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Jordan

Country Name: Hashemite Kingdom of Jordan
Currency: Jordanian Dinar (JOD)
Primary Tax Authority: Income and Sales Tax Department (ISTD)
Key Legislation:

  • Income Tax Law No. 34 of 2014 (as amended)
  • Value Added Tax (VAT) Law
  • Customs Law
  • Investment Law

Fiscal Authority Allocation

Centralized Fiscal System:
Jordan operates a centralized tax system with the Income and Sales Tax Department (ISTD) responsible for administering and collecting taxes, including corporate income tax (CIT), personal income tax (PIT), and sales tax (VAT).

Corporate Income Tax (CIT)

Standard Rates:
Jordan imposes a corporate income tax with varying rates depending on the sector:

  • General Corporations: 20%
  • Banks: 35%
  • Telecommunications, Insurance, and Financial Services (non-banking): 24%
  • Manufacturing Companies: 14%
  • Hotels and Hospitals: 14%

Corporate Forms and Taxation:

  1. Domestic Companies: Subject to CIT on worldwide income.
  2. Foreign Branches and Permanent Establishments (PEs): Taxed on Jordan-sourced income.

Exemptions and Incentives:

  • Investment Law No. 30 of 2014: Provides tax incentives for companies investing in specific sectors such as tourism, industry, agriculture, and renewable energy. Incentives include reduced CIT rates, customs duty exemptions, and tax holidays.
  • Development Zones: Companies operating in development zones benefit from reduced CIT rates of 5%, exemptions on dividends, and exemptions from customs duties and VAT.

Goods and Services Tax (GST) / Value-Added Tax (VAT)

Standard Rate: 16%
Jordan applies a VAT, referred to as a general sales tax, at a standard rate of 16%. VAT is levied on most goods and services, as well as on imports.

Exemptions:
Certain goods and services, such as basic foodstuffs, healthcare, education, and financial services, are either VAT-exempt or zero-rated. Exports are zero-rated, allowing businesses to reclaim VAT on inputs used in the production of exported goods.

Personal Income Tax (PIT)

Progressive Rates:
Jordan applies a progressive personal income tax system on individuals’ worldwide income. The rates for 2023 are as follows:

  • Up to JOD 5,000: 5%
  • JOD 5,001 to JOD 10,000: 10%
  • JOD 10,001 to JOD 20,000: 15%
  • JOD 20,001 to JOD 30,000: 20%
  • Above JOD 30,000: 25%

Deductions:
Individuals can benefit from deductions, including personal allowances and family allowances, which reduce the taxable base. For individuals, a basic personal deduction of JOD 12,000 applies, while a similar amount can be deducted for dependents.

Additional Mandatory Contributions

Social Security Contributions:
Both employers and employees are required to contribute to Jordan’s social security system, which provides benefits related to pensions, healthcare, and unemployment.

  • Employer Contribution: 14.25% of gross salary.
  • Employee Contribution: 7.5% of gross salary.

Withholding Taxes

  • Dividends: 10%
  • Interest: 5%
  • Royalties: 10%
    Jordan imposes withholding taxes on dividends, interest, and royalties. The rates may be reduced under Jordan’s double taxation agreements (DTAs).

Transfer Pricing Rules

Jordan introduced transfer pricing rules in 2019 in line with OECD guidelines. All related-party transactions must adhere to the arm’s-length principle. Companies are required to maintain transfer pricing documentation, including master files and local files, if the annual turnover exceeds JOD 1 million.

Special Tax Regimes

  • Development Zones: Businesses operating in development zones, such as the Aqaba Special Economic Zone, benefit from a reduced CIT rate of 5% and exemptions from customs duties and VAT on goods consumed within the zone.
  • Free Zones: Free zones in Jordan offer businesses tax incentives, including exemptions from CIT, customs duties, and VAT. Companies in free zones are primarily export-oriented and enjoy tax-free status for goods and services traded internationally.

Other Taxes

  • Customs Duties: Jordan imposes customs duties on imported goods, with rates typically ranging from 0% to 30%. Certain essential goods, such as food, medical supplies, and raw materials for industrial use, benefit from lower or zero rates.
  • Excise Taxes: Jordan imposes excise taxes on specific goods such as alcohol, tobacco, and fuel.
  • Real Estate Transfer Tax: Jordan imposes a 5% tax on the transfer of real estate properties, calculated on the market value of the property.

Double Taxation Agreements (DTAs)

Jordan has signed more than 35 double taxation agreements (DTAs) with countries such as the United States, United Kingdom, France, and Saudi Arabia. These agreements aim to reduce withholding taxes on cross-border income and prevent double taxation of income earned in Jordan and abroad.

Local Taxes

Municipalities in Jordan may impose minor local taxes or fees for specific services, but there are no significant local income taxes. All major taxes are administered centrally by the ISTD.

Compliance and Reporting

Annual Filing:
Corporate tax returns must be filed within four months of the end of the fiscal year. Personal income tax returns are generally due by April 30th of the following year. VAT returns are typically filed monthly or quarterly, depending on the size of the business.

Penalties for Late Filing:
Penalties for non-compliance or late filing include fines and interest on unpaid taxes. The ISTD imposes penalties for late filings and underreporting of income, with interest rates on unpaid taxes generally set at 1% per month.

Recent Developments

Investment Promotion and Tax Incentives:
Jordan continues to promote foreign direct investment (FDI) through its development zones and tax incentives under the Investment Law. These incentives focus on key sectors such as technology, renewable energy, and tourism. In recent years, Jordan has also worked to streamline business regulations to improve its investment climate.

Economic Reforms:
As part of efforts to reduce the public deficit and strengthen its economy, Jordan has implemented tax reforms, including introducing stricter tax enforcement measures and raising the VAT rate. The government continues to work on reforming its tax system, with the goal of increasing revenues and reducing reliance on external aid.

Transfer Pricing and BEPS:
Jordan has adopted international tax standards related to Base Erosion and Profit Shifting (BEPS) and transfer pricing. Companies with international operations are now required to comply with the country’s transfer pricing rules, aligning with global tax practices and OECD guidelines.

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