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Tax System
The New Tax Law
Treaties for the Prevention of Double Taxation
Taxation can be considered as one of the most sensitive areas for the government and investors. It is important for the government because it is a primary source of domestic revenues and this fact should not be ignored by policy makers. As for investors, taxes can be an impediment to the success of businesses and can reduce profits. Thus, a successful tax system should strike a balance between its importance as a source of domestic revenues and its role in encouraging more investment.
The main Jordanian law dealing with taxes is the Income Tax Law, No. 57 of 1985. Several amendments have been issued since the law’s inception. In a major development, the Income Tax Law was amended in 2001 to help bridge the gap between men and women earners. Article 13 of the new Income Tax Law grants equal exemptions to women and men by raising the non-taxable income applicable to women to JD 1000, similar to that of men.
According to law, income arising or deemed to be arising in Jordan shall be subject to tax. In order to determine a taxpayer's taxable income, all expenses wholly and exclusively made or incurred in the production of income during the year shall be deducted. Company expenditures on training, marketing, and research and development are tax exempt. Moreover, profits from the export of goods and services are totally exempted, with the exception of exports of phosphate, potash, fertilizers and other exports that are governed by trade protocols.
Under the current law, taxpayers may determine their own fiscal year. Tax returns are to be filed with the Tax Department within four months after the end of the fiscal year. Taxpayers who pay their tax liability within the first month following the close of their fiscal year are entitled to a 6 percent discount on their taxes. Similarly, a 4 percent discount and 2 percent discount are available to taxpayers who pay their taxes during the second or third month, respectively, after the close of their fiscal year.
There are different types of taxes that affect people and businesses in Jordan. The table below briefly highlights the tax structure in Jordan.
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| Tax |
Description |
Rate |
| Income tax on corporations and businesses:
1-Mining, Industry, Hotels , Hospitals
2-Banks, Financial and Insurance Companies
3- All other Companies |
Imposed on income generated by companies operating in Jordan |
15%
35%
25% |
| Distribution Tax |
levied on the distribution of company profits |
10% |
| Annual taxable income on individuals
First JD 2000
Next JD 2000
Next JD 4000
Next JD 4000
Next JD 4000 |
Income paid to employees is taxable. 50 percent exemption from tax on private sector employees' annual salaries up to JD 12,000 and a 25 percent exemption on amounts above JD 12,000. Foreign employees working for non-Jordanian companies are exempt from paying all income tax. Personal and family exemptions. |
5%
10%
15%
25%
30% |
| Social Service Tax
| A social service tax is due from each individual as a percentage of the tax payer's income tax. |
10% |
| Universities Tax |
This tax is payable by shareholding and foreign companies as a percent of net income before taxes and distributions. |
1% |
| Sales Tax |
The taxpayers are the manufacturers, merchants or service providers whose sales amount to JD 100,000 per annum and importers of any goods or services. |
0 % up to 20 % of the value of goods
10% on services |
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The New Tax Law
Earlier this year, the Jordanian Government suggested some amendments in relation to the current Income Tax Law. Previously, this change in the income tax law was rejected after a large public outcry. As far as investment is concerned, the proposed Tax Law will have negative effects on investors and on the role of the JIB as an institution that facilitates the procedural requirements for investment and attracts foreign investors. This remains a vital concern; a national consensus should be reached in order to get the best possible piece of legislation.
Treaties For The Prevention Of Double Taxation
Jordan has signed agreements for the prevention of double Taxation with Austria, Bahrain, Belgium, Canada, Cyprus, Denmark, Egypt, France, Iraq, Kuwait, Libya, Malaysia, Oman, Pakistan, Qatar, Romania, Saudi Arabia, Spain, Syria, Tunisia, Turkey, United Arab Emirates, United Kingdom, the United States and Yemen.
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