VAT, GST and Sales Tax in Jordan

Summary

Name of the tax General Sales Tax (GST) (the GST Law provides for two types of taxes, which are the General Tax [GT] and the Special Tax [ST])
Local name Addaryba al a’mma ala al mabia’t
Date introduced Jun-94
Trading bloc membership None
Administered by Income and Sales Tax Department (ISTD) (http://www.istd.gov.jo)
GST rates GT rates
Standard 16%
Reduced 4%, 8%
Other Zero-rated and exempt
ST rates Various (20 types of goods and one type of service are subject to percentage rates or fixed amounts set forth in Regulation No. 80 of 2000 and Regulation No. 97 of 2016)
GST number format 9999999
GT return periods Two months
ST return periods Monthly
Annual thresholds
Goods (Trade) JOD75,000
Services JOD30,000
Manufacturing JOD50,000
Manufacturing (ST applied) JOD10,000
Imports of goods or services for nonpersonal purposes Zero
Imports of goods or services for personal purposes None
Recovery of GST by nonresident businesses No

Scope of the tax

General Sales Tax (GST) applies to the following transactions:

  • The supply of taxable goods or services made by a taxable person
  • The importation of taxable goods or services

The GST Law contains two types of taxes, which are the General Tax (GT) and the Special Tax (ST). ST is part of the tax base for GT if ST applies.

Who is liable

A “taxable person” is any entity or individual that is registered or required to be registered for GST. A taxable person is required to register by the earlier of the following dates:

  • On the commencement of a new business that makes taxable supplies if it appears to the person that the person’s taxable turnover during the twelve months following the commence­ment date may exceed the threshold
  • At the end of any month if taxable turnover during the preced­ing 12 consecutive months has reached the threshold
  • At the end of any month if it appears that the person’s taxable turnover during the 11 consecutive months ending with the subsequent month may reach the threshold

If a taxable person fails to register by the dates prescribed under the GST Law, the Income and Sales Tax Department (ISTD) may agree on request to register the person, effective from the date on which the person was required to register.

The following are the annual thresholds for GST registration:

  • JOD10,000 for manufacturers producing goods subject to ST
  • JOD50,000 for suppliers of goods other than those subject to ST
  • JOD30,000 for service suppliers
  • JOD75,000 for goods (trade)
  • JOD0 for imports of goods or services for nonpersonal pur­poses
  • None for imports of goods or services for personal purposes
  • No threshold for the recovery of GST by nonresident business

If a person carries out more than one of the business activities mentioned above, the minimum limit is the applicable registra­tion threshold.

A person who imports taxable goods or services must register within 30 days of the first taxable import, regardless of the amount of the import, unless the import is made for private pur­poses.

Voluntary registration. A business may register for GST volun­tarily if its taxable turnover is below the GST registration thresh­old. A business may also register for GST voluntarily in advance of making taxable supplies.

Exemption from registration. A taxable person whose entire turn­over is zero-rated may request exemption from registration.

Group registration. GST grouping is not allowed. Legal entities that are closely connected must register for GST separately.

Registration procedures. A taxable person is required to register by the earlier of the following dates:

  • On the commencement of a new business that makes taxable supplies if it appears to the person that taxable turnover during the 12 months following the commencement date may exceed the threshold
  • At the end of any month if taxable turnover during the preced­ing 12 consecutive months has reached the threshold
  • At the end of any month if it appears that the person’s taxable turnover during the 11 consecutive months ending with the subsequent month may reach the threshold

A person with power of attorney should sign the registration form and submit it to the tax department. Under some circumstances he can authorize another person to act on his behalf.

The registration form is a preprinted, hardcopy form that should be submitted to tax department. The registration process can be completed in about 30 minutes if the following supporting docu­ments are available:

  • A certified copy of the registration certificate of the legal entity showing the authorized signatories for the legal entity
  • Personal identification documents for the authorized signato­ries
  • A certified copy of the commercial record certificate by the authorized party
  • A certified copy of the registration record of the commercial name and trademark, if available
  • A certified copy of the effective vocational license that includes: the number of branches related to the main activity under registration, legal name of the branch(es) and name of warehouses and storage associated with the branches as well as the addresses
  • If importer, a certified copy of the importation card

Please note that for the registration of the personal individual (i.e., not a legal entity/company) in addition to the above-men­tioned requirements, a personal identification document that contains the national number for the Jordanian individual and a copy of the passport for the non-Jordanian is required as well.

Late-registration penalties. The following penalties are assessed for late registration:

  • A penalty of two to three times the output tax plus a criminal penalty equal to JOD200 is imposed if the date of registration is more than 60 days from the date on which the business should have been registered.
  • A penalty of JOD100 is imposed if the date of registration is less than 60 days from the date on which the business should have been registered.

Non-established businesses. Not applicable. Tax representatives. No specific requirements. Reverse charge. Not applicable.

Digital economy. Rules for digital goods and services are the same as for traditional economy.

Deregistration. A registered person who stops supplying goods and services must deregister.

A registered person is not required to deregister in the following circumstances but may request deregistration:

  • Taxable turnover drops below the registration threshold.
  • Turnover is entirely zero-rated.

GST rates

“Taxable goods and services” are goods and services that are liable to a rate of GST, including the zero rate. The term “exempted goods” refers to supplies of goods and services that are not liable to GST and do not give rise to a right of input tax deduction.

In Jordan, the following are three rates of GT:

  • Standard rate: 16%
  • Reduced rate: 4%, 8%
  • Zero rate (0%)

The standard rate of GT applies to all supplies of goods or ser­vices, unless a specific provision allows a reduced rate or an exemption.

Twenty types of goods and one type of service are subject to ST. ST is imposed at various percentage rates and in fixed amounts. These rates and amounts are provided in Regulation 80 of 2000 and Regulation No. 97 of 2016.

Some goods and services liable to GT rates could also be liable to ST rates at the same time. These goods and services are defined under Schedule 1 annexed to the GST Law.

The following lists provide some examples of goods and services exempt from GT, taxed at a zero rate or taxed at a 4% rate, and examples of goods and services subject to ST.

Examples of goods and services taxable at 0%

  • Books, newspapers and periodicals
  • Supplies used by the handicapped
  • Inputs for drug manufacturing, industrial machinery and equipment exempted under the Customs Tariff Tables and used to manufacture drugs, laboratory devices and their accessories needed by the drug industry and spare parts, regardless of whether local or imported

Examples of goods and services taxable at 4%

  • Live animals
  • Dairy and salt for cooking
  • Green or black tea
  • Tomato paste
  • Natural phosphates
  • Potash

Examples of goods and services taxable at 8%

  • Iron used for construction building with a diameter of 5.5 mml or above
  • Internet services
  • Cream

Examples of goods and services subject to ST

  • Beer (including nonalcoholic beer)
  • Tobacco and tobacco products
  • Vehicles (cars)

Exempted goods are goods and services listed in Schedule 3 annexed to the GST Law and other goods and services exempted under the provisions of the GST Law. In addition, supplies to a person whose purchases are exempted are treated as exempted supplies even if these supplies are normally taxable. Other goods and services are called “nontaxable goods,” which are goods and services that are not within the scope of GST.

Examples of exempt supplies of goods and services

  • Wheat
  • Bread
  • Electrical energy
  • Firefighting vehicles
  • Education
  • Medical services

Option to tax for exempt supplies. Not applicable.

Time of supply

GST becomes due at the time of supply, which is called the “tax point.” The rules determining the tax point are discussed below.

GT or ST becomes due on the supply of goods at the earliest of the following events:

  • Delivery of goods. However, the Director General of the Income and Sales Tax Department may consider the date of the tax invoice as the tax point if it is issued periodically or at the end of a certain period following the date of delivery.
  • Issuance of a tax invoice.
  • Receipt of the full or partial value of the goods, receipt of credit payment or any other receipt of value according to the agreed terms for payments.

Tax becomes due on the supply of services at the earlier of the following events:

  • Issuance of a tax invoice
  • Receipt of full or partial payment for the service

Tax is payable in the cases mentioned above by reference to the value covered by the invoice or the amount paid, whichever is higher.

Imported goods. Importers of goods must pay the tax due on the goods at the clearance stage to the Customs Department in accor­dance with the procedures applicable for the payment of customs duties. Clearance of these goods is not finalized until the tax due is paid in full.

A registered importer may obtain permission from the ISTD to defer the payment of the tax payable on the importation of goods. This postponement is granted if the importer has no record of fraud or customs smuggling and has submitted all returns in the last 12 months.

Imported services. Importers of services must pay the tax due at the earliest of the following dates:

  • Within one month after the date of payment for the imported service or after the date of making a partial payment, limited to the amount paid
  • When the means that include the services (for example, com­pact disks and tapes) are released from Customs
  • Within six months after the date on which the service or any part of the service is received, limited to the amount related to the part received

Recovery of GST by taxable persons

A taxable person may recover input tax, which is GT charged on goods and services supplied to it for business purposes. Input tax is generally recovered by being deducted from output tax, which is GST charged on supplies made.

Input tax includes GT charged on goods and services supplied in Jordan and GT paid on imported goods and services into Jordan.

ST is also charged on goods supplied to produce goods subject to ST.

A valid tax invoice or customs documents must exist to recover input tax.

Special rules apply to the recovery of input GT on goods pur­chased or imported before registration.

Nondeductible input tax. Input tax may not be deductible on pur­chases or imports of goods and services that are not used for business purposes. In addition, input tax may not be recovered for some items of business expenditure.

The following lists provide some examples of items of expendi­ture for which input tax is not deductible and examples of items for which input tax is deductible if the expenditure is used for a taxable business purpose.

Examples of items for which input tax is nondeductible

  • Goods and services used for nonbusiness purposes
  • Goods and services attributable to exempt or nontaxable sup­plies
  • Sporting and recreational activities, other than those used for supplying goods or services
  • Restaurants and hotel services, other than those used for sup­plying goods or services
  • Purchases accounted for as returned purchases
  • The Special Tax paid on the items listed in Schedule (1) of the GST legislation (unless otherwise provided for)
  • Goods and services that have been used for construction pur­poses, other than those used for renting of construction and destruction equipment
  • Cars, other than cars purchased by car-trading businesses or for car rental purposes

Examples of items for which input tax is deductible
(if related to a taxable business use)

  • Business use of telephone and mobiles
  • Accounting and tax consulting fees
  • Cars purchased by car-trading businesses or for car rental pur­poses

Partial exemption. Input tax directly related to making exempt supplies is not recoverable. If a taxable person makes both exempt and taxable goods and services, it may recover input tax partially.

If the same taxable inputs are attributable to both taxable and nontaxable supplies (whether exempted or for nonbusiness use), the portion of the deductible general input tax is determined based on the production formula. If this is not possible, it is calculated based on the proportion of taxable supplies to total supplies.

Apart from the deduction of GT paid or charged on goods at hand at the time of registration, a registered person may not deduct the input tax paid more than three years earlier. However, a registered person that carries out a nontaxable business and that has already deducted tax paid on inputs relating to this business must prepare a debit note with respect to the already deducted tax on its pur­chases of taxable goods and services that were incorporated in nontaxable business supplies. The registered person must also undertake to calculate the tax based on the production formula and pay the tax shown in the tax return for its fiscal year. However, if calculation of tax based on the production formula is not possible, the tax is calculated based on the proportion of the nontaxable supplies to the total supplies.

Refunds. Tax is repaid within a period not exceeding three months after the date on which the claim for refund has been filed if any of the following circumstances exist:

  • Tax is paid on goods or services exported or used in the manu­facture of other goods that have been exported.
  • Tax is collected by mistake.
  • Recoverable input tax that was paid at least six months ago and that was carried forward as a credit has not yet been deducted from the tax charged on supplies made during that period.
  • Tax was paid on goods that left the country in the possession of nonresident persons, and the tax amount to be refunded be not less than JOD50 but not more than JOD500.
  • ST was previously paid on goods supplied to the bodies relieved from payment of tax under Article 21 of the GST Law (the King of Jordan, embassies, diplomats and consuls [subject to reci­procity] and international and regional organizations working in Jordan).

Capital goods. GST paid on capital goods is refundable. An exception is the GST paid on buildings and related expenditures, which is not recoverable. The GST paid on passenger cars is also not recoverable.

Preregistration costs. A newly registered person can recover GT paid or charged before registration on the goods at hand at the time it registers for GST. If the invoice for the purchases is not a tax invoice, half of the value of the invoice is multiplied by the GT rate to calculate the deductible tax. Only the tax paid or charged on goods at hand is deductible.

Write-off of bad debts. GST paid on bad debt is recoverable in the following cases:

  • If the purchaser dies without leaving assets sufficient to pay the tax
  • If the purchaser declares that his funds are not sufficient to pay the debts in full or in part, of if he fails to pay or communicate about the debt for two years
  • If the seller has exhausted all legal means to collect the debt, including the tax, with no success
  • If the seller has proved that the buyer has declared bankruptcy

Noneconomic activities. Not applicable.

Recovery of VAT by non-established businesses No recovery is possible.

Invoicing

A registered person who supplies taxable goods or services to another registered person is required to make out a triplicate tax invoice containing the following details:

  • The serial number and date of issuance of the tax invoice
  • Name, address and tax number of the registered person
  • Name, address and tax number of the purchaser
  • A statement regarding the supplied item that provides the type, quantity, value, and rate and amount of the tax, together with a statement of the total amount of the invoice

The original invoice must be provided to the purchaser, and the copies must be maintained by the registered person.

If taxable goods or services are supplied by a registered person to a person that is not registered for GST, the person must issue an ordinary invoice. However, the taxable person may issue a tax-inclusive invoice showing the quantity and the tax-inclusive price of the goods or services supplied. This invoice must contain the following details:

  • The serial number and date of the invoice
  • Name, address and tax number of the registered person
  • A statement regarding the supplied item that provides the type, quantity and value, together with a statement of the total amount of the invoice

The original invoice must be provided to the purchaser and the copies must be maintained by the registered person.

If a tax point results from a delivery of goods or services, or receipt of payment, the registered person must issue a tax invoice within the following time limits:

  • Immediately after the delivery of goods or the receipt of pay­ment if the supplier does not keep delivery notes or inventory cards.
  • Within a maximum period of one month after the date on which the services are performed, or immediately on the receipt of payment.
  • By the end of the day if the supplier keeps delivery notes and inventory cards.
  • Immediately after the delivery of goods or services, or the receipt of payment if the supplier keeps a cash register machine. In this case, the cash register roll is considered an invoice.

Exports. To export goods outside Jordan and to the duty-free estates, zones and shops, the following conditions must be met:

  • A customs declaration of the goods to be exported must be prepared with a minimum of three copies of the invoice attached to it.
  • The Customs Center must check the contents of the invoice against the relevant customs declaration, certify the copy of the invoice, and affix the number and date of the declaration on the invoice, which is stamped by the Customs Center.
  • The exporter must retain a copy of the invoice referred to in the bullet above together with a copy of the customs declaration produced and endorsed pursuant to the customs proceedings for the purposes of future audit.

If the exporter is not registered, in addition to the procedures described above, the procedures mentioned in Instruction No. 4 concerning the deduction or refund of the tax must also be fol­lowed. Under Instruction No. 4, a non-registered refund applicant must enclose the following documents together with the refund application:

  • A completed refund form numbered 6/B, approved by the Income and Sales Tax Department (ISTD) and submitted by the concerned person or a legally authorized person.
  • A copy of the supplier’s tax return signed and certified by the ISTD, which contains the relevant invoice numbers for the amounts claimed. This must be attached later by the concerned directorate in the ISTD.
  • The original of the tax invoice for local goods and services. However, if acceptable reasons prevent the issuance of an authenticated invoice and if the applicant undertakes that the applicant has never claimed and will never claim the tax in question when the original copy is found, the Director General of the ISTD may accept a certified copy of the invoice.
  • A copy of the import declaration in the name of the exporter (the first copy), if the original declaration is requested from the customs department together with all the relevant attachments.
  • A copy of the export invoice of which the number is fixed on the import declaration.
  • A production formula approved by the customs department or the General Sales Tax Department concerning the materials incorporated in the production of exported goods.

The above procedures must be followed to export goods to Aqaba Special Economic Zone (SEZ) if the cost of the exported goods exceeds JOD10,000, regardless of whether the exporter is regis­tered for GST. However, if the cost of the goods to be exported to the Aqaba SEZ is JOD10,000 or less, the following procedures must be followed:

  • The exporter must produce a detailed invoice showing the cost and quantity of every exported item.
  • The Customs Center must check and inspect the goods to be exported against the contents of the invoice and ascertain their exit of the goods to the zone. A customs employee then signi­fies the approval of the export invoices by affixing on the invoices the phrase “seen upon exiting.”

All goods leaving Jordan in the possession of the passengers, or those shipped abroad with a value not exceeding JOD500, may be exported without the need to produce a customs declaration if the exportation is substantiated in a manner satisfactory to the department. If the value of the goods does not exceed JOD1,000, the goods may be exported through the Jordan Export Development Commercial Corporation or via express mail, or it may be exported to the free zones, without the need to produce a customs declaration. In such a case it is sufficient to prepare a triplicate invoice or a bill of lading, stamped by the customs officer to substantiate the exportation. However, if the exported goods are valued at more than JOD1,000, the export must be made using the relevant transfer statement certified for this pur­pose.

To export services outside Jordan, the following conditions must be met:

  • The beneficiary of the service must be a foreigner or a Jordanian who is not resident in Jordan.
  • The place where the service is received must be outside Jordan.
  • The service supplier must produce a contract substantiating the exportation of the service.
  • The exporter must prove that the payment for the service has been transferred to Jordan.

To export services to the Aqaba SEZ, the following conditions must be met:

  • The importer of the service must be a corporation registered in the Aqaba SEZ.
  • The supplier must produce a service supply contract signed by both parties, which are the supplier and the purchaser located in the Aqaba SEZ.
  • The supplier must produce an invoice showing the type and nature of the service supplied, as well as the name of the pur­chaser of this service.

To export services to the free estates, zones and duty-free shops, the following conditions must be met:

  • The service must be provided to a person who is licensed to practice a business activity within the free estates, zones and duty-free shops.
  • The service must be intended for the sole purpose of exercising this activity.
  • The supplier must produce a service supply contract signed by both parties, which are the supplier and the purchaser of the exported service.
  • The supplier must produce an invoice showing the type and nature of the service supplied, as well as the name of the pur­chaser of this service.

Foreign-currency invoices. If the supply of taxable goods or ser­vices is for a consideration determined in a foreign currency, the value must be converted into Jordanian dinars (JOD), according to the exchange rate at the time of supply.

GST returns and payments

A tax return, either completed in writing (manually) or filed electronically, must be submitted by the registered person using the forms prepared by the ISTD for this purpose. A registered person must submit the required return within one month follow­ing the end of its tax period, as prescribed in the registration letter issued by the ISTD.

If a registered person realizes that it has made an error in a GST return that has already been submitted, it may amend the return through a written notice submitted to the ISTD. In this case, the registered person is not considered to have breached the provi­sions of the GST Law unless the ISTD discovered the error before the registered person declared it. However, the registered person must pay the underdeclared amount of tax, together with the late payment penalty imposed for that error, calculated for every week or any part thereof.

If a tax return adopted by the ISTD is submitted to a bank, it is deemed to be a tax return submitted to the ISTD.

If the tax return is submitted in a manner that violates the provi­sions of the GST Law, the return is considered to be canceled and the registered person is liable for the penalties provided for under the GST Law.

If the registered person submits more than one return for the same period, the ISTD accepts only the return submitted first. The other returns are considered cancelled except for any amend­ment notices submitted afterwards.

Penalties

Apart from the criminal tax offenses provided for in the GST Law, a penalty not less than JOD100 and not more than JOD500 is levied on misdemeanors committed in connection with the GST Law.

A person who commits a criminal tax fraud offense is liable for a civil compensation penalty payable to the ISTD of not less than twice and not more than three times the tax due, and a criminal penalty of not less than JOD200 and not more than JOD1,000. For a second offense, the criminal penalty imposed is doubled. If the offense occurs again within one year thereafter, the court may impose the highest criminal fine or a term of imprisonment for a period not less than three months and not exceeding six months, or both.