Hashemite Kingdom of Jordan

Jordan primarily applies a sourced-based taxation system, under which income derived from Jordanian sources is taxable, regardless of whether it is earned by residents or non-residents. In certain circumstances, residents may be subject to additional taxation rules depending on the applicable provisions of the Income Tax Law. The income tax structure is based on a progressive system. Taxable income is divided into bands, and each portion is taxed at a different rate, depending on income levels. An additional 1% national contribution tax applies to taxable income exceeding JOD 200,000 and supplementary charges may apply for very high-income earners. Individuals are also entitled to certain personal and family exemptions, which reduce taxable income within prescribed limits. Withholding tax for employees is collected through the Income and Sales Tax Department (ISTD). Employers are responsible for deducting income tax directly from employees’ salaries and paying it to the government. The ISTD is the official body in charge of collecting income tax, making sure the rules are followed and handling tax returns and payments.

Payroll taxes consist of income tax deductions and mandatory social security contributions, both administered through employer-led systems. Employers are required to withhold personal income tax from employees’ salaries based on progressive brackets ranging from 5% up to 30% and submit these amounts monthly to the ISTD. Additionally, Jordan mandates social security contributions, which provide coverage for pensions, disability, work injury, maternity and unemployment benefits. Employers withhold 7.5% of each employee’s gross salary for social security and contribute an additional 14.25%. These contributions must be deducted and paid monthly to the Social Security Corporation (SSC). In certain cases, additional minor payroll-related levies, such as the national contribution tax for high-income earners, may also apply. Governed by the Income Tax Law No. 34 of 2014 and the Social Security Law, these obligations form a key part of employment-related compliance in the country.

The Jordanian tax year aligns with the calendar year, running from 1 January to 31 December, although businesses may use a different fiscal year if the director-general of the ISTD grants prior approval. Employers must withhold income tax and remit it to the ISTD by the end of the following month. Social security contributions must be submitted to the Social Security Corporation (SSC) by the 15th day of the following month. Employers must also file an annual reconciliation report, detailing total employee earnings and taxes withheld, by the end of April the following year.

Under the ISTD Regulations No. 59 of 2015 (amended by Regulation No. 60 of 2021), businesses must retain all tax-related documents, including financial records and payroll files for at least four years. Specifically, copies must be kept from the end of the relevant tax period, the submission date of the tax return, or the date of assessment notification, whichever occurs later. Additionally, for SSC requirements and employer audit purposes, employers must keep comprehensive payroll records for at least five years. These records must detail each employee’s earnings, tax withholdings, social security contributions (employee and employer portions), overtime payments, bonuses, allowances and any statutory deductions. Electronic filing and record-keeping are mandatory for most entities. Failure to comply with record-keeping and reporting obligations can result in financial penalties, interest charges and potential legal consequences.