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Tax Consideration in Respect of Fees for Technical Services Performed in Tunisia by an Italian Company

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The feasibility study for the renovation of a Refinery in Tunisia and assistance provided in drafting the documents needed for the relevant tender create an issue in term of double taxation – the issue can be solved applying the provisions set by the Treaty against double taxation signed between Italy and Tunisia and the subsequent Protocol.

The Response 118 of 20th January 2023 of the Tax Revenue Agency provides this answer: the fees paid by the Tunisian client to an Italian Company, with no permanent establishment in Tunisia, for engineering feasibility studies, can be considered “royalties “, as per Art. 12, sub 3 of the Convention Between the Republic of Italy and the Republic of Tunisia for the Avoidance of Double Taxation. The said Art.12 in fact includes “technical and economic studies concerning industrial or commercial topics”.

The Revenue Agency recalls the treaty between Italy and Tunisia on double taxation

By virtue of the subject of the contract between the Tunisian client Company and the Italian Company, The Italian Tax Agency confirms the technical nature of services provided by the Italian Company to the Tunisian client; the 12% tax applied by the Tunisian authorities therefore complies with the rules provided for in the Convention between the two countries.

The response also confirms the impact on the Italian taxation: the Tunisian Tax applied are deemed final and, as such, deducted from the Italian tax, as per Art.165 TUIR/1986 (Unified Law on Income Tax).

A different approach could cause a possible litigation with the Italian Tax Agency, that would challenge the deduction of the tax credit, since the tax withhold in Tunisia may not be paid accordingly with the Convention applied.

Regulatory Framework

Response 118/2023, Tax Agency

Reference

Convention between the Republic of Italy and the Republic of Tunisia for the avoidance of double taxation with respect to taxes on income and the prevention of fiscal evasion, including Additional Protocol

Reference

Art. 165, Presidential Decree N.917, 22nd December 1986

Reference

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