Jordan has a relatively simple tax system that includes both direct and indirect taxes. The Jordanian taxation system is administered by the Income and Sales Tax Department.
Double Taxation Agreements
Jordan has signed double taxation agreements with several countries, including the United States, Canada, and most of the EU member states. These agreements aim to avoid double taxation on income earned in both Jordan and the other country. They also provide relief from withholding taxes on dividends, interest, and royalties.
Main Taxes for Expats
Income Tax
Expats in Jordan are subject to the same income tax rules as Jordanian residents. Income tax is calculated based on the amount of taxable income earned during the tax year, which runs from January 1st to December 31st. The income tax rates for 2023 are as follows:
- Up to JOD 10,000 is taxed at 7%.
- The amount between JOD 10,001 and JOD 20,000 is taxed at 14%.
- The amount between JOD 20,001 and JOD 30,000 is taxed at 20%.
- The amount above JOD 30,000 is taxed at 28%.
Expats may also be entitled to claim certain tax deductions and credits, such as the Personal Allowance and the Dependent Allowance. These deductions and credits reduce the amount of income tax payable.
Social Security Tax
Social Security Tax is a tax on earnings paid to the Social Security Corporation. The Social Security Tax rate is 14.25% for employees and 22.5% for employers.
Sales Tax
Sales Tax is a tax on the sale of goods and services in Jordan. The standard rate of Sales Tax is 16%. However, there are reduced rates of Sales Tax for certain goods and services, such as food, medicines, and education.
Special Tax Breaks for Expats
Tax Exemptions for Foreigners
Expats who are employed by a foreign entity or who work in a free zone may be eligible for certain tax exemptions in Jordan. These exemptions include an exemption from income tax for the first five years of their employment.
Filing a Tax Return in Jordan
Expats who are considered resident in Jordan for tax purposes are required to file a tax return each year. The tax return must be filed by April 30th of the following year.
Expats can file their tax returns online using the Income and Sales Tax Department’s website. To do so, they need to obtain a username and password, which can be obtained by visiting one of the tax department offices in person.
When filing a tax return, expats need to provide details of their income, deductions, and credits for the relevant tax year. If they have any foreign income or assets, they may also need to declare them on their tax return. It’s important to note that Jordan operates on a self-assessment system, which means that taxpayers are responsible for accurately reporting their income and paying the correct amount of tax.
Tax Exit Procedures
Expats who are leaving Jordan to move abroad need to follow certain tax exit procedures. Firstly, they need to notify the Income and Sales Tax Department of their departure and provide details of their new address abroad. They should also settle any outstanding tax liabilities before leaving Jordan.
If an expat is considered non-resident for tax purposes, they are only liable for Jordanian income tax on income earned in Jordan. However, they may still be liable for Jordanian tax on any income or gains that arise from Jordanian sources, such as rental income or capital gains from the sale of a Jordanian property.
Expats who have paid tax in Jordan may be entitled to claim a refund of some of the tax they have paid. To do so, they need to file a tax return for the relevant tax year and claim the refund through the normal tax refund process.
The taxation system in Jordan is relatively simple compared to other countries in the region. Expats in Jordan need to be aware of the main taxes that apply to them, such as income tax, Social Security Tax, and Sales Tax, as well as any special tax breaks that may be available. They also need to ensure they file their tax returns on time and follow the tax exit procedures if they are leaving Jordan to move abroad. By understanding the Jordanian tax system, expats can ensure they are complying with their tax obligations and maximizing any tax benefits available to them.