From 1998 to 2003 there was almost no movement whatsoever in privatization, despite extensive negotiations with the World Bank and USAID, particularly in the Jordanian Investment Corporation and the infrastructure sector. At the end of 2003 the government signed a deal to sell off 26% of its shares in the leading Arab Potash Company.
The industrial sector in Jordan comprises several major producers in the minerals sector and small to medium scale industries, in other sectors. The government maintains a substantial share of several major heavy industry ventures.
The major industries in Jordan are phosphate fertilizers and minerals, petroleum products, food processing, metal products, cement and building materials, cigarettes, animal feed and clothing. Additional industries include furniture, pharmaceuticals, cosmetics, paints, plastics, paper and cardboard.
The industrial sectors in Jordan have continued to grow. The already well-established minerals industry is pushing ahead with ambitious expansion plans. Small and medium scale industries are also expanding rapidly with record numbers of new industrial companies registering and commencing work. Although Jordan's industrial exports were devastated by the loss of the Iraqi, Kuwaiti and Saudi markets occasioned by the Gulf War crisis, many industrialists have bounced back. They have taken advantage of the growth in the domestic market led by the returnees and are using more imagination and energy than they had previously in order to look for new markets. In addition, the government itself encourages private industry to diversify and to develop new overseas markets.
Industrial zones have been established at Sahab (south of Amman), Irbid and Salt; while Zarqa and Aqaba have been further developed as industrial centers.
Tourism is one of the main sources of income and foreign currency earnings for Jordan. This sector contributes more than 10 percent of the GDP of Jordan, and its annual growth rate has remained a constant 6 to 8 percent since 1992. The government is extending full support to the private sector in marketing Jordan as a tourist destination.
Jordan's Central Bank put exports for the first ten months of 1996 at about US$ 1.20 billion compared to US$ 1.40 billion for the whole of 1995. Imports in the same period in 1996 stood at US$ 3.65 billion, already above the US$ 3.62 billion in imports for 1995.
The laws governing business in Jordan have undergone a fundamental change in 1995. This has been in line with government policies to convert Jordan from a consumption to a production oriented economy and to open all economic activity to the private sector, both local and foreign.
In recent years, priority was given to new investments, taxation and protection of intellectual property laws. New legislation has also been passed in the areas of labor law and sales tax. Key changes have been introduced in the laws governing major infrastructure enterprises such as the Telecommunications Corporation and the Jordan Electricity Authority as part of an on-going program of privatization, as well as in the laws governing the activities of the Amman Financial Market (AFM).
The Jordanian judicial system is comprised of both civil and religious courts. The religious court system's jurisdiction extends to all matters of personal status, and the civil courts have jurisdiction over all other matters.
The religious court system has jurisdiction over matters of personal status, including marriage, divorce, inheritance and alimony. Persons of the same religion are subject to the appropriate religious courts, the Shar'ia Courts for Muslims and Ecclesiastical Courts for Christians. Persons not of the same religion who do not expressly consent to the jurisdiction of a religious court may bring their dispute to the civil court having appropriate jurisdiction.
The civil judiciary is a three-tiered system. The lowest courts are the fourteen Magistrates Courts and the seven Courts of First Instance. The Magistrates Courts have expressly defined jurisdiction to hear civil and criminal cases of matters involving small fines of a maximum imprisonment period of two years.
The Courts of First Instance have general jurisdiction in all criminal and civil matters not expressly granted to the Magistrates Courts' jurisdiction. The Courts of First Instance also sit at a court of appeal for judgments of Magistrates Courts.
The next judicial tier is the Court of Appeals which is presided over by a tribunal of judges. Jurisdiction of the Court of Appeals is geographically based. The Courts of Appeals hear appeals in chambers in chambers of Magistrates Courts' decisions, and decide appeals from decisions of the Courts of First Instance and the Religious Courts.
The Court of Cassation is the highest level of the judiciary. Important cases are heard by a full panel of judges. Ordinary appeals of decisions from the Court of Appeals are heard by a five judge panel.
The Kingdom of Jordan is a signatory to the Paris Convention for the Protection of Industrial Property and a member of the World Intellectual Property Organization.
Although Jordan is a member of the Paris Convention for the Protection of Intellectual Property, the international classification of patents is not observed in Jordan. Applications for the grant of a patent are filed with the Patent Office, which examines the applications for compliance with formalities and patentability under the Jordanian Patents and Design Law and may require amendments to applications to achieve conformity.
Appeals by applicants against the requirements of the Patent Office as decided by the Registrar of Patents are made by petition to the High Court of Justice within thirty days of the Registrar of Patents' decision.
Approved applications are published in the Official Gazette. The period during which any interested party may file an opposition is two months from the date of publication. If no opposition has been filed or if the Registrar or court rejects the filed oppositions, a decision granting the patent is issued.
Patents are valid for a period of sixteen years from the date of filing the application, provided that registration fees are paid along with the decision to grant the patent and that renewal fees are paid every four years during the patent term.
Patent rights are freely transferable, however, notice of the transfer must be published in the Official Gazette and properly registered with the Patent Office so that they may become valid vis a vis third parties.
Under the Patents and Design Law, patents are not granted for chemical products relating to medical drugs, pharmaceutical compositions and food. The methods and processes used in the preparations of such products, however, may be the subject of a patent.
The Patents and Design Law requires that the owner of a patent use the patented product or process in Jordan within three years of the date the patent was granted; if this requirement is not satisfied, the law provides for compulsory licensing of the patent.
The Patents and Design Law provides penalties for infringement of patents.
The international classification of goods regarding trademarks is observed in Jordan although the Trademarks Law does not adopt the classification for service marks that are recognized worldwide. Applications for registration of a trademark are filed with the Registrar of Trademarks. The Registrar conducts an examination of the application, and, if accepted, the trademark application is published in the Official Gazette. Any interested party may file an opposition within three months of publication.
Oppositions which are not settled by the Registrar or appeals based on the Registrar's decision are brought to the High Court of Justice. If no opposition has been filed or if the Registrar or court rejects the filed oppositions, a decision granting the trademark is granted and the appropriate certificate is issued.
Trademark registration is valid for a period of seven years beginning on the date the application was filed and is renewable for additional periods of fourteen years each.
Trademarks are freely transferable, but in order for them to be valid vis à vis third parties, notice of the transfer must be published in the Official Gazette and properly registered with the Registrar of Trademarks.
The Trademarks Law requires actual use of the trademarks registered. Trademarks of which there was no bona fide use or which have not been actually used for a period of two years immediately prior to the submission of an application for cancellation may be canceled.
Unauthorized use or imitation of a trademark registered in Jordan is punishable by law.
Currently, an amendment to the Trademarks Law is pending before the Jordanian Parliament. Among the more important changes proposed is the introduction of the international classification for services.
In 1992, the Copyright Protection Law No. 22 was enacted. The Copyright Law grants copyright protection to original works of literature, art and science of any type, purpose or importance. It covers works of art as may be expressed in writing, sound, drawing, photography and motion pictures, including books, speeches, plays, musical compositions, films, applied art, three-dimensional works and computer software.
A copyright is filed at the Ministry of Culture. The work protected must be original and involve personal innovation and arrangement. The protection period, for both Jordanians and foreigners, is thirty years after the death of the author. Ministry of Culture may publish or republish a work subject to copyright protection if the author or the author's heirs have not published or republished the work within six months of the date the Ministry has given notice that the work is to be so published or republished. In the event of publication or republication by the Ministry of Culture, the author or author's heirs are entitled to fair remuneration.
The Copyright Law provides penalties for infringement. Enforcement of the Copyright Law is in the jurisdiction of the civil courts, however, the implementing regulations relating to the law have not yet been promulgated.
Amendments to the Copyright Law which are supposed to make enforcement more effective are currently pending before the Jordanian Parliament.
The Jordanian tax law is the Income Tax Law, No. 57 of 1985. Several amendments have been issued since then by the tax authorities. The latest amendment adopted is Amending Law, No. 14 of 1995, and new tax adjustments contained therein came into effect in 1996.
Taxpayers may determine their own fiscal year. Tax returns are to be filed with the Tax Department within four months after the end of the fiscal year. Taxpayers who pay their tax liability within the first month following the close of their fiscal year are entitled to a 6 percent discount on their taxes due. Similarly, a 4 percent discount and 2 percent discount are available to taxpayers who pay their taxes during the second or third month, respectively, after the close of their fiscal year. In case of late filing of a tax return, a fine of 2 percent per month, but not exceeding 24 percent overall, will be imposed. A fine of 1.5 percent per month is imposed on taxpayers who fail to pay their taxes.
The primary types of income taxes levied are corporate income tax, individual income tax, withholding tax and distribution tax. The Income Tax Law of 1985 was recently amended to include provisions of particular benefit for investors. This amendment, which came into effect in 1996, allows higher allowances for individual taxpayers and lower tax rates for individuals.
Taxation of Individuals
Salaries, wages and other income paid to Jordanian and foreign employees are taxable. The Income Tax Law gives a 50 percent exemption from tax on private sector employees' annual salaries up to JD 12,000 and a 25 percent exemption on amounts above JD 12,000. Foreign employees working for non-Jordanian companies are exempt from paying all income tax. In addition, there are personal and family exemptions given by the Income Tax Law. In the public sector, 50 percent of the salaries and wages of employees are tax exempt.
Ten percent of any payment made by a Jordanian resident to a non-resident should be withheld as payment on account of the tax due and should be forwarded by the Jordanian resident payer to the tax authorities within thirty days from the date it was withheld.
Every employer who pays salaries, wages, allowances or bonuses to employees must deduct from such payments the tax due and forward it to the tax authorities on a monthly basis.
This tax is levied on the distribution of company profits (i.e., dividends) and amounts to 10 percent of the dividends paid out. This tax is required to be deducted and forwarded by the entity distributing the dividends to the Tax Department within thirty days from the date of such distribution. For purposes of this tax, profits transferred abroad by a foreign company operating in Jordan shall be considered as distributed profits.
According to law, income arising or deemed to be arising in Jordan shall be subject to tax. In order to determine a taxpayer's taxable income, all expenses wholly and exclusively made or incurred in the production of income during the year shall be deducted.
Company expenditures on training, marketing, research and development are tax exempt. Profits from the export of goods and services are totally exempted, with the exception of exports of phosphate, potash, fertilizers and other exports that are governed by trade protocols.
The following items are not deductible under Jordanian tax law: Revenues and provisions; Capital losses (for non-depreciable assets); Capital expenditures; Head Office expenses for foreign branches in excess of 5 percent of the taxable income of the branch in Jordan; Losses or expenses recoverable under an insurance policy or a compensation contract; Amounts paid as income tax and social services tax; Depreciation expenses in excess of the permissible rates.
Loss Carry Forward
Losses realized in a particular tax year may be carried forward in order to be deducted from taxable income during the next six consecutive tax years. Losses may be not carried backward and applied to a previous tax year's taxable income.
Other Tax Exemptions
According to the Investment Law of 1995, projects approved under that law and established in the Hashemite Kingdom of Jordan are entitled to tax exemptions. The new law offers incentives for investors in the form of tax exemptions which are weighted in favor of less developed areas. Projects in Zone A receive a 25 percent deduction; projects in Zone B receive a 50 percent deduction; and projects in Zone C receive a 75 percent deduction in accordance with the following stipulations:
For hotels to benefit from the incentives granted by this law, they must be classified as more than three stars in Zone A;
The shores of the Dead Sea, within a five kilometers depth from the coastline, are classified as Zone A for hotel projects.
All areas of Jordan are classified as Zone C for the sectors of agriculture, animal resources and maritime transport and railways;
Social Service Tax
A social service tax is due from each individual and equals 10 percent of the taxpayer's income.
This tax is payable by shareholding and foreign companies at a rate of 1 percent of net income before taxes and distributions.
The taxpayers as defined by the Sales Tax Law are the manufacturers, merchants or service providers whose
sales amount to JD 100,000 per annum and importers of any goods or services irrespective of the volume of their imports. The sales tax rate ranges from 0 percent up to 20 percent of the value of goods, and for services, the sales tax is fixed at a rate of 10 percent.
This tax is payable when the sale is accomplished or the service is rendered. In the case of imported goods, the sales tax is payable at the customs clearance stage, before the release of such goods.
Treaties for the Prevention of Double Taxation
Jordan has signed agreements for the prevention of double Taxation with Austria, Bahrain, Belgium, Canada, Cyprus, Denmark, Egypt, France, Iraq, Kuwait, Libya, Malaysia, Oman, Pakistan, Qatar, Romania, Saudi Arabia, Spain, Syria, Tunisia, Turkey, United Arab Emirates, United Kingdom, the United States and Yemen.
Encouragement of Investment Law
The Investment Promotion Law No. (16) of 1995 repealed the Encouragement of Investment Law, No. 11 of 1987 and Law No. 27 of 1992 Regulating Arab & Foreign Investments. The new law opens the financial markto all investors and provides for the equal treatment of investors regardless of nationality.
The new law abolishes the distinction between economic and approved economic projects. Therefore, projects in the following sectors enjoy the special exemptions specified under the law: (1) Industry; (2) Agriculture; (3) Hotels; (4) Hospitals; (5) Maritime transport and railways; (6) Leisure and Recreation Compounds; (7) Convention and Exhibition Centers; and (8) any other sectors or its branches that the Council of Ministers decides to add based on the recommendation of the Higher Council for Encouragement of Investment. These sectors are also subject to a revised tax rate of 15 percent under latest amendments to the Income Tax Law.
In addition, exemptions from taxes and fees extend to all imported fixed assets, imported fixed assets of the expansion of productive capacity over 25 percent, and imported spare parts.
Exemptions from income and social service taxes for a ten year period starting from the date of production is granted in ranging amounts according to the level of development of particular locales.
The Committee for Encouragement of Investment considers investors' applications from other sectors for inclusion under the Encouragement of Investment Law and makes the appropriate decisions within thirty days from receiving such applications. A rejected application that is returned must include the reasons for the rejection. A new government office is to be established to encourage investment and to speed procedures for registering and licensing new investments. The law also contains a commitment that all investment proposals will receive a response from the Higher Council for the Encouragement of Investment, a body made up of ministers and business representatives within thirty days of application.
The new law also allows direct entry into the Jordan stock market in order to help attract foreign capital. Furthermore, it makes it possible for a foreign investor to buy shares directly, provided that the total foreign ownership in the publicly traded company does not exceed 50 percent at the end of the close of trade on the official market.
Restrictions on Foreign Investment
Special rules were issued specifying the sectors in which foreign investors are allowed to invest and the proportion of ownership foreign investors may maintain in addition to the minimum capital requirement for foreign investors. Until recently, such minimum capital requirements were set at a minimum of JD 100,000 with the exception of investments in the stock market, where such minimum was set at JD 1,000. On February 22, 1997 the Council of Ministers resolved to remove the minimum investment requirement of JD 100,000. Pursuant to said resolution, Jordanian and non-Jordanian investors are now afforded equal treatment with regard to their investment in Jordanian companies.
Encouragement of Foreign Investment
The Encouragement of Foreign Investment Regulation of 1995 allows wider foreign ownership and direct entry of foreign nationals and companies into the Jordan stock market. This regulation is intended to enhance the opportunity for substantial foreign investment and, in conjunction with a reduced tax structure, to enhance returns on stock. The Regulation is intended to boost confidence in Jordan as an attractive emerging market and to help attract foreign capital.
The Regulation eliminates the cumbersome requirements requiring prior approvals by the Cabinet and the purchasing of permits through licensed brokers as well as the set limitations on ownership. It also provides tax exemptions for investment in less developed regions in Jordan.
The Regulations for the Promotion of Foreign Investment No. 39 of 1997 eliminated the 50 percent ceiling on foreign equity ownership in the Amman Financial Market, transportation, insurance, banking, telecommunications and agricultural sectors. The 50 percent ownership ceiling remains in the construction, trading, trade services and mining sectors. These Regulations also reduced the minimum amount of foreign investment from JD 100,000 to JD 50,000.
Investment Tax Incentives
Exemptions from income tax and customs duties for projects are provided for under the Encouragement of Investment Law. All fixed assets for the project are exempt from customs duties and taxes. Fixed assets include the equipment, machinery apparatus and tools needed for the project. For hotels and hospitals, the definition includes furniture and other material specific to these industries. Imported spare parts for the project will be exempt from customs duties and taxes provided the value of these parts does not exceed 15 percent of the value of their related fixed assets.
Net profits of the projects are exempt from income tax for up to ten years starting from the commencement of commercial production or providing services in accordance with the rates set forth, in the Other Tax Exemptions section above.
Furthermore, additional incentives are granted if the project undergoes expansion, development or modernization resulting in an increase of its productive capacity. Hotels and hospitals may enjoy exemption from customs duties and taxes every seven years for the purchase of new furniture and other materials specific to these industries.
Free Trade Zones
In order to encourage export-oriented industry, Jordan has set up a number of Free Zones. The first Free Zone was established at the Aqaba port along the Red Sea. Other free trade zones are located at Zarqa, the Sahab industrial estate and Irbid.
Free Zones come under the supervision of an autonomous body, the Free Zone Corporation and are governed by the Free Zone Corporation Law, No. 32 of 1984.
In order to qualify for licenses to operate within a free zone area, projects must meet the following criteria: (1) applying new technology and introducing new industries to the country; (2) using local raw materials or components; (3) raising the level of domestic labor skills; and (4) reducing Jordan's imports. Applications for a Free Zone license are filed with the Free Zone Corporation.
Projects granted a license in a Free Zone enjoy the following privileges: (1) exemption of profits from income tax for a period of twelve years; (2) exemption of non-Jordanian employees from income tax on their remuneration and from the social service tax; (3) exemption for goods imported into or exported from Free Zones from customs duties, import fees and any other fees and taxes; (4) exemption of lands, buildings and properties in free zones from licensing fees and taxes; and (5) freedom to repatriate capital investment and profits earned, subject to prevailing laws and regulation.
Furthermore, importers using the Free Zones to supply the local market, avoid import license fees amounting to 5 percent of cargo value, until the goods are actually cleared for release from the Zone.
Qualifying Industrial Zone
Pursuant to the United States - Israel Free Trade Area Implementation Act of 1995, the governments of Israel and Jordan have agreed to the creation of the Irbid Qualifying Industrial Zone (QIZ). This zone is located in the Irbid duty-free zone in Jordan in conjunction with the Israeli side of the border-crossing at the Sheikh Hussein - Nahar Hayarden Bridge. Pending American designation of the Irbid duty-free zone as a qualified industrial zone, this zone would provide duty-free treatment to products jointly produced by Israelis and Jordanians that meet the requirements of US legislation. The Israeli parliament's reconfirmation and American approval of this project are expected in 1998.
The agreement signed between the Israeli and Jordanian governments provides for the creation of a joint committee that will identify businesses whose products are eligible for duty-free treatment and will advise the US Customs Trade Compliance Office of such businesses. Qualifying businesses in the QIZ area must meet, inter alia, standards requiring substantial economic cooperation between the two countries.
Additional border free trade zones, including the Jordan Gateway Project and the Sahab Industrial Zone, intend to requeQIZ designation in the near future.
Taxes on imports are the chief source of domestic revenue. All imported goods are subject to custom duty, except those specifically exempted. Rates of duty vary according to the importance of the item to the national economy. Essential commodities and various raw materials attract relatively low rates of duty, while luxury goods attract high rates.
Customs procedures in Jordan have historically been a major impediment to free trade. Overlapping areas of authority and excessive signature clearances on paperwork of shipments remain unchanged. Actual commodity appraisal and tariff assessment practices often differ from the written regulations. Discretionary decisions are sometimes made about certain cases that are subject to conflicting instructions and regulations.
It is anticipated that Jordanian customs legislation will be amended in the near future. The amendments provide the Customs Department with more powers regarding violations and confiscation and delegates part of the Minister of Finance's powers to the Director General of the Customs Department.
Under the prevailing Import Tariff Schedules, valid since 1989, a high tariff rate is imposed on luxury goods and on major categories of consumer goods. On automobiles, the tariff rate ranges from 110 percent to 310 percent. To stimulate export production, import tariffs are low on many raw materials, machinery and semi-finished goods. To secure tariff exemptions, businesses must document that the raw materials to be imported will be used in export production, maintaining at least 40 percent Jordanian value-added content.
The Director General of Customs may grant temporary admission status to certain goods such as heavy machinery and equipment used to implement Government projects or important projects which have obtained Government approval. Foreign construction companies operating alone or with a Jordanian partner can apply for this temporary admission status.
Labor affairs in Jordan are governed by the new Labor Law No. 8 of 1996. The provisions of the law apply to all employees and employers as defined by Article 2 of the Law.
Maximum working hours are forty-eight during a six day week. The seventh day is a paid weekly holiday. Additional hours will be considered as overtime and qualify for compensation of 25 percent over the regular wage. Except in the event of an emergency, an increase in daily work hours is subject to approval by the Minister of Labor.
Employees are entitles to an annual fourteen-day, fully-paid sick leave that may be extended by an additional fourteen days if the employee was hospitalized. The Law makes provisions for compensation regarding on-the-job injuries. A worker is also entitled to a one-time fourteen day leave to make the pilgrimage to the Islamic holy shrines in Mecca, provided he has worked for the same company for five years.
Female employees are allowed ten weeks maternity leave with pay. Employers who employ twenty or more women must provide daycare for all children under four years of age.
The minimum age for child employment under controlled conditions has been raised to sixteen years. The new law places restrictions on the types of jobs minors may hold as well as on the number of hours they are allowed to work.
The new Law regulates labor unions and employer alliances. Workers are free to join unions without objection from their employers. Strikes and close-downs are also regulated by the new Law.
Jordan is a signatory to several environmental treaties, among which are the following:
The 1973 Washington Convention on International Trade in Endangered Species of Wild Fauna and Flora. The objective of this convention is to protect certain endangered species from over exploitation via a system of import/export permits. Jordan became a signatory on November 4, 1980.
The 1973 International Convention for the Prevention of Pollution from Ships. The objectives of this convention is to preserve the marine environment by achieving the complete elimination of intentional pollution by oil and other harmful substances and the minimization of accidental discharge of such substances. Jordan became a signatory on March 17, 1975.
The 1951 International Plant Protection Convention. The objective is to maintain and increase cooperation in controlling pests and diseases of plants and plant products, and in preventing their introduction and spread across national boundaries. Jordan became a signatory on April 24, 1970.
The 1972 Convention on the Prohibition of the Development, Production, and Stockpiling of Bacteriological (Biological) and Toxic Weapons, and on Their Destruction. The objective of this convention is to eliminate and to prohibit the development of biological weapons, as a step towards general disarmament for the sake of all mankind. Jordan became a signatory on June 27, 1975.