If the submission of imported services by GST is not made within 30 days of the invoice date or payment date, whichever comes first, penalties ranging from a minimum of JD 100 (USD 141) to a maximum of JD 500 (USD 703). Any delay in payment will result in penalties equal to 0.4% of the tax due per late week, based on a difference between the tax return submitted and the tax notice, up to a maximum of 200% of the amount due. A company may be able to reduce this tax by importing such a service from its head office to its establishment in Jordan whenever possible, as the head office fee is exempt from the GST levied on imported services and therefore only levies a 7% withholding tax on payments. There is no definition of permanent establishment in the country; However, for the purposes of CIT transport, the legislator has clearly distinguished between a resident legal person and a non-resident legal person, the latter not being responsible for the CIT in the Kingdom. However, non-residents are subject to a withholding tax of 10%. Article 2 of the Income Tax Law stipulates that a company legally registered in Jordan is considered a legal entity resident in Jordan and must therefore comply with the applicable tax laws and regulations of the country. In the absence of an applicable tax treaty, the following special withholding tax applies to foreign residents. Interest paid by banks to depositors, with the exception of interest on local interbank deposits, is subject to a withholding tax of 5%. The withholding tax is considered as an advance payment for resident companies and as a final tax for resident and non-resident natural persons and non-resident companies.
On 31 January 2019, the Jordanian Revenue and VAT Authority (ISTD) issued instructions to amend the new Income Tax Law No. 38 of 2018, which will apply from 1 January 2019. Two of the important clarifications contained in the instructions concern the calculation of withholding taxes on monthly remuneration and the application of the 5% withholding tax on payments to Jordanian professional service providers. Companies resident in Jordan are not subject to corporate income tax on their worldwide income. Unless such income comes from Jordanian deposits and funds and is linked to sources derived from these 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. The tax return requires information relating to the income, expenses, exemptions and tax obligations of the natural or legal person, including details of the goods and services provided and payslips for the year. The full amount of tax owing must be paid at the time of filing to avoid penalties. In addition, the tax administration has the right to carry out a tax audit for up to four previous years and to charge the company any additional tax it deems due that has not been declared or paid before. Choose from the options below to purchase print or digital copies of our reports.
You can also purchase a website subscription that gives you unlimited access to all our reports online for 12 months. Imported services are subject to GST at 16%. This tax is not recoverable and is borne as a cost by the non-resident party incurring the tax. In addition, as explained above, these services are subject to WHT at a rate of 7%. In other words, imported services are subject to an overall tax rate of 23%. Accelerated depreciation up to 300% of the normal depreciation rate is permitted regardless of the industry, provided that the chosen accelerated depreciation rate is maintained for the remainder of the life of the asset. This provision shall not apply to buildings normally subject to a fixed depreciation rate of 2 % for non-industrial buildings, a depreciation rate of 10 % for temporary buildings and 4 % for buildings equipped with industrial plant and machinery. The following amounts are available as a personal exemption from personal income before taxable income is generated: Alternatively, the taxpayer may choose the accelerated depreciation method, where the double straight-line rate is applied (except for buildings).
However, machinery, equipment and other fixed assets imported temporarily are not eligible for accelerated depreciation. Used assets are depreciated at the statutory rates calculated on the purchase price. The sale of shares in an unlisted company results in an increase in income tax of 0.5 to 5% depending on the value of the sale rather than the realised capital gains, although a taxpayer with audited financial statements has the possibility to evade this progressive income tax and be taxed on the basis of the actual capital gain resulting from the sale, measured by the initial carrying amount of proven assets. by the audited annual accounts for the financial years concerned. The types of companies allowed under Jordanian law are general partnership, limited partnership, limited partnership, limited partnership, limited liability company, private holding company and public joint-stock company. Individuals, whether resident in Jordan or not, are taxed on the basis of income earned in the Kingdom from all taxable activities, including income from work, business (as sole proprietors or associates), rental income and attendance fees. At present, Jordan does not tax income from foreign sources. As a result of the OECD`s BEPS initiatives and the forthcoming implementation of the resulting legislation, transfer pricing is likely to be higher in the future. All business activities in Jordan can only be carried out after registration with the Department of the Comptroller of Affairs of the Ministry of Industry and Trade. Registration may be done on an individual basis; as public limited companies, which may be public or private; or in partnership.
Shares of public companies are publicly traded, while a private company is any company other than a public company. The new Income Tax Act established new personal tax rates and exemptions as annual amounts. To help employers determine the amount of tax to be deducted from monthly earnings, the instructions reformulate the annual thresholds to their monthly equivalent. Tax authorities do not use specific formulas to determine the income of local foreign-invested subsidiaries.
