Under Investment Environment Law No. 21/2022, the government may provide incentives by exempting fixed assets, production requirements and inputs, and spare parts that are necessary for performing the economic activity from Customs duties and sales taxes.
In accordance with the Investment Environment Law and bylaw, income tax shall be exempted or reduced by no less than (30 percent) for projects in the least developed regions in the Kingdom or projects that employ at least (250) Jordanians, and for a period of maximum (5) years from the date of actual operation. Sectors that can benefit from tax exemptions are shown below:
- Agriculture and livestock
- Specialized medical centers
- Hotel and tourist establishments
- Cities of entertainment and recreation
- Call centers
- Information technology
- Scientific research centers and scientific laboratories
- Artistic and media production and film industry
- Conference and exhibition centers
- Transportation, distribution and extraction of water, gas and oil derivatives using pipelines
- Air, sea and railway transport
The Bylaw excludes the following sectors from tax exemption and reduction provisions: activities registered in the Development Zones and Free Zones; industries related to phosphate, potash, uranium, or derivatives of any of them; and any other natural resources determined by the Council of Ministers, with the exception of the cement industry and the fertilizer industry. Power generation projects are also excluded from exemptions, except for renewable energy projects.
The Council of Ministers, upon the recommendation of the Investment Council, may offer investors a wide range of incentives and exceptions including exemptions and incentives. These include pricing on the sale or rent consideration for lands owned by the public treasury; subsidized energy and water costs and supporting renewable energy projects; tax deductions for infrastructure construction if the project is operational within a certain period of time; and/or tax or customs exemptions or reductions for employing a minimum number of Jordanian labor-force. Exemptions, deduction rates and validity differ based on certain criteria, including:
- Employing Jordanian females of not less than (50 percent) of the total number of its employees, provided that the number is not less than (50) Jordanian female employees.
- Activities with local added value, at a rate of not less than (50 percent.
- Activity transfers knowledge, technology, and digital transformation
- Strategic Economic Activities
- Public-Private Partnership Projects
- Activities in impoverished areas contributing to the development of and services for the local community
If investors meet more than one criterion according to the criteria specified in the law, then the volume of incentives, exemptions and additional benefits granted will increase by 10 percent of the size of the investment for each additional criterion.
Further incentives will be granted to activities that use recycling or are considered small and medium-sized enterprises or intended to protect the environment or supports transition to a green economy. The volume of incentives, exemptions and additional benefits granted would increase by a percentage of 5 percent of the size of the investment.
Jordanian law and regulation promote and incentivizes water efficiency, waste management, and green building in commercial property development. For example, since 2015 the Jordan National Building Codes have required energy efficient practices in new construction.
Starting April 2022, the government implemented a new electricity tariff structure, which reduced production costs for several vital economic sectors including health, tourism, commercial, agricultural, and industrial sectors.
Foreign Trade Zones/Free Ports/Trade Facilitation
The country is divided into three development areas: Zones A, B, and C. Investments in Zone C, the least developed areas of Jordan, receive the highest level of incentives while those in Zone A receive the lowest level. All agricultural, maritime, transport and railway investments are classified as Zone C, irrespective of location. Hotel and tourism-related projects along the Dead Sea, leisure and recreational compounds, and convention and exhibition centers receive Zone A designations. Qualifying Industrial Zones (QIZs) are zoned according to their geographical location unless granted an exemption. The three-zone classification scheme does not apply to nature reserves and environmental protection areas.
Jordan’s Investment Environment Law No. 21 of 2022 governs and regulates investments within Development and Free Zones Commission (DFZC),Supervises Development and Free Zones and organizes their work. The development areas are the King Hussein Bin Talal Development Area (KHBTDA) in Mafraq, the Ma’an Development Area, the Irbid Development Area (IDA), the Dead Sea Development Zone, the Jabal Ajloun Development Zone, and the King Hussein Business Park Development Zone.
The government also created nine industrial estates in Amman, Irbid, Karak, Mafraq, Madaba, Tafileh, Salt, and Aqaba, in addition to several privately-run industrial parks, including al-Mushatta, al-Tajamouat, al-Dulayl, Cyber City, al-Qastal, Jordan Gateway, and al-Hallabat. These estates provide basic infrastructure for a wide variety of manufacturing activities, reducing the cost of utilities and providing cost-effective land and buildings. Investors in the estates continue to receive incentives until their contracts expire, and receive various additional exemptions, such as a two-year exemption on income and social services taxes, complete exemptions from building and land taxes, and exemptions or reductions on most municipalities’ fees.
Besides the six public free zones in Zarqa, Sahab, Karak, Karama, Mowaqaar, and Queen Alia Airport, Jordan has over 37 designated free zones administered by private companies under the DFZC’s supervision. The free zones are outside of the jurisdiction of Jordan Customs and provide a duty and tax-free environment for the storage of goods transiting Jordan.
The Investment Environment Law No. 21 of 2022 regulates the establishment of Development and Free Zones, and stipulates the roles, responsibilities, and rights of developers.
Under Income Tax Law No. 38, industrial activities with a local value-added of at least 30 percent are subject to 5 percent income tax rate, while other projects and activities are subject to 10 percent.
Establishments registered in the free zones enjoy zero percent tax on any activity conducted within the borders of the free zones, the export of goods and services outside the Kingdom, and associated transit trade. They also are subject to zero percent on for imports duties, national contribution tax, and dividends tax. Profits earned on activities pertaining to the sale, disposal, or importation of goods and services within the borders of the free zones are subject to tax based on the normal income tax rates applicable to each entity, depending on its status (corporation or individual).
The Aqaba Special Economic Zone (ASEZA) is an independent economic zone not governed by the Investment Commission or the articles in the Investment Law governing investments in free zones or development zones. It offers special tax exemptions, a flat five percent income tax, and facilitates customs handling at Aqaba Port. In recent years, ASEZA has attracted projects, mainly in hotel and property development sectors, valued at over $8 billion. The government continues to implement development projects aimed at attracting commerce and tourism through the Port of Aqaba. The Aqaba New Port project became operational in 2018 and reached design capacity in 2019. The new port, 20 kilometers south of the previous port, added four new terminals and expanded general ship berthing and marine services, in addition to adding dedicated terminals for grain silos, liquefied natural gas, phosphates, and propane.
Investors, foreign or domestic, face specific requirements in trade, services, and industrial projects in free zones. Industrial projects must be related to one of the following industries:
- New industries that depend on advanced technology;
- Industries that require locally available raw material and/or locally manufactured parts;
- Industries that complement domestic industries;
- Industries that enhance labor skills and promote technical know-how; or,
- Industries that provide consumer goods and that contribute to reducing market dependency on imported goods.
In 2021, the government passed tax legislation to address gaps and loopholes to prevent tax leakages and ensure transparency and fairness. This included legislation on economic substance and transfer pricing and brought ASEZA under the national control for tax and customs administration.
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Performance and Data Localization Requirements
Jordan does not follow “forced localization.” However, some investment incentives are tied to deployment of local content at certain percentages.
Jordan does not have requirements for foreign IT providers to turn over source code or provide access to surveillance.
Jordan does not have a modern data protection law. In 2020, the Ministry of Digital Economy and Entrepreneurship submitted a draft for the personal Data Protection Law, which supports Jordan’s digitization efforts. The Council of Ministers approved the law and sent it to the Legislative and Opinion Bureau for review, as of March 2023, the draft law is with the Lower House for review. Criminal Law, Cybercrime Law, and Telecommunication Law offer partial protection of personal data.