JordanTax Guide

2012

PKF Worldwide Tax Guide 2012I

foreword

A country’s tax regime is always a key factor for any business considering moving into new markets. What is the corporate tax rate? Are there any incentives for overseas businesses? Are there double tax treaties in place? How will foreign source income be taxed?

Since 1994, the PKF network of independent member firms, administered by PKF International Limited, has produced the PKF Worldwide Tax Guide (WWTG) to provide international businesses with the answers to these key tax questions. This handy reference guide provides clients and professional practitioners with comprehensive tax and business information for 100 countries throughout the world.

As you will appreciate, the production of the WWTG is a huge team effort and I would like to thank all tax experts within PFK member firms who gave up their time to contribute the vital information on their country’s taxes that forms the heart of this publication. I would also like thank Richard Jones, PKF (UK) LLP, Kevin Reilly, PKF Witt Mares, and Kaarji Vaughan, PKF Melbourne for co-ordinating and checking the entries from countries within their regions.

The WWTG continues to expand each year reflecting both the growth of the PKF network and the strength of the tax capability offered by member firms throughout the world.

I hope that the combination of the WWTG and assistance from your local PKF member firm will provide you with the advice you need to make the right decisions for your international business.

Jon HillsPKF (UK) LLPChairman, PKF International Tax Committee jon.hills@uk.pkf.com

PKF Worldwide Tax Guide 2012 II

important disclaimer

This publication should not be regarded as offering a complete explanation of the taxation matters that are contained within this publication.

This publication has been sold or distributed on the express terms and understanding that the publishers and the authors are not responsible for the results of any actions which are undertaken on the basis of the information which is contained within this publication, nor for any error in, or omission from, this publication.

The publishers and the authors expressly disclaim all and any liability and responsibility to any person, entity or corporation who acts or fails to act as a consequence of any reliance upon the whole or any part of the contents of this publication.

Accordingly no person, entity or corporation should act or rely upon any matter or information as contained or implied within this publication without first obtaining advice from an appropriately qualified professional person or firm of advisors, and ensuring that such advice specifically relates to their particular circumstances.

PKF International is a network of legally independent member firms administered by PKF International Limited (PKFI). Neither PKFI nor the member firms of the network generally accept any responsibility or liability for the actions or inactions on the part of any individual member firm or firms.

PKF Worldwide Tax Guide 2012III

preface

The PKF Worldwide Tax Guide 2012 (WWTG) is an annual publication that provides an overview of the taxation and business regulation regimes of 100 of the world’s most significant trading countries. In compiling this publication, member firms of the PKF network have based their summaries on information current as of 30 September 2011, while also noting imminent changes where necessary.

On a country-by-country basis, each summary addresses the major taxes applicable to business; how taxable income is determined; sundry other related taxation and business issues; and the country’s personal tax regime. The final section of each country summary sets out the Double Tax Treaty and Non-Treaty rates of tax withholding relating to the payment of dividends, interest, royalties and other related payments.

While the WWTG should not to be regarded as offering a complete explanation of the taxation issues in each country, we hope readers will use the publication as their first point of reference and then use the services of their local PKF member firm to provide specific information and advice.

In addition to the printed version of the WWTG, individual country taxation guides are available in PDF format which can be downloaded from the PKF website at www.pkf.com

PKF INTERNATIONAL LIMITEDAPRIL 2012

©PKF INTERNATIONAL LIMITEDALL RIGHTS RESERVEDUSE APPROVED WITH ATTRIBUTION

PKF Worldwide Tax Guide 2012 IV

about pKf international limited

PKF International Limited (PKFI) administers the PKF network of legally independent member firms. There are around 300 member firms and correspondents in 440 locations in around 125 countries providing accounting and business advisory services. PKFI member firms employ around 2,200 partners and more than 21,400 staff.

PKFI is the 10th largest global accountancy network and its member firms have $2.6 billion aggregate fee income (year end June 2011). The network is a member of the Forum of Firms, an organisation dedicated to consistent and high quality standards of financial reporting and auditing practices worldwide.

Services provided by member firms include:

Assurance & AdvisoryCorporate FinanceFinancial PlanningForensic AccountingHotel ConsultancyInsolvency – Corporate & PersonalIT ConsultancyManagement ConsultancyTaxation

PKF member firms are organised into five geographical regions covering Africa; Latin America; Asia Pacific; Europe, the Middle East & India (EMEI); and North America & the Caribbean. Each region elects representatives to the board of PKF International Limited which administers the network. While the member firms remain separate and independent, international tax, corporate finance, professional standards, audit, hotel consultancy, insolvency and business development committees work together to improve quality standards, develop initiatives and share knowledge and best practice cross the network.

Please visit www.pkf.com for more information.

PKF Worldwide Tax Guide 2012V

structure of country descriptions

a. taXes payable

FEDERAL TAXES AND LEVIES COMPANY TAX CAPITAL GAINS TAX BRANCH PROFITS TAX SALES TAX/VALUE ADDED TAX FRINGE BENEFITS TAX LOCAL TAXES OTHER TAXES

b. determination of taXable income

CAPITAL ALLOWANCES DEPRECIATION STOCK/INVENTORY CAPITAL GAINS AND LOSSES DIVIDENDS INTEREST DEDUCTIONS LOSSES FOREIGN SOURCED INCOME INCENTIVES

c. foreiGn taX relief

d. corporate Groups

e. related party transactions

f. witHHoldinG taX

G. eXcHanGe control

H. personal taX

i. treaty and non-treaty witHHoldinG taX rates

PKF Worldwide Tax Guide 2012 VI

AAlgeria . . . . . . . . . . . . . . . . . . . .1 pmAngola . . . . . . . . . . . . . . . . . . . .1 pmArgentina . . . . . . . . . . . . . . . . . .9 amAustralia - Melbourne . . . . . . . . . . . . .10 pm Sydney . . . . . . . . . . . . . . .10 pm Adelaide . . . . . . . . . . . . 9.30 pm Perth . . . . . . . . . . . . . . . . . .8 pmAustria . . . . . . . . . . . . . . . . . . . .1 pm

BBahamas . . . . . . . . . . . . . . . . . . .7 amBahrain . . . . . . . . . . . . . . . . . . . .3 pmBelgium . . . . . . . . . . . . . . . . . . . .1 pmBelize . . . . . . . . . . . . . . . . . . . . .6 amBermuda . . . . . . . . . . . . . . . . . . .8 amBrazil. . . . . . . . . . . . . . . . . . . . . .7 amBritish Virgin Islands . . . . . . . . . . .8 am

CCanada - Toronto . . . . . . . . . . . . . . . .7 am Winnipeg . . . . . . . . . . . . . . .6 am Calgary . . . . . . . . . . . . . . . .5 am Vancouver . . . . . . . . . . . . . .4 amCayman Islands . . . . . . . . . . . . . .7 amChile . . . . . . . . . . . . . . . . . . . . . .8 amChina - Beijing . . . . . . . . . . . . . .10 pmColombia . . . . . . . . . . . . . . . . . . .7 amCroatia . . . . . . . . . . . . . . . . . . . .1 pmCyprus . . . . . . . . . . . . . . . . . . . .2 pmCzech Republic . . . . . . . . . . . . . .1 pm

DDenmark . . . . . . . . . . . . . . . . . . .1 pmDominican Republic . . . . . . . . . . .7 am

EEcuador . . . . . . . . . . . . . . . . . . . .7 amEgypt . . . . . . . . . . . . . . . . . . . . .2 pmEl Salvador . . . . . . . . . . . . . . . . .6 amEstonia . . . . . . . . . . . . . . . . . . . .2 pm

FFiji . . . . . . . . . . . . . . . . .12 midnightFinland . . . . . . . . . . . . . . . . . . . .2 pmFrance. . . . . . . . . . . . . . . . . . . . .1 pm

GGambia (The) . . . . . . . . . . . . . 12 noonGeorgia . . . . . . . . . . . . . . . . . . . .3 pmGermany . . . . . . . . . . . . . . . . . . .1 pmGhana . . . . . . . . . . . . . . . . . . 12 noonGreece . . . . . . . . . . . . . . . . . . . .2 pmGrenada . . . . . . . . . . . . . . . . . . .8 amGuatemala . . . . . . . . . . . . . . . . . .6 am

Guernsey . . . . . . . . . . . . . . . . 12 noonGuyana . . . . . . . . . . . . . . . . . . . .7 am

HHong Kong . . . . . . . . . . . . . . . . .8 pmHungary . . . . . . . . . . . . . . . . . . .1 pm

IIndia . . . . . . . . . . . . . . . . . . . 5.30 pmIndonesia. . . . . . . . . . . . . . . . . . .7 pmIreland . . . . . . . . . . . . . . . . . . 12 noonIsle of Man . . . . . . . . . . . . . . 12 noonIsrael . . . . . . . . . . . . . . . . . . . . . .2 pmItaly . . . . . . . . . . . . . . . . . . . . . .1 pm

JJamaica . . . . . . . . . . . . . . . . . . .7 amJapan . . . . . . . . . . . . . . . . . . . . .9 pmJersey . . . . . . . . . . . . . . . . . . 12 noonJordan . . . . . . . . . . . . . . . . . . . .2 pm

KKazakhstan . . . . . . . . . . . . . . . . .5 pmKenya . . . . . . . . . . . . . . . . . . . . .3 pmKorea . . . . . . . . . . . . . . . . . . . . .9 pmKuwait . . . . . . . . . . . . . . . . . . . . .3 pm

LLatvia . . . . . . . . . . . . . . . . . . . . .2 pmLebanon . . . . . . . . . . . . . . . . . . .2 pmLiberia . . . . . . . . . . . . . . . . . . 12 noonLuxembourg . . . . . . . . . . . . . . . .1 pm

MMalaysia . . . . . . . . . . . . . . . . . . .8 pmMalta . . . . . . . . . . . . . . . . . . . . .1 pmMauritius . . . . . . . . . . . . . . . . . . .4 pmMexico . . . . . . . . . . . . . . . . . . . .6 amMorocco . . . . . . . . . . . . . . . . 12 noon

NNamibia. . . . . . . . . . . . . . . . . . . .2 pmNetherlands (The) . . . . . . . . . . . . .1 pmNew Zealand . . . . . . . . . . .12 midnightNigeria . . . . . . . . . . . . . . . . . . . .1 pmNorway . . . . . . . . . . . . . . . . . . . .1 pm

OOman . . . . . . . . . . . . . . . . . . . . .4 pm

PPanama. . . . . . . . . . . . . . . . . . . .7 amPapua New Guinea. . . . . . . . . . .10 pmPeru . . . . . . . . . . . . . . . . . . . . . .7 amPhilippines . . . . . . . . . . . . . . . . . .8 pmPoland. . . . . . . . . . . . . . . . . . . . .1 pmPortugal . . . . . . . . . . . . . . . . . . .1 pmPuerto Rico . . . . . . . . . . . . . . . . .8 am

international time Zones

AT 12 NOON, GREENwICH MEAN TIME, THE sTANDARD TIME ELsEwHERE Is:

PKF Worldwide Tax Guide 2012VII

QQatar. . . . . . . . . . . . . . . . . . . . . .8 am

RRomania . . . . . . . . . . . . . . . . . . .2 pmRussia - Moscow . . . . . . . . . . . . . . .3 pm St Petersburg . . . . . . . . . . . .3 pm

sSierra Leone . . . . . . . . . . . . . 12 noonSingapore . . . . . . . . . . . . . . . . . .7 pmSlovak Republic . . . . . . . . . . . . . .1 pmSlovenia . . . . . . . . . . . . . . . . . . .1 pmSouth Africa . . . . . . . . . . . . . . . . .2 pmSpain . . . . . . . . . . . . . . . . . . . . .1 pmSweden . . . . . . . . . . . . . . . . . . . .1 pmSwitzerland . . . . . . . . . . . . . . . . .1 pm

TTaiwan . . . . . . . . . . . . . . . . . . . .8 pmThailand . . . . . . . . . . . . . . . . . . .8 pmTunisia . . . . . . . . . . . . . . . . . 12 noonTurkey . . . . . . . . . . . . . . . . . . . . .2 pmTurks and Caicos Islands . . . . . . .7 am

UUganda . . . . . . . . . . . . . . . . . . . .3 pmUkraine . . . . . . . . . . . . . . . . . . . .2 pmUnited Arab Emirates . . . . . . . . . .4 pmUnited Kingdom . . . . . . .(GMT) 12 noonUnited States of America - New York City . . . . . . . . . . . .7 am Washington, D.C. . . . . . . . . .7 am Chicago . . . . . . . . . . . . . . . .6 am Houston . . . . . . . . . . . . . . . .6 am Denver . . . . . . . . . . . . . . . .5 am Los Angeles . . . . . . . . . . . . .4 am San Francisco . . . . . . . . . . .4 amUruguay . . . . . . . . . . . . . . . . . . .9 am

VVenezuela . . . . . . . . . . . . . . . . . .8 amVietnam . . . . . . . . . . . . . . . . . . . .7 pm

PKF Worldwide Tax Guide 2012 1

Jordan

Jordan

Currency: Jordanian Dinar Dial Code To: 962 Dial Code Out: 00 (JOD)

Member Firm:City: Name: Contact Information:Amman Mohammad Khattab 6 5621 322/6/9 mkhattab@pkf.jo

a. taXes payable

FEDERAL TAxEs AND LEVIEsThe Jordanian Tax year is a financial year from 1st of January until the 31stof December.

COMPANy TAxDomestic companies are subject to income tax on all sources of income wherever arising.

Foreign companies are subject to income tax only on their income from Jordanian sources.

Export sales of goods only are income tax exempted until 31st of December 2015.

Dividends received from domestic companies are exempt from tax.

Company tax is levied as follows:

Rate

Domestic companies:

Banks 30%

Communication companies, Financial companies, Exchange companies, Insurance companies and Financial lease business 24%

Other than 14%

Foreign companies operating:

Banks and financial institutions 30%

Communication companies, financial companies, Exchange companies, Insurance companies and Financial Lease business 24%

Other than 14%

Foreign companies non-operating: 0%

Royalty and fees for technical services (subject to certain conditions) 1

Royalty and fees for technical services 7%

1 For Royalty and Fees for Technical Services where income by way of Royalty or Fees for Technical Services is received by foreign companies (or any other non-resident) pursuant to agreements executed after 31 March 2003, such income would be taxable on net basis if it is effectively connected to permanent establishment in Jordan.

sECURITIEs TRANsACTION TAxSecurity transaction tax is not applicable in Jordan.

CAPITAL GAINs TAxCapital gains incurred inside the Kingdom is exempted, other than profits from assets subject to depreciation.

TONNAGE TAx FOR sHIPPING INDUsTRyTonnage tax for shipping industry is not applicable in Jordan.

DIVIDEND DIsTRIBUTION TAxProfits from stocks and dividends distributed by a resident to another resident are exempted, except profits of mutual investment, funds of banks and financial companies.

BRANCH PROFITs TAxJordanian branches of foreign companies are taxed in Jordan on income received and/or accrued in Jordan (net of allowable expenses) at the rate applicable to Foreign Companies.

PKF Worldwide Tax Guide 20122

20% of the net income, after deducting the foreign income tax, for the Jordanian companies’ branches operating outside the kingdom as declared in their final accounts and which are certified by an external auditor shall be taxed. In all cases the net amount resulting from applying this percentage shall be considered as taxable income for the company and shall be subject to income tax 24%.

sALEs TAxEs/VALUE ADDED TAx (VAT)Sales Tax is levied on the sale of goods andservices, transfer of right to use goods and lease transactions. The transfer of materials in execution of works are also considered as deemed sales and are liable to Sales Tax. In this regard, ‘goods’ refer to movable property and even include intangible property such as copyright, trademark, patents etc.

The Sales Tax is levied on inter-state as well as intra-state sales. The inter-state sales tax collected by the Central Government is known as Income and Sales Tax Department (ISTD) and intra-state tax collected by respective state governments is known as Local Sales Tax (LST). Varying rates of sales tax are prescribed on different products. Most of the states levy sales tax at the first point of sales in the state. Consequently, subsequent sale of goods within the state are exempt from tax. The rates of Sales Tax are 16%,4%and zero rate. A state government initiative to promote industrial growth provides sales tax exemption, deferred payment facilities and sales tax set off.

Export sales and trading within qualified Free Zones are sales tax exempted transactions in Jordan.

FRINGE BENEFITs TAxThere is no separate fringe benefits tax. Benefits provided by employers to their employees are subject to income tax, computed in the prescribed manner. Employers are obliged to withhold payable income tax on all benefits provided to employees on their behalf. If the company adapts provident funds or insurance plans, employers are required to contribute.

LOCAL TAxEssTAMP DUTyStamp duty of 0.6% is payable on all transactions with governmental and publicly traded corporations.

LAND AND PROPERTy TAxNo tax is levied on land property except for improvement taxes. However, real estate property is subject to tax at a variable rate between 2% to 5% of a credited value.

OTHER TAxEsCUsTOMs DUTyCustoms duty is payable on goods imported into Jordan. The rates of basic customs duty may reach up to 300% depending on the governmental strategy.

REsEARCH AND DEVELOPMENTResearch and development tax is not applicable in Jordan since the beginning of the year 2010.

wEALTH TAxWealth tax is not applicable in Jordan.

GIFT TAxGift Tax is levied on certain gifts such as lottery prizes and other similar winnings. The rate is 10% plus if such income exceeds 1,000 JOD.

b. determination of taXable income

The scope of income varies depending upon the residential status of the taxpayers. Resident taxpayers are classified into two categories – ordinarily resident and not ordinarily resident. The residential status of individual taxpayers depends upon the number of days spent in Jordan and on the location of management and control in case of other taxpayers. To be a resident taxpayer, a person should stay more than 183 days of the year in Jordan.

Non-resident taxpayers pay tax only on Jordan income.

The assessment year is the period of 12 months from 1 January until 31December. Income earned in the period of 12 months or less immediately preceding the assessment year is taxed in the assessment year.

DEPRECIATIONDepreciation allowance is available as per the following rates depending on the nature of asset:

Jordan

PKF Worldwide Tax Guide 2012 3

Buildings (depending upon its nature) 4% to 10%

Furniture and fixtures 2.5% to 15%

Plant and machinery 10% to 25%

Intangible Assets (patents, trademarks,know-how, licences, copyrights, etc) According to IFRS

Ships 20%

Assets used for less than 180 days in the year of acquisition are entitled to half of the normal depreciation allowance. Depreciation not set off against current year’s income can be carried forward for set off against any future income for unlimited period.

sTOCK/INVENTORyThe valuation of closing stock is normally done on the basis of cost or market value, whichever is lower. The accepted valuation methods include FIFO, weighted average cost or other valuation methods in accordance with IFRS. The valuation basis is to be consistently followed.

INTEREsT DEDUCTIONsInterest paid on the borrowings used for business purposes is tax deductible as mentioned below. For new businesses, interest incurred prior to commencement of commercial production is to be capitalised. Interest paid on amount borrowed for investment in securities is allowed as deduction from interest income as mentioned in (Point A) below.

(POINT A)Interest paid by taxpayer other than banks, financial companies and financial leasing companies provided that the deduction shall not exceed the total debt to the higher of paid in capital and average equity as follows:

Tax period Ratio

2010 6:1

2011 5:1

2012 4:1

2013 and later 3:1

MAINTENANCE DEDUCTIONsAssets actual maintenance amount spent within the tax period provided that it does not exceed 5% of its value and, if it exceeds 5% from assets value, the exceeded amount shall be added to the assets balance for depreciation purposes.

ExPENDITURE INCURRED FOR ExEMPT INCOMEExpenditure incurred in earning an income exempt from income tax is not tax deductible.

LOssEsBusiness losses can be set off against any other income in the same assessment year and against business profits in subsequent assessment years subject to certain conditions.

Speculation and foreign branches losses can be set off only against speculation and foreign branches income. Unabsorbed business and speculation losses can be carried forward for adjustment against future business profits/speculation income for a period of eight assessment years following the year of loss. There are no provisions for carrying losses backward.

MINIMUM ALTERNATE TAx (MAT)MAT is not applied in Jordan.

CORPORATE REsTRUCTURINGBook profit is taxable for slump sale.

FOREIGN sOURCED INCOMEProfits derived by a foreign branch of a Jordanian enterprise are tabled at 20% of annual income after foreign tax.

INCENTIVEsThe Investment Promotion Act provides tax exemptions on certain new projects. In case of an undertaking located in a Special Economic Zone, the tax incentives for the first ten years are normally 75%.

Jordan

PKF Worldwide Tax Guide 20124

FOREIGN ExCHANGE EARNINGsThese are only taxable for companies.

c. foreiGn taX relief

UNILATERAL TAx CREDIT wHERE THERE Is NO TAx TREATyWhere a resident of Jordan has paid tax in any country with which Jordan does not have a tax treaty, credit is not available for such tax payment in Jordan.

TAx CREDIT UNDER TAx TREATIEsJordan has entered into tax treaties with several countries. Under applicable tax treaty, Jordanian residents paying taxes in other countries can claim credit in Jordan for foreign tax payments.

d. corporate Groups

There are no provisions in Jordan for consolidation of accounts for tax purposes or provisions for group taxation.

e. related party transactions

Related party transactions are required to be reported separately and the tax authorities are given power to consider whether transactions are at an arm’s length. Where prices paid for the purchase of goods or services are excessive or unreasonable, the assessing officer can disallow a deduction for the excess portion.

f. witHHoldinG taX

Tax at the prescribed rates is required to be deducted at source from payment of rent, salary, professional fees, interest, commission, etc to Jordanian residents. Tax is also required to be deducted from payments to non-residents of salaries, rent, interest, royalties, fees for technical services or other taxable income.

G. eXcHanGe control

There are no exchange control rules in Jordan.

H. personal taX

Income tax is payable by resident and non-resident individuals on taxable income, as discussed above. Tax is deducted at source from salary income with the following deductions being available.

Individuals deduction 12,000 JOD for the taxpayer Spouse & dependents 12,000 JOD for the dependents regardless of their number

Note: There are no deductions for companies.

Tax Rates for individuals: Taxable income (JOD) Rate

Up to 12,000 7%

Above 12,000 14%

i. treaty and non-treaty witHHoldinG taX rates

Under the Jordanian domestic laws, the withholding tax rates for non-treaty countries are as follows:

Non-treaty countries Rates

Dividends 0%

Interest 5%

Royalty 7% (add 16% sales tax)

Fees for technical services 7% (add 16% sales tax)

In nearly all cases, the double tax agreements between Jordan and the overseas territories do not reduce the rates of withholding tax applicable to those listed above.

Jordan

PKF Worldwide Tax Guide 2012 565

www.pkf.com$100