1. Corporate Income Tax (CIT)

Jordan imposes corporate income tax on businesses operating within its borders.

Key Points:

• Tax Rate: Jordan applies a standard corporate income tax rate of 20% on the net income of most companies.
• Applicable Entities: The tax applies to all businesses operating in Jordan, including foreign entities with a permanent establishment.
• Exemptions: Certain industries, like renewable energy or information technology, may benefit from tax exemptions or incentives.

Compliance Notes: Corporate tax returns must be filed annually. The deadline for filing is typically within four months after the end of the fiscal year.

2. Value Added Tax (VAT)

Jordan applies a Value Added Tax (VAT) on goods and services.

Key Points:

• Standard VAT Rate: The standard VAT rate in Jordan is 16%.
• Exemptions: Certain essential goods and services, such as healthcare, education, and basic food items, are exempt from VAT.

Compliance: Businesses are required to charge VAT on their taxable goods and services, and file VAT returns on a quarterly or annual basis depending on their turnover.

3. Withholding Tax

Jordan imposes withholding tax on certain payments made to non-resident entities.

Key Points:

• Dividends: Withholding tax of 5% applies to dividend payments made to foreign shareholders.
• Interest and Royalties: Withholding tax of 10% applies to interest and royalty payments made to foreign entities.

Compliance: Businesses must ensure that they withhold the appropriate tax from payments to foreign entities and file the relevant tax returns.

4. Personal Income Tax (PIT)

Jordan applies personal income tax to the earnings of individuals.

Key Points:

• Tax Rates: Personal income tax in Jordan is progressive, ranging from 7% to 20% depending on income level.
• Deductions: Individuals can claim deductions for certain expenses, such as medical expenses and education.

Compliance: Employees are required to file annual tax returns. Employers also withhold tax on behalf of their employees.

5. Social Security Contributions

Social security contributions are mandatory for all employees in Jordan, both local and foreign.

Key Points:

• Employer Contribution: The employer contributes 14.5% of the employee’s monthly salary to the Jordanian social security system.
• Employee Contribution: Employees contribute 7.5% of their monthly salary to the system.

Compliance: Employers are responsible for deducting and remitting both the employee and employer portions of the social security contributions on a monthly basis.

6. Tax Incentives and Exemptions

Jordan offers several tax incentives to encourage investment in specific sectors.

Key Incentives:

• Investment Incentives: Businesses investing in priority sectors such as renewable energy, technology, or manufacturing may qualify for tax exemptions or reductions.
• Free Zones: Jordan offers special economic zones where businesses can benefit from tax exemptions for a period of time, depending on the type of investment.

Compliance Notes: Companies must meet certain criteria to qualify for these incentives, which usually involve significant capital investment or job creation.

7. Filing and Compliance Deadlines

It is important to adhere to filing deadlines to avoid penalties.

Penalties: Late submissions or payments may result in penalties or interest charges.

Key Takeaways:

• Corporate Income Tax: Jordan applies a 20% corporate income tax rate for most businesses.
• VAT: Jordan applies a 16% VAT rate on most goods and services.
• Withholding Tax: Withholding tax applies to dividends, interest, and royalties paid to foreign entities.
• Personal Income Tax: Jordan’s personal income tax is progressive, with rates between 7% and 20%.
• Social Security Contributions: Both employers and employees must contribute to Jordan’s social security system.
• Tax Incentives: Businesses in priority sectors may qualify for tax exemptions or reductions.