Employer tax responsibilities
In Jordan, employers have several tax responsibilities. One of these is contributing 14.25% of an employee's gross salary toward the country's Social Security program. This program provides retirement, disability, and survivor benefits to eligible employees, as well as certain benefits for work-related injuries.
Social Security Contributions
- Contribution Rates: Employers contribute 14.25% of an employee's gross salary toward the Social Security program.
- Covered Benefits: The program provides retirement, disability, and survivor benefits, and covers certain benefits for work-related injuries.
Income Tax Withholding
Employers in Jordan are also responsible for withholding income tax from their employees' salaries. The tax rates are progressive, ranging from 5% to 30%, depending on the employee's income level. The withheld income tax must be reported and paid to the Jordanian tax authorities regularly, usually on a monthly basis.
- Progressive Rates: Tax rates range from 5% to 30%, depending on the employee's income level.
- Filing and Payment: Withheld income tax must be reported and paid regularly, usually monthly.
National Contribution Tax
If an individual's annual taxable income exceeds JOD 200,000, it is subject to an additional 1% National Contribution Tax. Employers of high-income earners must withhold this tax.
- High-Income Earners: An additional 1% National Contribution Tax applies to individuals whose annual taxable income exceeds JOD 200,000.
Other Potential Employer Taxes
Depending on the nature of your business or the industries you operate within, you might be liable for other taxes, such as property taxes and stamp duties.
- Property Taxes: Owners of property in Jordan are obligated to pay annual property taxes.
- Stamp Duties: Transactions involving certain documents may be subject to stamp duties.
Important Note
Tax laws and regulations are subject to change. To ensure compliance and accurate tax calculations, it's always recommended to consult with a Jordanian tax professional or refer to the latest regulations from the Jordanian Income and Sales Tax Department.
Employee tax deductions
In Jordan, income tax is the primary deduction for employees. The tax rates are progressive, meaning they increase as an individual's income rises. The tax rates range from 5% to 30%. Employees are also eligible for personal exemptions, which reduce their taxable income.
Social Security Contributions
Employees contribute 7.5% of their gross salary to Jordan's Social Security fund. This contribution covers benefits like retirement, disability, and survivor pensions.
Withholding Taxes for Specific Professions
Employees in fields such as medicine, law, engineering, accounting, and others may be subject to withholding tax on their income, typically at a flat rate. This is another form of employee tax deduction that is specific to certain professions.
VAT
Jordan imposes a Value-Added Tax (VAT), referred to as General Sales Tax (GST), on most goods and services. Understanding its application to your business is essential for compliance.
Standard VAT Rate
The standard VAT rate in Jordan is 16%. This rate generally applies to the supply of services within the country.
Zero-Rated Services
Certain services qualify as zero-rated, meaning the VAT rate is 0%. This usually includes exported services and international transportation.
Exempt Services
Some services are exempt from VAT altogether. These include:
- Financial services
- Medical and healthcare services
- Educational services
Import of Services
Services imported into Jordan from outside the country are subject to VAT under a reverse charge mechanism. This means the recipient of the imported service is responsible for calculating and paying the VAT to the Jordanian tax authorities.
VAT Registration
Businesses exceeding a specific revenue threshold (currently JOD 31,250 or roughly USD $42,000) in a 12-month period must register for VAT. Businesses below the threshold can still opt to register for VAT.
VAT Filing and Payment
Businesses registered for VAT must file regular VAT returns (usually bi-monthly) and pay any tax due to the Jordanian tax authorities.
Important Note
VAT regulations can be complex, and specific situations may require deeper analysis. It's advisable to consult with a Jordanian tax advisor to ensure accurate VAT calculation and compliance for your business.
Tax incentives
Jordan offers a range of tax incentives to attract businesses and foreign investment. These incentives vary depending on the type of business, its location, and its contribution to the Jordanian economy.
Free Zones and Development Zones
Companies operating in Free Zones and some Development Zones are entirely exempt from income and social service taxes for a specific period, typically 10 years. This significantly reduces the overall tax burden for businesses. Additionally, businesses in Free Zones can import goods and materials without paying customs duties, reducing operational costs.
Tax Breaks for Specific Sectors
The Jordanian government offers tax reductions for businesses in the industrial sector. The specific details and eligibility criteria are still under development.
Other Tax Benefits
Businesses in certain industries, especially those focused on exports, may benefit from a reduced income tax rate. Companies in Free Zones are often exempt from property taxes, licensing fees, and other levies.
These are just general examples, and the specific tax incentives available to your business will depend on its unique circ*mstances. For the latest information and to determine which incentives you qualify for, it's advisable to consult with a Jordanian tax advisor or directly contact the Jordan Investment Commission.
