Jordan

Depreciation and amortisation

Depreciation and amortisation of fixed assets are determined using the straight-line method, using provisions, procedures, and rates defined by the depreciation regime issued for this purpose.

Goodwill

Purchased goodwill can be amortised using the straight-line method, using provisions, procedures, and rates defined by the depreciation regime issued for this purpose.

Start-up expenses

There is no clear provision in the Jordan income tax law to define the treatment of start-up expenses; however, these expenses can be accepted at the establishment year.

Interest expenses

A 3:1 debt-to-equity ratio would apply in respect of related party debt (e.g. shareholder debt). No restriction should apply on unrelated party financing.

Interest (including capitalised interest) on the related party debt exceeding the 3:1 debt-to-equity ratio would not be deductible for CIT purposes.

For the purposes of the debt-to-equity ratio, equity is the higher of: (i) paid in share capital or (ii) average equity.

Bad debt

Bad debts are deductible under certain conditions.

Charitable contributions

A person may deduct any amount paid during the tax period as a donation to any of the governmental departments, public or official institutions, or municipalities from the gross income in the period in which the payment occurred.

Any person may deduct subscriptions and donations paid in Jordan without any personal benefit for religious, charitable, humanitarian, scientific, environmental, cultural, sport, and professional purposes if the Council of Ministers approves its character. The deductible amount according to the provisions of this paragraph shall not exceed 25% of the taxable income after deducting what is provided for in the first paragraph above and before making this deduction.

Fines and penalties

Fines and penalties are not acceptable expenses for income tax purposes.

Taxes

Taxes and fees paid on taxable activities are deductible.

Foreign income tax paid for income earned from sources outside Jordan that was subject to tax under the provisions of the tax law is deductible.

Other significant items

Approved expenses, including the following, are deductible:

• Insurance premiums.
• Amounts paid as civil compensation under contracts concluded by the taxpayer for the purpose of carrying out taxable activities.
• Amounts paid by the employer for employees to the Social Security Corporation.
• Hospitality and travel expenses incurred by the taxpayer.
• Expenditures for employees' medical treatment, meals during duty, travel, transport, and life insurance against work injuries or death.
• Marketing, scientific research, development, and training expenses.
• Expenses of prior tax periods that were neither defined nor final.

Net operating losses

Assessed losses incurred after 1 January 2015 may be carried forward up to five years. As for the assessed losses incurred before 1 January 2015, such losses may be carried forward indefinitely, taking into consideration that these losses should be used first. The carryback of losses is not permitted.

Payments to foreign affiliates

A resident generally may claim a deduction for royalties, management service fees, and interest charges paid to foreign affiliates, taking into account the transfer pricing regime and the applicable WHT and sales tax.