Jordan – New treaties, tax rates and investment incentives

Jordan – New treaties, tax rates, investment incentives

KPMG in Jordan provides updates on recent tax changes in the country, including new tax treaties, social security and General Sales Tax (GST) rates, and tax incentives for taxpayers operating in less developed zones.

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New tax treaties signed

In the last 7 months, new tax treaties between Jordan and the following jurisdictions took effect:

Jurisdiction Signing date Effective date
United Arab Emirates 5 April 2016 1 January 2017
Saudi Arabia 9 October 2016 1 January 2017

Social security rates increase

New social security subscription rates took effect on 1 January 2017:

  • For subscriptions in the private sector, the new rate will be 21.75 per cent of employee salaries, with 14.25 percent in addition to 1 percent for risky jobs, which will be covered by employers and 7.5 per cent by employees. 
  • For the public sector, the rate will be 19.5 percent of the salaries, with public institutions and ministries covering 13 percent of the subscription, and employees paying 6.5 percent. 
  • The optional subscribers’ rate will be 17.5 percent of the subscribers’ salaries.

GST rates changes

Jordan’s government has reallocated certain goods subject to GST2 from exempt and 0 percent to 4 percent such as meat and chickens, from exempt and 0 percent to 16 percent and from 4 percent to 16 percent such as gasoline heater, ambulance cars and medical equipment.

In addition to that the government has cancelled the reduced GST rate of 8 percent for related items and revised the rate to 16 percent such as internet services and steal. 

Those changes shall be effective from the date in which such Cabinet Resolution was published in the official gazette which is 14 February 2017.

There was an imposition of additional tariffs of 5 percent on the value of the goods imported by companies into Jordan, noting that the imposed amount should not be less than 100 JOD and not more than 10,000 JOD.

Furthermore, excise tax was imposed in the form of a special tax on carbonated drinks at a rate of 10 per cent, in addition to the items included below:

Description  Before After Changes
Mobile phone service
24 percent 26 percent
Mobile phone subscription service for each new line sold  0 percent Add 2,600 Fils per line 

Tax incentives for activity in less developed zones

Jordan’s government introduced corporate income tax reductions for 20163 for taxpayers operating in certain rural areas. These areas are divided into four zones with income tax reductions applying to business activities in each zone as follows:

  • Zone A – 100 percent tax reduction
  • Zone B – 80 percent tax reduction
  • Zone C – 60 percent tax reduction
  • Zone D – 40 percent tax reduction

To benefit from these tax incentives, the company must first apply for and receive approval from a technical committee appointed by the Investment Commission.

2 Cabinet Resolution No 5442

3 Regulation No. 44 for the year 2016.

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