Cairo Amman Bank Update: Jordan’s New Income Tax Law Number (34) Of The Year 2014

Jordan’s new Income tax law number (34) of the year 2014 (to published in the official gazette) is put in force as of January 1, 2015. Major changes included in the new tax law related to capital market gains are the following: 

 The new tax law included some changes regarding the withholding tax related to income from investment, and any other non-exempted income paid by a resident directly or indirectly to a non-resident person. Article (12/B) of the new income tax law, states the following:

1. “Every person responsible for the payment of a non-exempted income, directly or indirectly to a non-resident person shall at the time of payment deduct tax at the rate of (10%), He shall also prepare and submit to the Income Tax Department, and the beneficiary a declaration of the amounts generated and the tax deducted.
2. The amounts deducted in accordance with Para (1) above can be considered as final taxes in accordance with the instructions issued thereto”.

It is worth mentioning that the amendment to this provision raised the withholding taxes from (5%) to (10%), taking in consideration the above article includes interest income generated from investments and any other non-exempted interest income paid by a resident directly or indirectly to a non-resident person including coupon interest payments of government and corporate bonds.

Para (H) of the same article states that the person responsible for deducting taxes related to article (12/B) above shall deduct and pay the withholding taxes within (30) days of payment date, The tax that has not been deducted and paid shall be recovered and collected as if it were tax due from such person.

 Para (I) of this article also referred to instructions that will be issued to set procedures and provisions necessary to enforce this article. The said instructions has not been issued yet.

The new tax law kept the following activities exempted from tax, and added to those exemptions income derived from trading of Sukuk instruments:

•  Profits from stocks and dividends distributed by a resident to another resident, except profits of mutual investment funds of banks and financial companies, telecommunication companies, insurance, financial services companies. Exempted from taxes.
• Capital gains incurred inside the Kingdom, other than profits from assets subject to depreciation.
• Income derived from inside the kingdom from trading in dividends and stocks, bonds, equity loan, sukuk, treasury bonds, mutual investment funds, currencies, commodities in addition to futures and options contracts related to any of them, except that incurred by banks, financial companies, financial intermediation and insurance companies and legal persons who undertake out financial lease activities.