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Tax Guide for US Expats Living and Working in Tunisia
Who Is Liable For Income Taxes in Tunisia
All individuals whose habitual residence is in Tunisia must pay income tax on all benefits or income received in the previous year. Nonresident individuals are taxed on Tunisian-source income. They are subject to a 15% final withholding tax on such income.
Individuals are considered tax residents if they meet any of the following conditions:
- They maintain their home in Tunisia.
- They are present in Tunisia for at least 183 days during the year.
- They are civil servants or state officials performing their duties or assignments in a foreign country, and they are not subject to personal tax on their global income in the foreign country.
Income subject to tax. The taxation of various types of income is described below. For a table outlining the taxability of income items.
Employment income. Taxable employment income includes total compensation after deducting the employee’s social contributions and personal deductions and allowances.
Self-employment and business income. Self-employed individuals are divided into two categories for tax purposes, depending on the nature of their activities. They may be taxed on income from commercial and industrial activities or on income from agricultural and fishing activities.
Investment income. Profits distributed by companies are not subject to the tax on securities income. Interest is subject to the tax on income derived from sales of movable assets at the rates.
Capital gains. Capital gains derived from shares are taxable at a rate of 10%, with an annual deduction of TND 10,000. Capital gains derived from the sale of buildings and lands is subject to tax at a rate of 10% if the asset retention period is less than 10 years and 5% if the retention period is more than 10 years.
Taxation of employer-provided stock options. No specific law in Tunisia addresses the taxation of employer-provided stock options. Under common law, options are taxed at the time of exercise on the difference between the exercise price and the fair market value of the stock. The benefit is subject to both income tax and social security contributions.
Deductions
Deductible expenses. The following expenses are deductible
- The required amounts withheld by the employer for contributions to annuities, pensions, retirement funds or mandatory social security schemes
- Professional expenses equal to 10% of the balance of income after the deduction of amounts withheld
Personal deductions and allowances. The following personal deductions are granted:
- Mandatory arrears and annuities paid free of charge
- Premiums from certain life insurance policies
- Interest received by the taxpayer for special savings accounts, limited to an annual amount of TND 1,500
- Rental income from property that houses students
- TND 150 for heads of families, in addition to TND 90 for the first child, TND 75 for the second, TND 60 for the third, TND 45 for the fourth, and TND 1,000 for disabled children, plus 5% of net income per dependent parent, up to a combined maximum of TND 150
- TND 1,000 for employees with the guaranteed minimum wag
B. Estate and gift taxes
Heirs or legatees must file and register a declaration of inherited property within six months following the decedent’s death. Gifts must be recorded within 60 days after the date of the gift.
The following are the rates of tax on gifts and inheritances:
- TND 15 per page and per copy for direct lineal relatives (children, spouses and parents) and 5% for indirectly related individuals. Gifts of houses to a spouse under the community regime are subject to a charge of TND 15 per page and per copy.
- 25% for collateral lineal relatives.
- 35% for relatives beyond the fourth degree and for unrelated individuals.
C. Social security
Employees pay social security contributions on their salaries at a rate of 9.19%. The total rate for contributions paid by the employer is 16.57%. No ceiling applies to the amount of wages subject to social security contributions.
Double tax relief and tax treaties
Tunisia has entered into double tax treaties with the following countries.
Algeria
Korea (South)
Romania
Austria
Kuwait
Senegal
Belgium
Lebanon
South Africa
Cameroon
Libya
Spain
Canada
Luxembourg
Sudan
China
Mali
Sweden
Czech Republic
Malta
Switzerland
Denmark
Mauritania
Syria
Egypt
Mauritius
Turkey
Ethiopia
Morocco Union of the
France
Netherlands
Arab
Maghreb
Germany
Norway
United Arab Emirates
Hungary
Oman
Indonesia
Pakistan
United Kingdom
Iran
Poland
United States
Italy
Portugal
Yemen
Jordan
Qatar
These treaties generally stipulate that wages and compensation are taxed in the state where the activity is performed. Dividends and interest are taxed differently, depending on whether the source is Tunisian or foreign.
To learn more about the history, culture, economy and other information about Tunisia
We have been preparing US income tax returns for US Citizens and permanent residents living in Tunisia for over 15 years. As a US Citizen or permanent resident (green card holder) you are required to file a US return each year regardless of the fact that you file and pay taxes in your residence country. The expatriate earned income exemption ($100,800 for 2015) can only be claimed if you file a timely tax return. It is not automatic if you fail to file.
We have scores of clients located in Tunisia and know how to integrate your US taxes into the local income taxes you pay. Any income tax you pay there can be claimed as a dollar for dollar credit against the tax on your US return on the same income.
As an expat living abroad you get an automatic extension to file until June 15th following the calendar year end. (You cannot file using the tax fiscal year for US tax purposes). You must pay any tax that may be due by April 15th in order to avoid penalties and interest. You can get an extension to file (if you request it) until October 15th.
There are other forms which must be filed if you have foreign bank or financial accounts; foreign investment company; or own 10% or more of a foreign corporation or foreign partnership. If you do not file these forms or file them late, the IRS can impose penalties of $10,000 or more per form. These penalties are due regardless of whether you owe income taxes or not.
There are certain times you may wish to make elections with respect to your Corporation or Investment Company which will give you US tax benefits. There are other situations where forming a US corporation to receive your business income may be more advantageous than using a corporation in your resident country. We can help you with these decisions.
If you are self-employed, you will have to pay US self-employment taxes (social security). If you are a bona-fide employee you do not have to worry about paying US social security on your wages earned in Tunisia.
We have helped hundreds of expats around the world catch up because they have failed to file US returns for many years. Unfortunately, unlike India, Canada, UK, etc. you must also file so long as you are a US citizen or resident. You can if you follow proper IRS and State Department procedures surrender your US Citizenship and therefore cut off your obligation to pay US taxes in the future. You must surrender that Citizenship for non-tax avoidance reasons and then can usually not return to the US for more than 30 days per year for the subsequent ten years.
Let us help you with your US tax returns, US tax planning and other US tax and legal concerns. Download our expat tax questionnaire or request a consultation by phone, skype or email