Legislators in Tunisia have a habit of crafting laws that cannot be implemented until additional decrees are passed at a later date. Several articles of the Investment Law No. 71 of 2016 were limited to stating principles, while the concrete modalities needed to bring about actual legal change were to be included in succeeding decrees. Specifically, this is the case for Article 4 of the investment law, which laid out the foundational principle of investment liberalisation and referred to a decree that would establish exceptions to this principle.

However, delays in the implementation of these decrees have made this approach problematic and created difficulties for the application of laws. Indeed, the passage of investment laws without an accompanying implementing decree has resulted in an air of uncertainty for different administrations, private organisations and law firms, especially with regard to the investment liberalisation regime and foreign investment. As a result of such legal uncertainty, the transition period between the old and new investment frameworks is beset with challenges.

This is all the more regrettable considering that the adoption of the investment law was accompanied by a large-scale, government-led campaign designed to attract investors. The state failed to meet investor expectations on two occasions. The first was because of the relatively limited contribution of the new investment law, while the second involved the excessive delay in passing the implementing decrees. This contributed to a climate of ambiguity and confusion in legal interpretations.

Investment Law

A year and a half after the implementation of the 2016 Investment Law, the primary application decree was formulated. Governmental Decree No. 417 of 2018, which was passed on May 11, clarified both the list of economic activities subject to authorisation and the list of administrative authorisations required for the realisation of projects. The decree was expected to be succinct and drastically reduce the number of activities subject to authorisation; however, at 200 pages, it ended up being one of the longest legal texts ever published in Tunisia. Adding to issues, the text is presented in a relatively disorganised manner, and after almost a year is only available in Arabic. We would have expected a text targeted at foreign investors to also be available in French and English.

Primary Points

Article 4 of the investment law enshrined the principle of freedom of investment and prescribed that the list of activities subject to authorisation, deadlines and permit procedures would be fixed by state order, taking into account security, national defence, subsidy rationalisation, as well as natural and cultural resources, environmental protection and health.

Moreover, Article 4 states that, provided the request meets all conditions, in the absence of an authorisation or reply in a timely manner by the administration in charge, the Tunisia Investment Authority (TIA) can automatically grant the authorisation after verifying that all criteria for the relevant request are met. This is know as the “silence equates authorisation” principle. However, this is not an absolute principle, and the application of such a procedure can be invalidated by decree.

Provisions & Limitations

Regarding Article 4, the decree stipulates that certain activities, including natural resource exploitation, all types of transport, banking and financial services, insurance, hazardous and polluting industries, health care, education, telecommunications, and selected commercial and service activities, will require authorisation. Annex 1 of the decree details the procedures for filing applications, the administrations concerned and the required documents to obtain authorisation.

Additionally, Appendix 3 of the decree lists the authorisations that are not related to a specific activity, including those involving a merger authorisations related to foreign exchange regulations. Appendix 4 of the decree details the set of activities excluded from the “silence equates authorisation” principle. The list is relatively limited and is composed of activities involving explosives use, the trade and manufacture of weapons, the sale and manufacture of medicines and infant formulas, hydrocarbons exploration, aircraft use, aerial transport, the transport of persons, switching the status of agricultural land, telecommunications networks, and the production and sale of media. Without exception to the aforementioned industries that are excluded from the “silence equates authorisation” principle, the decree stipulates rules for the following situations:

• With regard to authorisations for which a deadline is already provided by the applicable regulations, they must be issued within this period.

• With regard to authorisations for which no deadline is provided by the applicable regulations, an automatic deadline of up to 60 days is stipulated. However, this 60-day period is subject to a few exceptions. These are as follows:

• In the event the decision to approve or refuse an authorisation requires the intervention of one or more other administrative authorities by law, the deadline shall be suspended for a period of up to 90 days.

• In the event the application for authorisation requires the approval of the Higher Investment Board, the deadline is increased to 180 days.

• In the event the request relates to a transfer of capital abroad in foreign currency, the decree provides for a maximum period of 90 days. In addition to the organisation of deadlines and in line with giving effect to the aforementioned provisions, the following rules have been established by the decree:

• The filing date is indicated on the receipt issued by the authority after it has received the documents relating to the authorisation request.

• Upon receiving the authorisation request, the relevant administrative body has 10 days to verify that the application is complete. If it is not, the applicant receives a request to complete their file, and the countdown is suspended until all required documents have been submitted.

• The administrative body does not have the right to impose additional terms and conditions or request additional documents beyond those mentioned in the decree or in its appendix.

• In the case of a late answer from the administration at the expiry of the deadlines provided for by the decree, the applicant may request authorisation from the TIA.

• Upon receiving this request, the TIA has five working days to follow up with the appropriate administration and confirm that no answer has been given to the applicant. The TIA will confirm that the relevant administration has not answered, and will request the required clarifications to grant the authorisation.

• Upon receiving this request, the relevant administrative body has up to 10 working days to share the applicant’s complete file, and relevant technical reports, and show proof of its answer. In the absence of an answer to such a request, the TIA has the right to decide based on the relevant documents provided, but it can also require the applicant to submit additional documents if their file is incomplete and does not contain all the documents required by the decree.

• In the event that complementary documents are requested by the TIA, the countdown is suspended until the file is made complete.

• After verifying that all the required conditions and procedures have been fulfilled, the TIA has 20 working days to respond to the administrative authority concerning whether or not authorisation has been granted.

• Within five working days of having formed a decision, the TIA must inform the applicant.

• The decree specifies that the TIA cannot intervene in any authorisations that involve the Central Bank of Tunisia (Banque Centrale de Tunisie, BCT), the Financial Market Council, the General Insurance Committee or any state body that has regulatory authority over a given sector by law.

• The TIA does not intervene in the granting of authorisations for activities excluded from the “silence equates authorisation” principle listed in Appendix 4 of the decree.

Decree Limitations

Despite the relative liberalisation of investment, the principle of freedom of investment outlined in the investment law has been rendered somewhat ineffective by the provisions in the decree and the maintenance of a large number of authorisations. In addition, the long response times of the administrative authorities could be improved. They give the impression that Tunisian authorities are unaware of the degree of swiftness required by the current global economy.

Moreover, the “silence equates authorisation” principle is rarely applicable in practice. Even in the event that the administration fails to give an answer within the specified time, applicants may have to wait a long time for authorisation from the TIA. The TIA also has various methods to delay the hypothetical authorisation for a large number of cases.

Start-Up Act

In addition to the Ministry of Communication Technologies and Digital Economy (Ministère des Technologies de la Communication et de l’Economie Numérique, MINCOM), new economic actors, including incubators and young Tunisian entrepreneurs, called for an economic and legal framework specific to start-ups and recent ventures.

To this end, the Assembly of the People’s Representatives ratified Law No. 20 of 2018, more commonly referred to as the Start-up Act, which aims to put an incentive framework in place for the creation and development of start-ups in Tunisia focused on creative industries, innovation and the use of new technologies.

Obtaining Start-Up Status

The Start-up Act defines a start-up as any commercial enterprise that conforms to the current legislation and has been certified as a start-up by the committee. The committee, which was created by MINCOM, is charged with certifying start-ups in accordance with the conditions specified in Article 3 of the Start-up Act and the provisions included in Decree No. 840 of 2018.

Under the aforementioned texts, the start-up label is granted to a company that meets the following criteria:

• It has not been incorporated for more than eight years;

• The business does not employ more that 100 employees;

• Its total balance sheet does not exceed TD15m ($5.2m);

• Its annual turnover does not exceed TD15m ($5.2m);

• More than two-thirds of its capital is held by individuals, venture capital firms, venture capital funds, seed funds and any other charity, investment organisation or foreign start-up;

• Its business model is highly innovative, particularly with regard to technology; and

• Its business has significant potential for economic growth.

Encouraging Start-Ups

To unlock and realise the full entrepreneurial potential of young Tunisians, the Start-up Act encourages any public official or employee of a private company to launch their own start-up. To this end, the Start-up Act codifies the following measures:

• The right to create: Under the terms of the Start-up Act, any public official or employee of a private company has the right to create a start-up without their employer objecting.

• The right to leave: Any public official or employee of a private company is entitled to a leave of absence for up to one year, renewable one time, to create their start-up. This right is limited to three founders, shareholders and/or full-time employees. The individual benefitting from the leave of absence keeps the contractual and regulatory relationship with their primary employer without receiving remuneration or benefits from said employer.

• The right to a grant: Any start-up promoter can benefit from a start-up grant for a one-year period. Similarly, this right is limited to three founders, shareholders and/or full-time employees in the relevant start-up. The amount allocated for this scholarship comes from the National Employment Fund, donations, and any other resources provided for by the legislation and regulations in force. For employees, the size of the grant is based on their net average monthly income for the last 12 months prior to being officially labelled as a start-up, ranging anywhere from TD1000 ($347) to TD5000 ($1740) per month. For non-employees, the net monthly amount of the stock exchange is set at TD1000 ($347).

• The right to employment programmes: Similar to the right to leave for public officials and employees, any young graduate who is both eligible for employment programmes and who creates a start-up reserves the right to benefit from these programmes for a maximum of three years following the creation of the start-up.

• The right to intellectual property: MINCOM covers filing procedures and registration fees for start-ups at the national level. It also supports the international filing and patent registration process within the limits of available resources.

Advantages & Incentives

The official start-up label grants certified entrepreneurs and their companies several advantages. These advantages are available during the entire lifetime of the company being officially labelled as a start-up, which cannot exceed eight years following incorporation. The main advantages for labelled start-ups are fiscal, operational and financial.

Fiscal Advantages

Under certain conditions listed in Article 21 of the Start-up Act, officially labelled start-ups are eligible for a full tax deduction in a number of circumstances. These cases are as follows:

• Revenue or profits reinvested in the subscription to the initial capital or its increase; and

• Revenue or profits either reinvested in the capital of venture capital companies, or placed with them in the form of, venture capital funds, seed funds or any other investment organisation, according to current legislation. Such entities must commit to use at least 65% of the total sum to fund start-up equity, subscribe to interest-free convertible bonds or invest in any other type of quasi-equity with no interest earned by start-ups. Unlike the common tax regime, the sale of start-up capital securities is not subject to capital gains tax. In addition, and under conditions listed in Decree No. 840 of 2018, labelled start-ups are fully exempt from corporate income tax, and the state covers all national social security fund contributions for the entire time the label is valid.

Operational Advantages

Unlike common law, which requires the commissioner be appointed by the court in the event of a share capital contribution, the partners and shareholders of labelled startups are free to choose a commissioner to accept contributions. This allows companies to circumvent bureaucracy and the possibility of being assigned a commissioner with a different expertise.

Start-ups are also allowed to issue convertible bonds (obligation convertible en action, OCA), but are not required to abide by the regulations of the Commercial Companies Code of Conduct. Specifically, start-ups no longer have to wait for the deadline to expire or for option periods for the conversion of previously issued convertible bonds.

Financial Advantages

Since 2017 the authorities have allowed domestic companies to use an international technology card (carte technologique internationale, CTI) to pay for telecoms services that are solicited from foreign countries. Such services include website hosting, outsourcing, advertising, online training and software licences. The CTI is denominated in a foreign currency.

Under common law, the maximum annual allowance for a CTI is TD10,000 ($3470), transferable on one or more occasions to carry out the transactions referred to above. However, the implementation of Circular No. 2 of 2019 of the BCT increased the maximum annual allowance to TD100,000 ($34,700) for any resident company with a start-up label.

In addition, under the Start-up Act and according to the provisions of Circular No. 1 of 2019 of the BCT, labelled start-ups can open a special foreign currency account with authorised intermediaries. These start-up accounts are fed freely and exclusively by the following:

• Currencies from the subscription in the capital of the company;

• The issuance of OCAs;

• The establishment of loans in the form of an advance in shareholder current accounts; and

• All forms of quasi-equity or income from their operations. In line with this circular, the Start-up Act can be used to pay for the following:

• Tangible and intangible goods as part of the company’s operations;

• To cover overseas living expenses in the event of business trips related to the start-up;

• To settle any other current foreign currency expenditure related to the activity of the start-up;

• Transfers as foreign investments or equity investments in foreign non-resident companies;

• To repay current account advances, bonds (if not yet converted into shares) and almost any form of quasi-equity fund received foreign currencies;

• The sale of foreign currencies on the foreign exchange market; and

• The credit of another currency start-up account opened in the name of the same start-up. Unlike common law, under the Start-up Act, the funds in this special account are freely managed and can be used by the start-up without requiring any authorisation, provided the actions relate to commercial operations (e.g., purchased goods) or investments (e.g., establishing a foreign office or building financial interests in foreign-based companies). The Start-up Act is relatively new, so its long-term impact remains to be seen. Nevertheless, this legislation has been well received by key stakeholders and should allow for significant improvement in sector operations.