Transfer Pricing in Tunisia: A Comprehensive Guide for Multinational Enterprises

Multinational enterprises operating in Tunisia must navigate a complex transfer pricing (TP) regulatory framework. This guide provides a comprehensive overview of Tunisia's TP rules, compliance requirements, and best practices.

1. Legal Framework and Regulatory Basis

Tunisia's transfer pricing legislation was established under Article 29 of Law n°2018-56 of December 27, 2018 (Finance Law for 2019), applicable to the 2020 financial year (declared in 2021). The rules are codified in Article 59 §II bis and Article 38 bis of the Tax Rights and Obligations Code.

The framework is based on:

• The arm's-length principle – ensuring related-party transactions reflect conditions that would prevail between independent parties

• OECD Guidelines – Tunisia follows OECD transfer pricing guidelines, particularly Action 13 of the BEPS project

Guidance Notes on transfer pricing

Tunisian tax authorities (DGI) have issued several guidance notes clarifying TP obligations:

2. Applicability and Thresholds

Who Must Comply?

Transfer pricing obligations apply to resident companies engaged in cross-border intercompany transactions. The following thresholds determine mandatory compliance:

Note: The threshold is TND 200 million (VAT excluded) for TP filing and documentation obligations, confirmed by Finance Law 2021 and Finance Law 2026.

3. Accepted Transfer Pricing Methods

Per Guidance Note n°11 (June 17, 2020), Tunisia accepts the following methods:

Traditional Transaction Methods:

• Comparable Uncontrolled Price (CUP) – Compares the price in a controlled transaction to the price in a comparable uncontrolled transaction

• Cost Plus Method – Adds an appropriate markup to the costs incurred by the supplier

• Resale Price Method – Deducts an appropriate gross margin from the resale price

Transactional Profit Methods:

• Transactional Net Margin Method (TNMM) – Examines net profit margin relative to an appropriate base (sales, costs, assets)

• Profit Split Method – Allocates combined profits based on relative contributions

Flexibility: Companies may use other methods if the above methods are not suitable, provided the pricing meets the arm's-length standard. Any adopted method must be:

• Justified

• Consistent with functions performed, risks assumed, and assets employed

• Supported by appropriate documentation

4. Three Types of Transfer Pricing Documentation

Tunisia requires three distinct types of TP documentation:

A. Transfer Pricing Declaration (TP Declaration)

Filing Requirement: Mandatory for companies with cross-border intercompany transactions exceeding both:

• Annual turnover > TND 200 million

• Individual transactions > TND 100,000

Filing Deadline: 25 March of each year (same as CIT return)

Content: Information regarding related-party transactions, transfer pricing methods applied, and arm's-length compliance.

B. Local File and Master File

Content aligns with OECD standards:

Presentation Requirement: Must be presented within 40 days of a formal notice from tax authorities during an in-depth tax audit.

C. Country-by-Country Reporting (CbCR)

Who Must File: Tunisian resident ultimate parent entities that:

• Are required to prepare consolidated financial statements (or would be if listed on the Tunis Stock Exchange)

• Achieve consolidated annual turnover (excluding taxes) ≥ TND 1.636 million

Filing Deadline: Within 12 months of the closing date of the reportable financial year

Exchange of Information: CbCR filed with Tunisian authorities is subject to automatic exchange with States linked to Tunisia by agreement (list fixed by Minister of Finance decision of June 15, 2022, published in JORT N°69 of June 17, 2022).

Applicability: Applies to accounting years beginning on or after January 1, 2020.

5. Exemptions

The following are exempt from TP reporting obligations:

1. Companies belonging to local groups that do not have cross-border transactions

2. Companies belonging to international groups that have cross-border transactions but do not exceed the thresholds (both turnover and transaction value thresholds must be met for the obligation to apply)

Important: The thresholds are cumulative – both the annual turnover threshold (TND 200 million) AND the individual transaction threshold (TND 100,000) must be exceeded for the filing obligation to apply.

6. Penalties for Non-Compliance

A. Failure to File the Annual TP Declaration:

• TND 10,000 for failure to file within the time limit

• Plus TND 50 per information not provided, incomplete, or inaccurate (capped at TND 5,000)

B. Failure to Present TP Documentation (Master File & Local File):

Upon formal notice from tax authorities during an in-depth audit:

• First stage: Formal notice to present documents within 40 days (Article 38 bis)

• Penalty: 0.5% of the amount of transactions concerned by the documents not presented

• Minimum penalty: TND 50,000 per audited year (Article 84 undecies)

C. Failure to File Country-by-Country Report:

• TND 50,000 for failure to file within deadline (Article 84 decies)

• TND 100 per information not provided, incomplete, or inaccurate (capped at TND 10,000)

7. Risk Factors for Challenge

The Tunisian tax authorities are particularly attentive to:

• Limited risk distributors or industrial contractors

• Entities with low net margins or continuous losses

• Transactions with related parties resident in low tax jurisdictions

• Business restructurings

8. Economic Analysis and Demonstrating Arm's-Length Results

Comparability Factors: Under OECD guidelines, Tunisia requires analysis of:

1. Characteristics of goods or services – Physical features, quality, reliability, availability, volume

2. Functional analysis – Functions performed, assets used, risks assumed (FAR)

3. Contractual terms – Written agreements and actual conduct

4. Economic circumstances – Geographic market, industry sector, competitive environment

5. Business strategies – Market penetration, cost leadership, innovation strategies

Benchmarking:

• Interquartile range is required for statistical analysis

• Commercial databases are used for identifying external comparables

• Quality of comparables takes precedence over quantity

• All search stages must be justified (search strategy, selection criteria, reasons for inclusion/exclusion)

Burden of Proof: The burden of proof is on the taxpayer to demonstrate TP compliance.

9. Advance Pricing Agreements (APAs)

Purpose: APAs provide tax certainty for future transactions with related parties.

Application Process:

1. Submit written application to DGI at least 6 months before the beginning of the first fiscal year concerned

2. Request preliminary meetings with competent DGI departments

3. Application must be sufficiently motivated and justified with necessary documents

Legal Basis: Order of the Minister of Finance of August 6, 2019; Guidance Note n°12 of June 17, 2020.

Annual Report: APA beneficiaries must file an annual report during the first half of each year covering transactions carried out under the APA.

APA Lapse: The APA lapses if the company:

• Misrepresented or withheld information, or engaged in fraudulent conduct

• Failed to meet its obligations under the agreement

Note: The tax administration is not legally bound by a time limit for ruling on APA applications, nor is it required to give reasons for refusal. Close and regular cooperation is essential.

10. Practical Considerations for EPC and Construction Projects

For companies in the EPC, construction, and infrastructure sectors, transfer pricing issues frequently arise in relation to:

• Offshore equipment procurement from group companies – Ensuring pricing reflects arm's-length terms

• Engineering and technical assistance fees – Proper allocation of costs and margins

• Management and administrative services – Justification of charges and markups

• Financing arrangements and shareholder loans – Interest rates and guarantees

• Allocation of EPC project profits – Determining profits attributable to Tunisian PE vs. foreign entities

11. Key Takeaways for Multinationals

Why Luca Pacioli?

With 40 years of experience and IBFD-certified transfer pricing expertise, Luca Pacioli provides comprehensive TP advisory services for multinationals operating in Tunisia. As a collaborating firm of Andersen Global, we offer:

• TP documentation preparation (Master File & Local File)

• TP declaration filing support

• TP audit defense and dispute resolution

• APA application and negotiation support

• Functional analysis and benchmarking studies

• Training and compliance guidance

Contact us to ensure your Tunisian operations remain fully compliant with Tunisia's transfer pricing regulations : Luca Pacioli – Chartered Accountant & Tax Services in Tunisia