Regulatory framework

The Kingdom of Jordan links Asia with Africa, as well as the Arab World with Europe. Its geographic location plays a major role in mobilizing investment to the Middle East region. Foreign investors are allowed full ownership in many sectors, including telecommunications, hotels, mining, manufacturing, hospitals and information technology. In the following sectors, however, foreign ownership cannot exceed 50 per cent:

  • Trade and distribution;
  • Engineering and construction contracting;
  • Advertising; and
  • Most transport services.

Certain sectors are entirely closed to foreign investors, including the following:

  • Passenger transportation;
  • Freight road transportation, including taxis, buses and trucks;
  • Quarries activities;
  • Security services;
  • Investigation services; and
  • Sports services, including the organization of sports events and clubs.

Restrictions on foreign equity are lifted or eased under some bilateral agreements, such as the Bilateral Investment Treaty with the US, the Euro-Jordanian Partnership Agreement, and the Trade and Economic Cooperation Agreement between Jordan and Canada. Moreover, Jordan's Council of Ministers is entitled to waive any restriction on foreign equity in cases where national interest is served, or where the project will develop the economy, increase exports and create jobs for Jordanians, particularly in certain locations.

The minimum capital requirement for foreign direct investment is 50,000 Jordanian dinars (JOD) or its equivalent, and foreign investors enjoy the same rights as Jordanians in respect of their investment and can transfer any returns outside Jordan.

The Investment Law was designed to attract and promote local and foreign investments into Jordan, and offers investors many incentives and exemptions. Hotels, conferences and exhibition centres, agriculture projects, manufacturing, rail and the maritime transport sectors all enjoy the maximum tax exemption rate of 75 per cent. Projects may also be exempt from income and social service taxes for a period of 10 years (by 25 per cent, 50 per cent, or 75 per cent, depending on the location and economic activity of the project), and any related goods and services imported or purchased locally are free of sales tax. The imported fixed assets of a licensed project as well as its spare parts are fully exempt from customs duties and taxes.

Free & Industrial Estates zones

Established under the Free Zones Corporation Law, 1984, free zones in Jordan offer investors exemptions from income and social services taxes, custom duties and fees. Profits generated in free zones from exporting goods and transit trade are fully exempt from income tax, and investors may transfer profits outside Jordan without any restrictions. Moreover, the salaries of non-Jordanian employees working in free zones are exempt from income and social services taxes.

Investors in industrial activities may take advantage of further incentives by registering and operating within the Industrial Estates Zone, established in accordance with the Jordan Industrial Estates Corporation Law 1985 and managed by the Jordan Industrial Estates Corporation. In addition to the benefits provided for in the Investment Law, investors can benefit from extra two years exemption (from income and social services taxes) in this zone, full exemption from building and land taxes and an exemption from local authority fees.

The most recent piece of legislation in Jordan is the Development Areas Law, 2008, which aims to create an advanced investment environment in the country and to grow its economic activities. Investors registered and operating in the Development Area pay no income tax and a flat rate corporation tax of 5 per cent. They are also exempted from customs duties and other fees and taxes on all materials, instruments, machines and appliances needed to construct and furnish their project.

Where such incentives and privileges are not available, income generated in Jordan is subject to income tax at variable rates. Industries, hotels, hospitals, transportation and the construction sectors are subject to a relatively low corporate tax rate of 15 per cent, with 35 per cent applicable to banks and financial companies, and 25 per cent to all other sectors. Jordan has signed several double taxation agreements, including treaties with the UK, Ireland, Canada, India, Turkey, and Lebanon, in which some income is tax free.

The Aqaba Special Economic Zone

The Aqaba Special Economic Zone was established by a 2000 law as a duty-free, low tax, multi-sectoral development zone, with a simplified flat income and sales tax regime and duty free imports. Investors in the Aqaba Special Economic Zone that are registered therein enjoy several privileges and are exempt from most of the foreign equity restrictions applicable in the rest of Jordan. However, the incentive schemes contained in the Investment Law do not apply in the Aqaba Special Economic Zone; it has its own, more attractive packages.

Structural reforms

After joining the World Trade Organization in 2000, Jordan reformed its trading and investment regime to attract more foreign investment, provide long-term protection for potential investors, and to ensure their profitability. Several institutions responsible for investment and private sector development now promote and develop foreign direct investment strategies, and provide advice and information to investors, pointing out any incentives or exemptions for which they may be eligible. These institutions, discussed below, operate under the minister of industry and trade, and work within a framework of investment laws adopted by the Council of Ministers in 2003.

Jordan Agency for Enterprises and Investment Development

To develop and organize the country's investment climate and to promote economic and trading activities in Jordan, the Council of Minister adopted the Investment Climate and Enterprise Development Law, 2003. The Jordan Agency for Enterprises and Investment Development (JAEID) was formed pursuant to this law to study the business environment and relevant sectors, and propose programmes, plans, strategies and policies necessary to support the investment climate. They also:

  • review and evaluate registration and licensing procedures of enterprises;
  • study the organizational structure of investment institutions and propose necessary amendments; coordinate and evaluate the performance of investment institutions; and
  • provide assistance to those investment institutions, and any other entities to enable them to implement the investment and trade strategies and achieve their objectives and goals.

Jordan Enterprise Development Corporation

The Enterprise Development Corporation Law, 2003 aims to develop and support enterprises in Jordan, and to increase exports and export opportunities. This law established the Jordanian Enterprise Development Corporation (JEDCO) to do the following:

  • Provide advice and available information to enterprises;
  • Advise the enterprises in preparing their strategies;
  • Provide the necessary financial and technical assistance to enterprises according to JEDCO's capabilities;
  • Assist enterprises in competing and reinforcing their skills and exporting capabilities;
  • Establish trade centres and exhibitions;
  • Open markets inside and outside Jordan; and
  • Provide technical expertise to support export operations.

Jordan Investment Board

The Investment Law empowered the Jordan Investment Board (JIB) to do the following:

  • Design and implement investment promotions;
  • Study particular investments; and
  • Identify investment opportunities.

It also runs a one-stop-shop to help investors get registered, licensed and generally set-up. The one-stop-shop can issue a preliminary license to get projects up and running and grant visas and permanent residency approvals for investors and foreign labour. Its services are available to various industrial sectors, agriculture, hotels, hospitals, maritime transport, railways, conventions and exhibition centres, as well as water distribution projects, gas and petroleum derivatives or any other project with a foreign participation of at least JOD 50,000.

The Investment Law also established the Investment Incentives Committee at the JIB to handle applications from investors for incentives, exemptions and privileges provided for in the Investment Law.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.