Jordan – Highlights of the New Income Tax Law for 2015

Jordan – Highlights of the New Income Tax Law for 2015

KPMG in Jordan summarizes key changes in the country’s New Income Tax Law for 2014 that are of special note to foreign investors. These measures are in effect as of 1 January 2015.

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New corporate income tax rates

Sector

New tax rate on taxable income

Previous tax rate on taxable income

Insurance, telecommunications, stock brokers, finance companies, currency exchange companies and finance leasing companies

24%

25%

Banks

35%

30%

Industrial companies

14%

14%

Others

20%

14%

Payroll and personal income tax rates

Taxable income

2015 income tax rate*

First JOD 10,000

7%

Second JOD 10,000

14%

Above JOD 20,000

20%

*  For 2014 and earlier, these rate was 7% on the first JOD 12,000 and 14% on income over that amount.

Natural persons (individuals/employees) are also entitled to personal exemptions as follows:

  • Personal exemption of 12,000 Jordanian dinar (JOD) – provided they stay in Jordan for more than 183 days during the calendar year (continuous or interrupted)
  • Family exemption of JOD 12,000 – provided the family stays in Jordan for more than 183 days during the calendar year (continuous or interrupted.)
  • Monthly retirement benefit exemption of JOD 3,500 – down from JOD 4,000 under the old Law
  • Additional personal and family exemption of JOD 4,000 on medical expenses, university education expenses and interests paid on housing loans, housing rent, technical services, engineering services, legal services.

For the additional personal and family exemption, supporting documents and invoices must be available, and the exemption is granted case-by-case basis following the Income Tax Department’s review of the supporting documents.

Withholding tax changes

Withholding tax for non-resident services providers is increased to 10 percent (up from 7 percent.

The 5 percent withholding tax on real estate rent has been abolished.

As of 1 January 2015, certain service providers are subject to a 5-percent retention, including doctors, lawyers, engineers, Certified Public Accountants, experts, consultants, insurance agents, custom clearing agents, arbitrators, speculators, agents and commission brokers, financial brokers, freight forwarders, and other persons specified by the Minister of Finance in related regulations.

The withholding tax on cash and in-kind prizes and Jordanian Lottery winnings in excess of JOD 1000 per each prize is increased to 15 percent (from 10%).

In-kind and in-cash dividends are not subject to withholding tax when paid by a resident to a non-resident party.

Interim corporate income tax payments

Corporate taxpayers that had annual total gross income over JOD 1 million (previously JOD 500,000) in the preceding tax year are required to pay interim corporate tax payments at a rate of 40 percent of the corporate income tax liability calculated based on the reported interim financial information related to the interim period (previously 37.5 percent), or 40 percent (previously 37.5 percent) of the income tax amount declared to the tax authority in the preceding tax year. These payments are due within 30 days from the end of the first half and second half of the fiscal year.

Losses carried forward

Under the new law, approved losses can be carried forward for up to 5 years (the period was unlimited in the previous law).

Social security contributions

Monthly social security contributions increased to 20.25 percent (from 19.50 percent), as of 1 January 2015, implemented as follows:

  • The employees’ monthly contribution increased to 7 percent (from 6.75 percent).
  • The employer’s monthly contribution increased to 13.25 percent (from 12.75 percent).

Exemption from fines and penalties

An exemption has been granted from penalties and fines related income tax, sales tax, customs duty, stamp duty and property tax1. The exemption covers penalties related to the tax years 2014 and before, provided that taxes and duties claimed have been fully settled before 31 March 2015. Such exemption is reduced to 75 percent if the amounts are fully paid during the period from 1 April to 30 June. From 1 July 2015 to 30 September 2015, the penalties are phased out at 50 percent.

Exemption for renewable energy inputs

Jordan’s Renewable Energy Law2 is amended to include a full exemption from sales tax and customs duty on the renewable energy inputs, including spare parts and equipment. 

Footnotes

1Jordanian Cabinet Resolution No 7156, dated 21 December 2014.

2Amended law No 33 for the year 2014 of Renewable Energy Law, published in the official Gazette on 16 November 2014, edition No 5311.

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