Insights

Value Added Tax (VAT) adheres to the principle of territoriality. Article 1 (I) of the VAT Code (Law No. 88-61 of June 2, 1988) states: “Subject to VAT, regardless of their purpose or outcome, are transactions conducted in Tunisia, as defined in Article 3 below, which are industrial, artisanal, or related to a liberal profession, as well as commercial operations other than sales.”

The legal status of the involved party, the form, or the nature of the intervention has no bearing on the taxability of the transaction. Accordingly: “This tax applies regardless of:

• The legal status of the persons involved in the taxable operations or their status concerning other taxes;
• The form or nature of their intervention and whether it is habitual or occasional.”

According to Article 3 (I) of the VAT Code:
“A transaction is deemed to have taken place in Tunisia:

• In the case of a sale: When the delivery of the goods occurs in Tunisia.
• For any other operation: When the service rendered, the right transferred, or the object leased is used or exploited in Tunisia.”

Thus, services provided by entities not established in Tunisia, but utilized within Tunisia, are subject to Tunisian VAT. This VAT must be withheld at 100% of its amount by the client established in Tunisia.

Article 19 of the VAT Code stipulates that this 100% withholding covers operations performed by legal entities or individuals without an establishment in Tunisia, including operations conducted for the benefit of the State, local authorities, enterprises, and public institutions.

The VAT withholding is final for non-resident service providers. However, non-established persons in Tunisia who have been subject to VAT withholding may opt to file a VAT declaration. In this case, they can deduct the VAT paid on goods and services necessary for the execution of the taxable operations. If a tax credit arises, it is refundable in accordance with the applicable legislation.

The VAT withheld on services provided by non-residents, which is withheld by the Tunisian client company, is recoverable by the Tunisian company subject to VAT under standard conditions. It is understood that the requirement to include a tax identification number does not apply to non-resident service providers.