Jordan

Group taxation is not permitted in Jordan.

Transfer pricing

The transfer pricing regulations in Jordan require transactions between related parties to be dealt with on an ‘arm’s-length basis’, i.e. on similar terms and conditions that could have been agreed upon if the persons involved in the transactions were independent. In addition, taxpayers are required to comply with annual transfer pricing documentation requirements as follows:

• Transfer pricing disclosure form: To be submitted by the time the tax return is due. The form is expected to include certain information on related-party transactions, including the nature of transactions, the transfer pricing method, etc.
• Transfer pricing Master File and Local File: To be maintained with the transfer pricing disclosure form and submitted upon request by the Income and Sales Tax Department. An exemption is provided for natural persons and small establishments with arm’s-length value of related-party transactions not exceeding JOD 500,000.
• Country-by-Country Report (CbCR) and notifications: CbCR notification to be submitted by the time the tax return is due, and CbCR to be submitted within 12 months from the year-end. Requirements applicable to both Jordan headquartered and non-Jordan headquartered multinational groups with consolidated revenue more than JOD 600 million.

Thin capitalisation

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.

Controlled foreign companies (CFCs)

In the Jordanian tax laws, there is no definition of a CFC; however, foreign-sourced income is taxed in Jordan.