Jordan's Industrial Sector Income Tax Incentives Regulation grants reductions from the applicable income tax rate to a number of specified industrial activities, linked to conditions on Jordanian employment ratios and the employment of women and persons with disabilities, provided the tax actually paid never falls below 14% for most industrial activities, or 10% for the pharmaceutical and clothing industries.
What Industrial Activity Qualifies for the Incentives?
The Regulation defines industrial activity as activity that converts materials into a new product by changing its shape, components, type or nature through various production means, including chemical processes, mixing, cutting, forming, assembly, packing and packaging, and that achieves a local value added of no less than 30% under the legislation in force, excluding the mining of basic materials.
Eligible activities include specified industries such as food products, non-alcoholic beverages, leather products, textiles and clothing, wood, paper, chemical and pharmaceutical products, rubber and plastics, non-metallic minerals, base metals, electrical equipment, vehicles, and jewelry.
The Jordanian Employment and Women/Disability Employment Conditions
The Regulation grants the taxpayer a reduction from the applicable tax rate if its establishment meets the required Jordanian employment ratios set for each industrial sector, with that ratio rising gradually each year. It also grants an additional reduction where the ratio of employment of Jordanian women and persons with disabilities holding the identification card does not fall below 15% of total employment during the full tax year.
Cases Where the Incentives Do Not Apply
The provisions of this Regulation do not apply to a taxpayer if the taxpayer is among the industrial activities actually benefiting from the Regulation on the Reduction of Income Tax in Less-Developed Areas No. 44 of 2016, or if the industrial activity is an establishment registered in the development zones, in order to avoid combining more than one incentive for the same activity.
The Mandatory Minimum Tax for the Industrial Sector
Despite all the reductions available under this Regulation, it provides that the tax rate actually paid by the taxpayer must not, in all cases, fall below 10% for the pharmaceutical and clothing industries, and 14% for the other industrial activities covered by the Regulation, so that these rates remain floors that may not be gone below regardless of the total reductions to which the taxpayer is entitled.
Legal References
- Industrial Sector Income Tax Incentives Regulation — Article 2(a) (definition of industrial activity).
- Industrial Sector Income Tax Incentives Regulation — Article 4 (exclusion of less-developed areas and development zones).
- Industrial Sector Income Tax Incentives Regulation — Article 7 (the reduction for employing women and persons with disabilities).
- Industrial Sector Income Tax Incentives Regulation — Article 16 (the mandatory minimum tax of 10% and 14%).
For questions about your specific situation, you can ask the Jordan Tax & Legislation Helper on Helpers, or consult a licensed chartered accountant.