lundi 27 septembre 2010

Land property in Tunisia

The property right is guaranteed by Article 14 of the Tunisian Constitution. It is practiced within the limits provided by laws.

The rules governing the property right are provided by the Real Estate Code (hereinafter referred to as “C.D.R.”) promulgated by Law N° 65-5 of February 12th, 1965.

According to the provisions of Article 14 of the C.D.R. the property confers to the owner the exclusive rights of usus, fructus and abusus.

  • Who can own land?

The property right is granted for all nationals (individuals and legal entities).

For foreigners (individuals and legal entities), the right to property depends on the land nature and for which use is intended to be.

Specific cases:

- Residential land/property:

Pursuant to the property transactions' decree dated on June 4th, 1957, the purchase and sale of a residential property in Tunisia by a foreigner are subject to prior authorization of the governor of the region where is located the concerned property.

If the land is located in a urban plan’s zone of development, it is deemed to be for residential purpose. The prior authorization of the Governor is required. However, if the land is not a part of the urban plan, it is deemed to be an agricultural land and therefore it is impossible for a foreigner to acquire it.

The sales transactions made by the French nationals related to their properties constructed or acquired in Tunisia before January 1956 are exempt from the authorisation of the Governor, according to an exchange of letters between the Tunisian and French governments dated October 20th, 1997.

Tunisia has concluded between 1961 and 1964 treaties with Libya, Algeria, Morocco and Niger for the principle of equal treatment of nationals in many purposes including land ownership.

Yet, after the first applying of these treaties, the Tunisian Government has retracted when it has appeared that the said countries have not granted equal treatment to Tunisians.

In spite of this fact, the Tunisian Civil and Real Estate courts have unanimously applied the Establishment Treaties in matters which concerned transactions in which North African citizens were involved.

Before requesting the governor authorization, a promise of sale shall be drafted by a lawyer. The promise of sale shall specify a reasonable deadline (eg six months) for the prospective purchaser to obtain such authorization.

The promise of sale should also force the case of failure to obtain such authorization. Paying an advance amount of the total price may be provided by the promise of sale. In case of failure to finalize the purchase transaction, it can be expected to recover all or a portion of the advance amount.

Please note that it is important to verify the regularity of the land title and the title of property at the Conservation Land Office before initiating any acquisition process.

- Industrial zone land/property:

Pursuant to the provisions of Article 7 paragraph 2 of Decree of June 4th, 1957, relating to property transactions (as amended by Law N°2005-40 of May 11th, 2005), the acquisition or lease by foreigners of lands and premises built in industrial areas for the realization of economic projects are exempt from the prior authorization of the Governor.

Is considered as industrial zone, any area that has been assigned the industrial character in accordance with the legislation in force related to the development of industrial zones and legislation in force on the protection of agricultural/housing land a having acquired the industrial character within the framework of the urban development plans.

In order to encourage foreigners to purchase lands in Tunisian, the Finance Act for the fiscal year 2007 brought new provisions concerning the acquisition by non-resident foreigners of real estate in Tunisia.

Thus, the Finance Act 2007 provides in its article 34 that the registration of ownership transfers for properties acquired in foreign currencies by non resident foreigners is subjected to fixed fees.

Foreigners were previously submitted to the same indexed fees applied for Tunisian nationals.

Please note that the non residents who have purchased lands in foreign currencies according to the legislation in force (with an investment sheet delivered by the bank), can freely transfer overseas the invested funds and the surplus value.

The national agency in charge of fiting out the industrial zones and selling lands for industrial investments is the Industrial Real Estate Agency[1].

Please find herein enclosed the application form to acquire industrial land (Attachment #1).

- Tourist zone land/property:

The acquisition by foreigners of the bare lands in the tourist zones is free.

However, the acquisition of already established tourist units (hotels, restaurants, etc.) shall be subject to the prior authorization of the governor.

Is considered as tourist zone, any area that has been assigned the tourist character in accordance with the legislation in force related to the development of tourist zones and legislation in force on the protection of agricultural/housing land and having acquired the tourist character within the framework of the urban development plans.

According to the provisions of Article 34 of the Finance Act 2007, the registration of ownership transfers of properties acquired in foreign currencies by non resident foreigners is subject to fixed fees.

The national agency in charge of fiting out the tourist zones and selling lands for tourist investments is the Tourism Real Estate Agency[2].

- Agricultural zone land/property :

Pursuant to the provisions of Law N°64-05 of May 12th, 1964, Agricultural land cannot be sold to foreigners, whatever the motives of purchase.

The sale of an agricultural land to a foreign person or entity is absolutely null and utterly void. The foreigners can exploit agricultural land only by rent.

  • How is land held?

According to the provisions of article 22 of C.D.R., property is acquired by contract (sale, donation, contribution in a company, etc.), succession, occupation, prescription, accession or any other mode provided by law.

- by contract

The acquisition of land by contract may be by sale/purchase agreement, by donation or by contribution in a company.

Land can be directly acquired from government agencies (the Real Estate Housing Agency (“AFH”) for residential lands, the Industrial Real Estate Agency (“AFI”) for lands in industrial zones and Tourism Real Estate Agency (“AFT”) for tourism projects) or can be bought from private individuals or legal entities.

Please note that in case of contribution in a company the land shall be evaluated by an assets auditor.

According to Article 377 bis of the CDR, all lands property’s agreements shall be drafted by a lawyer, a public notary, the land property conservator (a public agent), the regional directors of land property conservation agency or the public agents of the land property conservation agency which are duly mandated.

The land purchase agreement shall provide the mandatory indications such as: the seller and the purchaser details, the description of the property, the land title number and details, the mortgages and other securities, and the price.

The parties' signatures shall be legalized/authentificated before a public authority under section 378.

- by succession

Successions are governed by the Code of Personal Status. The succession of land’s property located in Tunisia is the exclusive competence of the Tunisian courts.

- by occupation/ prescription

Any person who is charring out an occupation of a building in a peaceful, public, continuous, not interrupted and not ambiguous way for fifteen (15) years, he becomes the owner of that building.

The duration of prescription is reduced to ten (10) years in case the possession is in good faith and by virtue of a legal act which would have normally transferred the property if it was delivered by the real owner.

However, it should be noted that:

- no one may appropriate property of the State for himself by occupation, prescription or accession;

- The possession in good faith cannot be transformed into ownership if the land is registered in the real estate conservation.

According to Article 23 of the C.D.R., vacant and ownerless buildings become the property of the State.

- by accession

Ownership of property gives a right to what it produces and to what is united to it, naturally or artificially, from the time of union. This right is called a right of accession

- by other legal way of acquisition

In case property is mortgaged to secure a loan, if the debtor does not pay, the mortgage is entitled to appropriate the pledged property in respect of judicial proceedings.

Property can be also transferred by auction.

  • How are property rights protected?

As mentioned above the property right is guaranteed by the Tunisian Constitution.

The main protection of property is to register the right on the land at the land conservation office. As from the date of registration of the land ownership/property right, no person may contest legally the said land ownership/property right.

On a penal level, the attempts against the property are criminally punished.

For example, anyone who would, by force, deprived others of a property, is punished up to three (03) months imprisonment and a fine of one hundred and twenty dinars (120 TND) without prejudice of more severe punishments incurred for the other offenses committed. It should be noted also that even the attempt of the aforementioned acts is punishable.

Furthermore, anyone who would, against owner’s will, enters or lives in a residence, is punished up to three (03) months imprisonment.

  • Can security be granted over property?

Security can be granted over property.

The mortgage shall be in writing to validly bind the parties. The property on which the mortgage is made and the amount of the debt shall be determined in the deed.

According to the provisions of Article 274 of CDR, agreements made abroad may not be the cause of mortgage assignment, or grant a mortgage on property located in Tunisia.

It is strongly recommended to register the mortgage on the land title at the land conservation office. Indeed, pursuant to Article 275 of CDR, the mortgage as security for a loan, up to a specified amount, is valid and has priority as from the registration date at the land conservation office, regardless of the debt date.

The mortgage follows the assigned property for each transfer of ownership. Creditors with a mortgage registered on land title of a property follow each transfer of property and are paid according to their registration rank.

In case the debtor transfers the ownership/rights of the mortgaged property to a third party, each mortgagee is entitled, at any time, to sale the mortgaged property within a thirty (30) days notice made to the third party holder of the mortgaged property and to the original debtor to pay the due debt or to abandon the property.

The mortgage extends to the property accessories and to the improvements

The mortgage registration on the land title is crossed out in case of submission to the land conservation office of a release signed by the creditor mortgagee or a res judicata court decision.

  • How is international investment supported by the government?

The Tunisian government has implemented a number of incentives in order to secure transactions and encourage international investments. Indeed, the Investment Incentives Code covers all the activities’ sectors with the exception of mining, energy, domestic commerce and the financial sector which are governed by specific texts providing specific advantages to the said sectors.

- Certain common tax advantages foreseen in Articles 7 and 9 of the Investment Code may be granted upon a simple request. The said common tax advantages are as following :

Ø Tax relief for shareholders up to 35% of profits or net revenue subject to corporate tax or personal income tax;

Ø Tax relief on profits reinvested back into the company up to a limit of 35% of taxable corporate profits;

Ø Profits that are reinvested are to be recorded in a special investment reserve account under the liabilities column of the balance sheet before the deadline for submission of the definitive tax return relating to profits for the year in which the deduction is taken and added to corporate capital no later than the end of the year in which the reserve is set up;

Ø The corporate tax return shall include the schedule of investments to be made «and a commitment by those taking advantage of the deduction to follow through with investment by the end of the year in which the reserve is set up»;

Ø Assets acquired in the framework of investment cannot be sold until at least one year after the date of effective start up of production;

Ø Capital should not decrease for the first five years following the date on which profits and income have been invested, unless a reduction is required to absorb losses;

Ø « Subject to the terms of articles 12 and 12a of law n° 89-114 of 30 December 1989, which promulgates the code governing personal income tax and corporate tax, the following items can be deducted from the tax base for both personal income tax and corporate tax: income or profits that are reinvested in acquisition of corporate assets or acquisition/subscription of stock or shares leading to holdings of at least 50% of capital in the framework of voluntary transmission by a company following death, inability to pursue management of the company, or retirement as outlined in article 11a of the tax code for personal income tax and corporate tax as well as in the framework of ongoing activity or transmission as outlined in law n° 95-34 relating to recovery at companies encountering economic difficulties as further elaborated and modified by subsequent texts, up to 35% of income or net profits subject to personal income or corporate tax. These terms do not apply to transactions to acquire or subscribe to stock or shares (in the framework of ongoing activity or transmission as outlined in law n° 95-34 mentioned above) by company directors and by the associate who holds the majority share of capital at the date of acquisition or subscription. Calculation of the rate of holdings for the associate with the majority share in capital takes into account the associate’s direct and indirect holdings as well as those of his or her spouse and adult children. »

Ø Exemption from Customs duties and similar taxes and Value-added-tax (VAT at 12%) payments for imported equipment that has no locally manufactured equivalent;

Ø Suspension of VAT for locally manufactured equipment purchased before the enterprise enters into production;

Ø Payment of VAT (12%) for locally acquired equipment after production startup activity.

- Specific advantages may be granted for companies that export 100% of production such as total deduction from the tax base of income or profits from exports for the first 10 years of activity, after which the rate falls to 50%, and Corporate tax at a rate of 10% on profits from export, subject to the terms of article 17 of the present code, for income generated starting 1 January 2011, « including exceptional profits as outlined in paragraph Ia of article 11 of the Code governing personal income tax and corporate tax, with the same conditions applying for both », Other specific advantages may be granted to companies exporting a portion of their production.

- Investment premiums, tax incentives and other specific advantages may be granted to companies acting for regional development, agricultural development and support investment.

- Additional advantages may be granted for activities of particular import for the national economy or border zones and major activities with high added value and a high integration rate after the superior Commission for Investment gives its opinion.

- Furthermore, the State, works for the setting-up of infrastructures, communication networks, and for the establishment of technological poles dedicated to many sectors of technology (such as Elgazala pole of communication technologies and Bio-Tech Pole Sidi Thabet).

- Also, via the industrial real restate agency, the State creates and develops industrial zones equipped with all necessary commodities for the implementation of industrial projects; and constructs flexible industrial premises intended for the Tunisian and international investors.

  • Are there any specific risk factors in relation to the Tunisian jurisdiction?

I emphasize on the absence of specific risks concerning the property rights in Tunisia.

However, it should be noted that the Urbanism Code provides sovereign measures in order to organize and fit out cities.

In deed, the State is entitled to plan by decree perimeters of intervention (PIF) in order to fit out new zones. Among the effects of the PIF is to plan a preemption right for the public real estate agencies to purchase the lands and a non-transferability of the land till the end of the PIF which may lasts up to six (6) years.

Also, the State may exercise the expropriation for public utility in return of a fair compensation to the owner.

However, to be noted that the said measures are applicable in zones which are not fitted out to prevent the anarchy constructions and plan new fitted out zones either for residence, or for industry or tourism.

These measures are always practiced in the total respect of the rules stated for that purpose by the Urbanism Code and subsequent texts.

In order to prevent such sovereign procedures, it is strongly recommended to acquire lands in already fitted out zones.

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