Overview of Tax Compliance in Jordan
The Income and Sales Tax Department (ISTD) was created by the Jordanian tax authorities to maintain compliance and efficiently collect taxes. Assessments of taxes, collection of taxes, and other tax compliance rules are under the control of this department. To avoid fines and legal implications, taxpayers must keep proper records and must comply with tax regulations and laws on time. Water, oil, and other natural resources are scarce in Jordan, which has one of the worst economies in the Middle East. However, there was a noticeable turnaround in the first quarter of 2023, when the Jordanian economy expanded 2.8% year over year, above the 2% growth seen in the preceding quarter. The country focuses a lot of emphasis on tourism and views it as a vital component of its economy.
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Types of taxes in Jordan
- Sales Tax
The sales tax is levied at the rate of 16% in Jordan. There are some services that are exceptions to sales tax, like services related to education, public health, air transport, some religious activities, activities related to social organizations and services related to the disposal of sewage and waste. Sales tax is similar to value-added tax. Some of the goods are also exempted from the sales tax. The services and goods exported from special economic zones have zero sales tax.
- Corporate Income tax
This type of tax is imposed on the revenue which is earned by the companies. The corporate income taxes in Jordan are divided into certain categories, and the CIT rates are according to those categories. The Corporate income tax for companies is 20%, while for insurance, telecommunications and financial intermediation companies, the rate is 24%. The corporate tax rate for banks is 35% in Jordan. All businesses have the legal obligation to fulfil all the rules related to tax compliance, or they will face penalties and fines.
- Custom Duty
Custom duty is a tax which is levied on goods when it enters or leaves a country. It resembles the cost you must pay when importing or exporting goods. Some imported goods into Jordan need this kind of custom tax. The custom tariff, which adheres to a system known as the Harmonized Commodity Description and Coding System, determines the amount of customs duty according to the nature and origin of the goods.
- Excise Tax
Some of the goods and services are levied with excise duty. Excise duty is the duty which is levied on certain goods and services which have origin in the country itself. Excise tax is an indirect tax. Wines, cars, beer, spirits, tobacco products, and cement are some of the goods that are imposed with excise duty in Jordan.
- Property Tax
The property tax is decided on the basis of the area of the property along with the location of the property by the municipality in Jordan. This tax is to be paid annually.
- Stamp Duty
The stamp duty generally is between 0.3% and 0.6%.
- Transfer Property Tax
A tax called a "transfer property tax" is applied when real estate is transferred from one owner to another. Property transfers are subject to a 9% tax, which is made up of a 5% registration charge and a 4% tax on the sale of theproperty.
The purpose of a tax audit is to guarantee that tax rules and regulations are being followed by the tax authorities through a formal inspection and evaluation of the financial records and tax returns of an individual or company. A tax audit is performed to check the accuracy and thoroughness of the data submitted on tax returns and to look for any discrepancies or possible problems that may need further examination. To reduce the possibility of a tax audit, it is crucial for companies to have accurate and well-organized financial records and to abide by the law. Within a year after the return's filing date, the tax audit is most likely to occur.
Tax Period in Jordan
The term "tax period" in Jordan refers to the precise time range that taxpayers must record their financial operations and determine their tax responsibilities. The tax year, which usually lasts one year and spans from January 1 to December 31, is the same length as the country's fiscal year.Individuals, companies, and other organizations in Jordan are required to keep thorough records of their earnings, expenditures, and other financial dealings during the tax period. They make use of this information to compile and file their yearly tax returns, which are sent on time to the tax authorities.
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