New Income Tax Law approved

Jordan

Published: 2018-11-19 09:57

Last Updated: 2018-11-19 10:31


New Income Tax Law approved
New Income Tax Law approved

House of Representatives passed the controversial 2018 Income Tax Bill (ITB), on Sunday, November 19, 2018, under amendments raising income thresholds from government set ones.
which must also be endorsed by the Senate before forwarding it to His Majesty the King.

Under the new law, household non-taxable income threshold was set at JD20,000 for 2019 (to go down to 18,000 in 2020) in addition to JD2,000 in exemptions applicable upon delivery of receipts and invoices.

The tax threshold for individuals was set at JD10,000 for 2019 (to go down to JD9,000 in 2020) in addition to JD1,000 in exemptions. Non-taxable income for household must not exceed JD23,000, according to the new law.

According to the bill, tax will be collected from those whose annual income is less than JD300,000 and according to the following ratios:

  • the first JD5,000 of taxable income will be subject to 5% tax;
  • the second JD5,000 (10%);
  • third JD5,000 (15%);
  • fourth JD5,000 (20%)
  • 25% for any amount exceeding the JD300,000-JD1 million threshold.
  • 35% for those whose annual income exceed JD1 million.
  • Income tax for the industrial sector was set at 14%;
  • 35% for the banking sector
  • 24% for telecom, electricity, mining, insurance, reinsurance and financial brokerage firms as well as legal persons practicing lease business.
  • Other legal persons will be subject to a 20% tax.

According to Petra News Agency, “Earlier, Prime Minister Omar Razzaz told the lawmakers that the bill should be passed, otherwise, the Kingdom will have to pay more interest on its debt, adding the 2018 income tax law pursues equality and will not impact those with limited or low income.

He said his government will in the future look into the blanket taxation system (called indirect taxes which include the sales tax), adding that no one can raise prices after the bill goes into effect because the income tax targets the net income.

Deputy Prime Minister Raja'i Mu'asher said only 9 percent of the overall income tax will come from individuals and households while 76 percent will be collected from corporations. He indicated that the law is a first step towards building a new economic approach that focuses on growth instead the fiscal policy-centered approach, which proved unsuccessful.”