The Tunisian Startup Act

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The Tunisian Startup Act is a legal framework that comprises 20 measures designed to support investors and startups in Tunisia. It is a part of the Digital Tunisia 2020 strategy.
What are the main aims and objectives?
The Tunisian Startup Act aims to foster the growth and development of startups in Tunisia by providing a supportive legal framework and incentives for investors and entrepreneurs. Its core objectives include labelling 1,000 startups, creating 10,000 new jobs, producing a cumulative turnover of 1 billion TND and creating one national unicorn, over a period of five years. The act also aims to promote entrepreneurship culture and encourage investment in startups, particularly those working on innovative solutions in sectors such as ICT, green energy, and biotechnology. Ultimately, the goal of the Tunisian Startup Act is to make Tunisia a hub for entrepreneurship and innovation in the region. 
How does the program work?

The Tunisian Startup Act comprises 20 measures that are structured around five main themes, which are: defining startups, incentivising potential entrepreneurs, removing procedural and tax barriers for startups, access to capital and access to international markets.  

Defining startups 

The legislation establishes a Labelling Committee which will determine the startup status of companies that apply and then advise the Ministry of Communication Technologies accordingly. The committee will consist of 10 members that includes a president, five venture capitalists funds, a representative from an accelerator and two public sector officials.  

Startups are defined as companies that are no more than 8 years old, have an annual revenue and total balance sheet of less than 15-million Tunisian Dinar (roughly $6 million) and fewer than 100 members of staff. They are also required to have an “innovative business model and significant growth potential”. There is a fast-track process for companies that have already secured VC funding.  

The Startup Portal is the main point of interaction for startups to apply for the Startup Label. The portal is intended to evolve to integrate other functionalities that facilitate the administrative operations of startups.

Incentivising entrepreneurs 

The Tunisian Startup Act contains four measures to encourage individuals with innovative ideas to launch a company. Firstly, individuals will be granted a year long period of “Startup Leave” from their current job which is extendable to two years. This is only available if you have worked with a company for 3 years already. Secondly, up to three founders per startup will be granted a monthly stipend calculated on the average previous income for the employees which ranges from 1k TND (approx $320) to 5k TND (approx $1,600). Thirdly, to reduce the cost of hiring employees, the law establishes employment programs that subsidises graduates enrolled in the scheme and incentivises employers to hire them. Finally. The legislation incentives “good failure” by promoting the amicable liquidation of startups through a combination of measures such as the Startup Guarantee Fund.   

Removing procedural and tax barriers  

Four measures to make the creation, development, and liquidation of a business are contained within the law. They include a startup portal for startups guiding them on the administrative and regulatory processes involved at every stage of business dvelpemnt, and reform of the Commercial Companies Code to allow for simplified share companies, preferred shares, free shares and warrants. Likewise, startups will be exempt from corporate tax and the state will cover social security contributions for startups.  

Access to capital 

Five measures are included in the legislation to address the funding gap for startups: 

1.     Tax relief for individuals and entities that invest in startups  

2.     Tax relief on capital gains for investments in startups  

3.     Allowing startups to issue several convertible bonds 

4.     Startups are authorised to designate themselves their own contribution auditors for capital raised via contribution in kind 

5.     The Startup Guarantee Fund guarantees VC funds investment in startups for up to 30% of the amount invested 

Access to international markets 

The law also contains five measures to support Tunisian startups that attempt to enter international markets. It does this by firstly raising the maximum amount (to 100k Tunisian Dinar, approx. $39k) startups can pay through the International Technology Card that allows them to pay for online transactions in a foreign currency. Secondly, there is a provision allowing startups to open foreign exchange bank accounts. Thirdly, startups are sanctioned to use accounts for capital contributions, quasi-capital and revenue in foreign currencies. Fourthly, startups are sanctioned to invest these assets abroad without any restrictions. Finally, the legislation exempts startups from certain imports and customs procedures around telecoms and electronic equipment.  

Fund of Funds

In addition to the 20 measures listed above, the Tunisian Government has created a Fund of Funds to run alongside the Startup Act. This fund has a target size of €200M and aims to invest in more than 13+ investment funds dedicated to startups including the Life Grant and CNSS support.

What is the overall cost?
As of 2020 7.8 MTND (approx $2.5 million) had been spent on the Life Grant and CNSS support. 
How was it implemented?

The Tunisian Startup Act was developed through a collaborative effort between the Tunisian government and various stakeholders in the country's startup ecosystem. The process began with an informal meeting with ecosystem actors held by the ICT Minister Noomane Fehri in 2015 which was followed up by an initial brainstorming session with a group of 70 entrepreneurs, investors and representatives of banks and accelerators. The collection of suggestions that emanated from these sessions were then structured into a participatory process within eight thematic working groups which covered top level areas such as investment, market access, regulation, internationalisation, and financing. The proposals of the working groups were finally submitted to a coordination group at the Ministry of Communication Technologies and Digital Economy.  

The legislation was first proposed by the Ministry of Communication Technologies and Digital Economy in 2017 and was subsequently reviewed and amended by the Tunisian parliament before being passed into law in 2018. The law received widespread support from both the government and the private sector, as it is seen as a major step forward for the country's technology and entrepreneurial sectors. The legislative process was thus a collaborative effort that involved significant input from various stakeholders.  

It is also worth noting that the startup ecosystem launched an information campaign during the passage of the Startup Act to ensure that decision-makers as well as the broader public fully understood the motives and benefits of the policies contained within it. This ultimately resulted in the Tunisian Parliament unanimously voting in favour of the legislation.  

What impact has been measured?

 Between April 2019 and December 2020:

·      718 applications had been made

·      401 Labels awarded (an acceptance rate of 63%)

·      167 Pre-Labels granted

·      117 Pre-Labels transformed into labels

Summary of benefits granted as of December 2020

·      2.1 MTND (approx. $670k) allocated to Life Grants received by 127 startups

·      189 founders benefited from a Life Grant scholarship

·      5.7 MTND (approx. $1.8M) allocated to CNSS support benefiting 279 startups

·      7 employees per startup were supported by the CNSS budget

Additionally, 27 individuals has been granted leave for startup creation benefiting 22 startups

CURATED BY

Tom Hancock

Research Associate
Global Entrepreneurship Network
United Kingdom