax administration is not legally bound by any time limit for ruling on APA applications, nor is it required to give reasons for any refusal to grant an APA application, it will nevertheless endeavour to process reasoned applications supported by the necessary supporting documents with due diligence. The prior approval procedure presupposes close and regular cooperation between the company and the administration (Guidance note no. 12 of 17 June 2020).
- Any company benefiting from an APA must file with the tax authorities, during the first half of each year following the year covered by the agreement, an annual report relating to all the transactions covered by the agreement and carried out during the previous year, as well as information relating to the changes that have occurred affecting the agreed assumptions referred to above.
- The APA lapses, as of the date of its application, when it is established that the company concerned :
- has misrepresented or withheld information, or has engaged in fraudulent conduct; or
- failed to meet its obligations under the agreement.
- Exempted from compliance with TP reporting obligations are:
- Companies belonging to local groups that do not have cross-border transactions
- Companies belonging to international groups that have cross-border transactions but do not exceed the thresholds provided for by the law.
- The tax authorities have issued guidance notes 11; 12; 13 and 14 in 2020 to explain the reporting obligations and the analysis that must be done to demonstrate that the prices charged are at arm's length and have also published the contents of the TP