Tax Regime in Jordan
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The Income Tax Act No. 34 of 2014 and the General Value Added Tax Act No. 29 of 2009 constitute the legal framework of the Kingdom of Jordan and regulate taxes on profits and income of individuals and legal entities (income and corporate income tax) since January 2015. These laws are implemented by the ISTD (Income and Sales Tax Department) belonging to the Ministry of Finance.
Double Taxation Treatiess
No double taxation agreement (DTA) has yet been concluded between Germany and Jordan. For tax subjects with unlimited tax liability in Germany, the avoidance of double taxation can thus in principle only result from the unilateral rules for avoiding double taxation, so that taxes paid in Jordan can be offset against the German tax burden. In special cases, the Foreign Employment Decree may be applicable to employees.
Taxation
In contrast to other countries, Jordan does not tax income earned worldwide, but, pursuant to Art. 3 Jordan Income Tax Law, all income of residents and non-residents from Jordanian sources. Any foreign company with its registered office in Jordan is considered resident and is taxable on the income generated in Jordan. Taxable income is defined as income derived from Jordan or from Jordanian sources through income from dividends. Jordan's standard corporate income tax rate is 20%, with rates ranging from 14% to 35% for various sectors and branches of business. Losses can be carried forward for up to five years but require the approval of the tax authorities.
Jordan has entered into income tax treaties with Algeria, Azerbaijan, Bahrain, Bulgaria, Canada, Croatia, the Czech Republic, Egypt, France, India, Indonesia, Iran, Iraq, Italy, Saudi Arabia, South Korea, Kuwait, Lebanon, Libya, Malaysia, Malta, Morocco, the Netherlands, Pakistan, Palestine, Poland, Qatar, Romania, Sudan, Syria, Tunisia, Turkey, Ukraine, United Arab Emirates, the United Kingdom, Uzbekistan, and Yemen.
Jordan has transportation agreements with many countries and is negotiating treaties with more countries.
The most important taxes and exemptions by type of business are listed below:
Corporate income tax rates
The corporate income tax rates in Jordan are applied based on the industry/business activities from which the taxpayer generates income. According to the Income Tax Law No. 34 of 2014 (as amended by Law No. 38 of 2018), which was updated in 2019, the corporate income tax rates (pursuant to the revised Art. 11 lit.b) are as follows
- 35 per cent for banks.
- 24 per cent for telecommunications, insurance and reinsurance companies, financial intermediation companies (including stock exchange and finance leasing companies), companies that generate and distribute electricity and companies that carry out mining activities.
- 20 percent for other companies.
Resident companies are not subject to corporate tax rates in Jordan on their worldwide income. Unless such income is derived from sources derived from and related to Jordanian deposits and funds. In this case, this income would be taxed at a rate of 10%. For foreign branches of companies resident in Jordan, the total net income of the branch is also taxed at a fixed rate of 10%. Foreign companies are taxed on a withholding tax basis.
New tax - National Contribution
From January 2019, Jordanian lawmakers introduced a new tax, called the National Contribution Tax. The tax base is the taxable income. This tax has different rates depending on the sector (Art. 11 lit. f) Income Tax Act):
Industry | Rate (%) |
Banks and companies that undertake generating and distributing of electricity activities | 3 |
Companies that undertake mining raw materials activities | 7 |
Financial intermediation and brokerage firms, currency exchange companies, juristic persons who undertake financial leasing activities | 4 |
Main telecommunications companies; insurance and reinsurance companies | 2 |
Other companies not listed above | 1 |
Source: GTAI, PwC Jordan – Worldwide Tax
For industrial companies, the following applies, staggered until 2023
Corporate income tax rates (Art. 11 lit. c) No. 1 Income tax):
2019 (25 %) / 2020 (20%) / 2021 (15%) / 2022 (10%) / 2023 (5%).
For companies that manufacture textiles and pharmaceutical products, the following graduated corporate income tax rates apply until 2023 (Art. 11 lit. c) No. 1 Income Tax Act):
2019 (50 %) / 2020 (30%) / 2021 (20%) / 2022 (10%) / 2023 (5%).
For all other companies (legal entities), the standard corporate income tax rate of 20% applies (Art. 11 lit b) No. 1 Income Tax Act.)
Further information can be found on the official website of the ISTD (Income and Sales Tax Department) at http://www.istd.gov.jo/English/Legislations/Laws.aspx
Value added tax
The following transactions are subject to a general sales tax of 16%, which is similar to value added tax (VAT):
- Sale of goods or services or both.
- Import of services or goods outside Jordan or from the free zone areas and markets within Jordan.
The remaining sales tax rates are:
- 8 percent on private Internet (home use), construction of iron, reinforcing steel and certain foodstuffs.
- 4 percent on certain agricultural products, french fries, meat, vegetables and live animals.
- A zero rate is applied to export sales of goods and services outside Jordan, to free zones and markets, to the Aqaba Special Economic Zone (ASEZ) and to developing areas. Goods exempt from VAT are bread, water in less than five litres, tea, sugar, gold, money and electricity.
The following are some of the services that are exempt from VAT:
- Air transport.
- Education.
- Disposal of sewage and waste.
- Public health and similar activities.
- Activities of religious organizations.
- Activities of social organizations.
Taxation of individuals
Both residents and non-residents are taxed on income derived from employment in Jordan. According to the Income Tax Law, income tax rates are levied at progressive rates ranging from 5% to 30%. Several deductions and allowances are available. There is no personal taxation on capital gains, capital duty, capital acquisition, stamp duty, inheritance, estate, property and net assets.
Personal Income tax
The Jordanian legislator has also changed the taxation of natural persons.
From 2019, the following income tax rates will apply (Art. 11 lit a) Income Tax Act):
Taxable income (JOD*) | PIT rate (%) |
The first 5,000 | 5 |
The second 5,000 | 10 |
The third 5,000 | 15 |
The forth 5,000 | 20 |
Over 20,000 and up to 1,000,000 | 25 |
The remaining balance | 30
|
* Jordanian dinar
Local Income Tax
Any amount exceeding JOD 200,000 of the annual taxable income for individuals will be subject to 1% as national contribution tax.
Special tax rates are applied to certain items:
Capital Tax | None |
Consumption taxes | The consumption tax is a type of special turnover tax levied on certain goods and services. Including cement, tobacco products, wine, spirits, cars, beer, fuel and lubricants |
Property tax | Property tax in Jordan is paid annually. The tax rate is set by the municipality depending on the location and size of the land and, in the case of buildings, on the annual rental value. |
Transfer property taxes | The transfer of property is subject to a tax rate of 9% (registration fee of 5% and sale of property tax of 4%). |
Income tax | According to the Income Tax Act, income tax rates are levied at progressive rates of 5% to 30%. |
Stamp duty | Usually a stamp duty of 0.3% or 0.6% depending on the value of the signed contracts is levied. |
Social security contributions | Social security taxes are levied on the employer and the employee at 14.25% and 7.5% respectively on monthly salaries and certain allowances. The employer should report and withhold these contributions on a monthly basis. The maximum basis for calculating social insurance contributions is 3,084 IOD per month. |