Jordan Individual Tax Guide

Worldwide Personal Tax and Immigration Guide 2021–22

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Jordan ey.com/globaltaxguides

Amman EY Mail address: P.O. Box 1140 Amman 11118 Jordan

GMT +2 Street address: 300, King Abdullah Street Amman Jordan

Executive and immigration contacts Ali Samara

Jacob Rabie

Abdullah Al-Husban

Mohammad Allouzi

+962 (6) 580-0777 Fax: +962 (6) 553-8300 Email: ali.samara@iq.ey.com +962 (6) 580-0777 Fax: +962 (6) 553-8300 Email: jacob.rabie@jo.ey.com +962 (6) 580-0777 Fax: +962 (6) 553-8300 Email: abdullah.al-husban@jo.ey.com +962 (6) 580-0777 Fax: +962 (6) 553-8300 Email: mohammad.allouzi@jo.ey.com

A. Income tax Who is liable. Jordanian nationals and foreign individuals working in Jordan are subject to tax in Jordan on their income earned in, or derived from, Jordan, regardless of their residency status.

An individual is considered a resident of Jordan for tax purposes if he or she resides in Jordan for a period of at least 183 consecutive or non-consecutive days per calendar year. Residents may claim personal allowances.

Income subject to tax

Ordinary income. Income tax is assessed on all income earned by residents and nonresidents of Jordan from taxable activities performed in Jordan, including employment income and rental income. The income tax is levied at the graduated rates set forth in Rates. In addition, a national contribution tax of 1% is levied on the taxable income of natural persons exceeding JOD200,000.

Interest income. For natural persons, interest income is subject to withholding tax at a rate of 5%. Banks are required to withhold at source the tax from the interest.

Other income. Net income realized by a resident of Jordan from foreign sources is taxable in Jordan at a rate of 10% if such income is generated from Jordanian monies or deposits.

Capital gains. Capital gains resulting from the sale of shares in Jordan are taxable at different rates.

For the sale of shares on the Amman Stock Exchange by natural persons, general partnerships, limited partnerships and nonresidents in Jordan, the buyer and seller are subject to income tax at a rate of 0.08% of the shares’ sales price for each sales transaction. For other direct sales of shares by natural persons in

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Jordan, capital gains tax is calculated based on either of the following: • Graduated tax rates ranging from 0.5% to 5% applied to the gross sale consideration • The domestic personal income tax rates, set forth in Rates, applied to the capital gains For other direct sales of shares transactions by nonresident natural persons in Jordan, the Jordanian Income and Sales Tax Department (ISTD) may apply a withholding tax rate of 10% to the capital gains arising to the nonresident natural person from the transaction.

A tax rate of 10% applies to the capital gains from the sale of shares outside Jordan, provided that such gain is generated from Jordanian monies or deposits.

A national contribution tax of 1% may also be applicable if the capital gains exceed JOD200,000.

For residents, the capital gains tax should be due as part of the normal annual tax return filing process for the period in which the transaction occurs for residents.

For nonresidents, prior to the closing date of the transaction, a tax clearance certificate must be obtained from the ISTD, and the capital gains tax must be paid.

Deductions

Personal and family allowances. The following annual allowances are granted from 2020 onward.

JOD

Personal allowance 9,000 Dependents allowance 9,000 Additional allowances 1,000 for for payments of medical individuals, expenses, educational 1,000 for spouses, expenses, rent, home and 1,000 for loan interest or murabaha each child up to (interest paid by banks 3,000 applying Islamic banking principles), technical services, engineering services and legal services Business deductions. In general, business expenses incurred in generating income are deductible. However, certain limitations apply.

Rates. Ordinary income earned by individuals in Jordan is sub-

ject to tax at the following graduated tax rates.

Annual taxable income Exceeding Not exceeding JOD JOD

0 5,000 10,000 15,000 20,000 1,000,000

5,000 10,000 15,000 20,000 1,000,000 —

Rate %

5 10 15 20 30 30

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For payments made by resident taxpayers to nonresidents for taxable services in Jordan, taxpayers must withhold 10% of gross payments. In addition, for payments made to corporate nonresidents, taxpayers must withhold a national contribution tax at the rate applicable to the sector of the service provider ranging between 1% and 7%. For payments made to individual nonresidents that are in excess of JOD200,000, taxpayers must withhold a 1% national contribution tax. The withholding tax and national contribution tax must be remitted to the tax authorities within 30 days after the due date or payment date, whichever is earlier, and are final taxes.

For payments made by resident taxpayers to certain resident individual and corporate service providers, such as engineers, auditors or lawyers, taxpayers must withhold 5% of gross payments and remit this withholding tax to the tax authorities within 30 days after the due date or payment date, whichever is earlier.

Relief for losses. Taxpayers may carry forward losses up to five years to offset profits if the losses are supported by proper accounting records, are acknowledged by the tax assessor and relate to taxable sources of income.

B. Other taxes Jordan does not levy net worth tax, inheritance tax or gift tax.

C. Social security Social security contributions are levied at a rate of 21.75% on gross salary except overtime. The employer’s share is 14.25%, and the employee’s share is 7.5%. The social security system provides retirement and death benefits as well as certain benefits for work-related injuries.

D. Tax filing and payment procedures The tax year is the calendar year. Tax returns must be filed in Arabic using a prescribed form within four months after the end of each fiscal year. The total amount of tax due must be paid at the time of filing.

Married individuals are taxed jointly or separately, at the taxpayers’ election, on all types of taxable income.

E. Tax relief Under the law, foreign income tax is considered a deductible expense for income tax purposes. However, if a double tax treaty exists between the foreign country and Jordan, the provisions of the treaty may apply.

F. Temporary visas All visitors must obtain entry visas to visit Jordan.

The following temporary visas are available to foreign nationals who want to enter Jordan: • Transit visa, which is valid for a maximum of 48 hours.

• Business visit visa, which is granted to foreign nationals who intend to attend meetings and training courses in Jordan. The visa is valid for one to three months and may be renewed once.

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• Student visa, which is valid for the period that the foreign national is attending an educational institution in Jordan.

• Medical visa, which is valid for the time required to complete the medical treatment.

• Tourist visa, which is valid for three months.

Nationals of Australia, Canada, the European Union, the United Kingdom and the United States may obtain a business visit visa and a tourist visa on entry. Other nationalities are required to obtain the approval of the Ministry of Interior before entry.

In general, these visas may be applied for either in the foreign national’s home country or in Jordan. Temporary visas may be renewed once for three additional months.

G. Work and residency permits Individuals of all nationalities must apply for work and residency permits if they want to work in Jordan, with a priority given to Arab nationals. Work and residency permits are issued with the approval of the Ministry of Labor and the Ministry of Interior.

An applicant may not begin working in Jordan before obtaining work and residency permits. Work and residency permits may not be transferred from one employer to another; therefore, if an employee changes his or her employer, the previous work and residency permits must be canceled, and the employee must apply for new work and residency permits.

The work and residency permits are valid for one year and may be renewed on an annual basis.

As a prerequisite to obtain work and residency permits, the Ministry of Labor requires the employer to submit a bank letter of guarantee to the order of the Ministry of Labor for each expatriate employee seeking work and residency permits in Jordan.

Under the Jordanian Labor Law, certain occupations are exclusively reserved to Jordanians and may not be filled by non-Jordanians, such as those in the fields of medicine, engineering, accounting and administration, as well as clerical work, such as data entry and secretarial work, warehousing, hairdressing, teaching, and mechanical and car repair type of work.

Foreign investors may engage in almost any type of economic activity. In general, Jordan does not impose limitations on foreign investments. Except for certain sectors, including construction and trade, in which foreign ownership may not exceed 50%, nonJordanians may have full ownership in any economic project in Jordan. Full ownership by a foreign investor is permitted in the following sectors: • Agriculture • Hotels • Health care • Mining • Industrial • Telecommunications

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H. Family members The spouse of a foreign national who has a work permit in Jordan does not automatically receive the same type of work permit as the spouse holding the work permit. He or she must file independently of the primary work-permit holder if he or she also wants to work in Jordan.