Avoiding Recurring Mistakes in Transfer Pricing Local Documentation in Tunisia
Tax & Legal
Nov 4, 2026
Avoiding Common Mistakes in Transfer Pricing Documentation in Tunisia
Transfer pricing has become an increasingly important area of tax compliance for multinational groups operating in Tunisia. As cross-border related-party transactions attract greater attention from the Tunisian tax administration, businesses must ensure that their transfer pricing policies are properly supported, consistently applied and adequately documented.
The Tunisian transfer pricing framework is principally governed by Article 48 septies of the Code of Personal Income Tax and Corporate Tax (IRPP/IS Code), Article 38 bis of the Code of Tax Rights and Procedures (CDPF), and Article 59, paragraph II bis, of the IRPP/IS Code. These provisions were introduced or amended by the Finance Law for 2019 (Law No. 2018-56 of 27 December 2018) and the Finance Law for 2021 (Law No. 2020-46 of 23 December 2020).
The content of the transfer pricing documentation is further specified by the Ministerial Order of 16 October 2019, which provides for a Master File and a Local File, while Common Notes No. 11/2020 and No. 13/2020 provide additional administrative guidance.
Despite this framework, transfer pricing documentation is frequently approached as a formal compliance exercise rather than as a substantive analysis of the economic reality of related-party transactions.
The following are eight recurring weaknesses that Tunisian taxpayers should avoid when preparing their transfer pricing documentation.
1. Superficial or Generic Functional Analysis
A functional analysis is fundamental to any transfer pricing assessment. It must accurately identify the functions performed, assets used and risks assumed by the Tunisian entity and its related parties in connection with each category of controlled transactions.
A common mistake is to rely on generic group descriptions or standardised templates that do not adequately reflect the actual activities of the Tunisian subsidiary.
The analysis should go beyond contractual descriptions and examine the actual conduct of the parties, including decision-making responsibilities, the control of economically significant risks, the use of tangible and intangible assets, and the financial capacity to assume risks.
Particular attention should be paid to whether the contractual allocation of risks is consistent with the parties' actual conduct and economic substance.
Best practice: Prepare a transaction-specific functional analysis and ensure that it is consistent with the company's organisational structure, accounting records, operational activities and financial results.
2. Inappropriate or Insufficiently Supported Benchmarking
Benchmarking is an important element of transfer pricing analysis, particularly when applying transactional profit-based methods such as the Transactional Net Margin Method (TNMM).
However, a frequent weakness is the use of outdated financial information, insufficiently comparable companies or benchmarking studies that do not adequately explain the selection and rejection of potential comparables.
The analysis should consider the economically relevant characteristics of the controlled transactions, including the contractual terms, functions performed, assets employed, risks assumed, characteristics of goods or services, economic circumstances and business strategies.
The use of Tunisian comparables is not a mandatory prerequisite. Where reliable local comparables are unavailable, regional or international comparables may be considered, provided that their selection is supported by a sound economic rationale and that material differences are appropriately assessed.
It is equally important to distinguish between updating financial information for existing comparables and conducting an entirely new benchmarking search. A new search is not automatically required every year. The analysis should nevertheless be reviewed regularly and updated whenever material changes in the business, market conditions or available data may affect its reliability.
Best practice: Document the search strategy, database and selection criteria, rejected comparables, financial adjustments and reasons supporting the final benchmarking conclusions.
3. Missing, Outdated or Inconsistent Intercompany Agreements
The Tunisian Ministerial Order of 16 October 2019 expressly requires the Local File to include copies of important agreements concluded between the local entity and its related or controlled enterprises.
Missing, unsigned or outdated agreements can weaken the credibility of the transfer pricing position, particularly where the actual transactions cannot be reconciled with the contractual framework.
Agreements should accurately describe the nature of the services or goods supplied, the parties' respective responsibilities, pricing mechanisms, payment terms, allocation of risks and other economically relevant conditions.
However, the existence of a written agreement does not, by itself, establish that the transaction complies with the arm's length principle. The contractual terms must be assessed against the actual conduct of the parties.
Best practice: Maintain signed and current agreements for material related-party transactions and regularly verify their consistency with invoices, accounting records, operational evidence and the transfer pricing analysis.
4. Incomplete Identification and Description of Controlled Transactions
A Local File should provide a sufficiently detailed description of each relevant category of controlled transactions.
A common weakness is to group different transactions under broad descriptions such as management fees, technical assistance, service charges or commercial transactions without explaining their actual nature and economic purpose.
The documentation should identify the related parties involved, the nature and conditions of the transactions, the amounts of intra-group payments and receipts, and the relevant foreign tax jurisdictions.
It should also address the commercial rationale of the transactions and explain how the pricing mechanism has been determined.
Particular care should be taken with intra-group services, management fees, royalties, financing arrangements, guarantees, purchases of goods and sales commissions. For these transactions, the taxpayer should retain evidence of the actual services rendered, the benefits received, the contractual basis and the methodology used to determine the consideration.
Best practice: Prepare a transaction-by-transaction or category-by-category analysis, supported by agreements, invoices, calculations and appropriate operational evidence.
5. Failure to Reconcile Transfer Pricing Documentation with Financial Records
One of the most significant weaknesses in transfer pricing documentation is the absence of a reliable reconciliation between the amounts reported in the Local File and the company's accounting and tax records.
The Tunisian Ministerial Order of 16 October 2019 expressly requires annual financial statements and information enabling the financial data used in the transfer pricing analysis to be reconciled with those statements.
A robust reconciliation should cover, as applicable:
The Local File and the general ledger;
The annual financial statements;
The annual transfer pricing declaration;
The corporate income tax return;
The relevant analytical accounting and segmental profitability information;
The financial indicators used in the benchmarking analysis.
Differences may arise from accounting classifications, foreign exchange movements, accruals, re-invoicing, year-end adjustments or allocation methodologies. Such differences should be identified, quantified and adequately explained.
Best practice: Establish a documented reconciliation process before finalising the Local File, ensuring that all reported amounts can be traced back to the company's accounting records.
6. Overlooking Specific Tunisian Transfer Pricing Requirements
The OECD Transfer Pricing Guidelines provide an important international reference, but they should not be confused with the actual requirements of Tunisian domestic legislation.
The Tunisian framework includes specific obligations concerning the scope, content, thresholds and submission of transfer pricing documentation.
In particular, Article 38 bis of the CDPF requires companies to provide transfer pricing documentation where both of the following conditions are met:
The company's annual turnover excluding VAT is equal to or greater than TND 200 million; and
It carries out transactions with one or more related or controlled enterprises resident or established outside Tunisia, with an annual amount equal to or greater than TND 100,000 for each transaction category.
The documentation requirement applies to the relevant cross-border controlled transactions. The information included in the Local File is limited to transaction categories meeting the TND 100,000 threshold.
The statutory framework provides for a Master File describing the group and a Local File relating to the Tunisian entity and its controlled transactions.
Furthermore, according to the OECD's Tunisia Transfer Pricing Country Profile, the Local File should be prepared in Arabic or French, whereas the Master File may be prepared in Arabic, French or English.
It is essential to distinguish the statutory documentation obligation from the broader transfer pricing principle. Falling below the documentation thresholds does not automatically exempt an enterprise from the substantive transfer pricing rules under Article 48 septies or from other applicable tax control provisions.
Best practice: Assess the company's eligibility and documentation obligations annually, taking into account its turnover, the nature and value of its cross-border related-party transactions, and the applicable Tunisian legal provisions.
7. Insufficient Explanation of Losses or Unusual Profitability
Sustained losses or profitability significantly different from the results of comparable independent enterprises may attract the attention of tax auditors, particularly where the Tunisian subsidiary performs routine activities or operates under a group transfer pricing policy.
Nevertheless, losses do not automatically indicate that transfer pricing is inconsistent with the arm's length principle.
The analysis should consider the actual economic circumstances of the entity, including market-entry costs, start-up phases, changes in business strategy, capacity utilisation, exceptional events, market conditions and the allocation of economically significant risks.
Where losses are attributable to commercial decisions or exceptional circumstances, the taxpayer should retain contemporaneous evidence supporting those explanations.
The analysis should also examine whether independent enterprises operating under comparable circumstances would reasonably have experienced similar results.
Best practice: Provide a documented explanation of significant deviations from expected profitability, supported by management reports, budgets, business plans, market information and other relevant evidence.
8. Inconsistencies Between the Local File and the Annual Transfer Pricing Declaration
Tunisian legislation provides for two distinct compliance obligations that should not be confused:
The annual transfer pricing declaration under Article 59, paragraph II bis, of the IRPP/IS Code;
The transfer pricing documentation obligation under Article 38 bis of the CDPF.
The annual declaration applies to qualifying Tunisian enterprises with annual turnover excluding VAT of at least TND 200 million and relevant cross-border relationships with related or controlled enterprises. The information reported is limited to transaction categories meeting the annual TND 100,000 threshold.
The Local File and annual declaration have different purposes and prescribed contents. Nevertheless, the information disclosed in each should be consistent and reconcilable.
Differences in transaction amounts, counterparty identification, transaction categories or financial information may raise questions during a tax audit.
Best practice: Coordinate the preparation of the annual transfer pricing declaration, Local File, financial statements and corporate income tax return, ensuring that the underlying transaction data are consistent across all relevant documents.
Understanding the Penalties and Audit Exposure
The Tunisian legislation provides for specific administrative penalties in relation to transfer pricing reporting and documentation obligations.
Under Article 84 nonies of the CDPF, failure to submit the annual transfer pricing declaration may result in an administrative penalty of TND 10,000. Incomplete or inaccurate information may also trigger a penalty of TND 50 per missing or incorrect item, capped at TND 5,000.
Under Article 84 undecies of the CDPF, failure to submit the required transfer pricing documentation, or submitting incomplete or inaccurate documentation, within the statutory 40-day period following formal notice, may result in an administrative penalty equal to 0.5% of the amount of the transactions concerned, subject to a minimum of TND 50,000 per financial year concerned by the audit.
These penalties are distinct from potential corporate income tax adjustments arising from the application of the substantive transfer pricing rules.
Conclusion
Transfer pricing documentation should not be treated as a mere administrative formality. It is an essential instrument for demonstrating the consistency between a company's related-party transactions, its economic substance and the arm's length principle.
For businesses operating in Tunisia, effective compliance requires more than adopting a group-wide template. It requires a detailed understanding of local legal requirements, reliable functional and comparability analyses, accurate financial reconciliations and consistency between contractual arrangements and actual conduct.
A well-prepared Master File and Local File, supported by appropriate accounting and operational evidence, can significantly strengthen a company's ability to explain and defend its transfer pricing position during a tax audit.
At Luca Pacioli, a collaborating firm of Andersen Global in Tunisia, we assist businesses and multinational groups with transfer pricing documentation, transfer pricing policy reviews, benchmarking analyses and tax risk assessments.
For further information, please contact us at contact@lucapacioli.com.tn.
