Jordan, with a workforce of approximately 3.2 million, is a growing business hub in the Middle East, attracting domestic and international companies due to its strategic location, free trade agreements, and competitive tax regime. Employees are typically paid monthly, as outlined in employment contracts, with some sectors offering a 13th-month bonus, particularly in government or large private organizations.

The country has a well-defined framework for labor and tax regulations, with the Income and Sales Tax Department (ISTD) under the Ministry of Finance overseeing tax compliance and the Social Security Corporation (SSC) managing social insurance contributions. 

Tax residents are subject to Personal Income Tax with progressive rates ranging from 5% to 30% based on income levels.

For businesses operating in Jordan, compliance with payroll and tax regulations is critical to avoid penalties, maintain employee trust, and ensure smooth business operations in Jordan’s dynamic market.

What is Payroll Tax in Jordan?

Definition and Purpose of Payroll Tax

In Jordan, payroll tax primarily consists of contributions to the Social Security Corporation (SSC) and income tax withholding through the Pay-As-You-Earn (PAYE) system, administered by the ISTD. 

Social security contributions fund pensions, maternity leave, unemployment benefits, and workplace injury benefits, while income tax supports public services. These contributions and taxes are mandatory for most employers and employees, ensuring social protection and government revenue.

Employer and Employee Responsibilities

Payroll taxes in Jordan include Social Security Contributions and Personal Income Tax withholding. Employers  and employees both contribute to social security based on gross earnings.

Employers must register with the SSC and ISTD, submitting monthly payroll tax returns and social security contributions via the ISTD’s online portal or designated banks by the end of the following month.

Employees should verify deductions on payslips to ensure compliance. Non-compliance, such as late filings or underreporting, may lead to penalties or audits by the ISTD or SSC.

Contribution rates and regulations may be updated periodically. Stay informed by regularly checking the Income and Sales Tax Department (ISTD) or the Ministry of Finance websites.

Alternatively, employers can streamline compliance by using a PEO service or engaging an Employer of Record (EOR) to manage calculations, filings, and regulatory updates.

Employer Payroll Tax Rates in Jordan

Breakdown of Employer Contributions

  • Social Security Contributions: Administered by the SSC, these cover pensions, unemployment, maternity, and workplace injury benefits. Employers contribute 14.25% of the employee’s gross salary, capped at JOD 3,349 monthly, while employees contribute 7.5%.
  • Personal Income Tax Withholding: Employers withhold income tax based on progressive rates from 5% to 30%, depending on the employee’s income bracket. A 1% National Contribution Tax applies to taxable income exceeding JOD 200,000 annually.
  • Other Contributions: Employers in specific sectors may offer voluntary benefits, such as end-of-service gratuities for employees not covered by social security, calculated as one month’s salary per year of service.

Industry-Specific Tax Considerations

Jordan offers tax incentives to encourage investment in key sectors:

  • Development Zones and Free Zones: Companies in designated zones, such as the Aqaba Special Economic Zone, benefit from reduced corporate tax rates (as low as 5%) or exemptions on certain income, as per ISTD regulations.
  • Renewable Energy and Technology: Firms in these sectors may qualify for tax holidays or reduced rates under the Investment Law, promoting innovation and sustainability.
  • Expatriate Incentives: Non-residents employed in Jordan are subject to the same income tax and social security rules unless exempted by double taxation treaties. Jordan has signed over 20 such treaties, including with the UK, reducing withholding tax on certain income types like interest or royalties to 10%.

Overview of Income Tax in Jordan

In Jordan, tax residents are subject to Personal Income Tax on their worldwide income, while non-residents are taxed only on Jordan-sourced income. The Income and Sales Tax Department (ISTD), under the Ministry of Finance, oversees the administration of personal income tax through the Pay-As-You-Earn (PAYE) system.

Personal Income Tax Brackets and Rates

Personal Income Tax in Jordan follows a progressive system, with rates increasing based on income levels. Below is the breakdown of tax brackets:

Annual Taxable Income (JOD) Tax Rate (%)
0 – 5,000 5%
5,001 – 10,000 10%
10,001 – 15,000 15%
15,001 – 20,000 20%
20,001 – 1,000,000 25%
Over 1,000,000 30%

The 1% National Contribution Tax on annual income exceeding JOD 200,000 is calculated after deducting allowable exemptions, social security contributions, and other deductions. Taxpayers must file annual returns by April 30 of the following year via the ISTD’s online portal.

Tax-Free Allowances and Deductions

Jordan offers several exemptions and deductions to reduce taxable income, including:
  • Personal and Family Exemptions: A tax-free exemption of JOD 9,000 for individuals and an additional JOD 9,000 for dependents (spouse and children), subject to conditions.
  • Social Security Contributions: Employee contributions to the Social Security Corporation (7.5% of gross salary, capped at JOD 3,349 monthly) are deductible.
  • Medical Expenses: Up to JOD 1,000 per family member for medical treatment, supported by receipts, is deductible.
  • Educational Expenses: Up to JOD 1,000 per child for educational costs at accredited institutions is deductible.
  • Housing Loan Interest: Interest on loans for purchasing or constructing a primary residence is deductible, up to JOD 1,500 annually.
  • Charitable Donations: Donations to approved charitable organizations, as recognized by the ISTD, are deductible with proper documentation.
  • Professional Expenses: Costs related to professional development, such as training or subscriptions to professional bodies, may be deductible if directly related to employment.

Key Components of Payroll in Jordan

Payroll Cycle and Pay Slips

Jordan typically follows a monthly payroll cycle, with salaries paid by the last working day of the month. A 13th-month bonus is common in government and some private sectors, paid in December or during religious holidays, and is subject to taxation.

Employers may provide allowances, such as transportation or housing, which are taxed unless specifically exempted.

Employers must provide monthly pay slips detailing:

  • Basic salary
  • Social security contributions (7.5% employee contribution)
  • Income tax withheld (PAYE)
  • Other deductions or benefits, such as overtime or end-of-service gratuities

Pay slips must comply with ISTD and Social Security Corporation (SSC) regulations, often submitted via the ISTD’s online portal or designated banks.

Employer Responsibilities for Income Tax Compliance

Employers are responsible for:

  • Calculating and withholding Personal Income Tax and employee social security contributions (7.5%) from salaries.
  • Contributing 14.25% to social security, capped at JOD 3,349 monthly, covering pensions, unemployment, maternity, and workplace injury benefits.
  • Filing monthly payroll tax returns and social security contributions by the end of the following month via the ISTD’s online portal or SSC’s designated channels.
  • Maintaining accurate records for audits by the ISTD or SSC.

Common Payroll Errors and How to Avoid Them in Jordan

  • Misclassifying Employees: Misclassifying employees as independent contractors can lead to penalties, as contractors have different tax and social security obligations. Verify classifications using Jordanian labor laws and SSC guidelines.
  • Incorrect Tax Calculations: Errors in applying progressive tax rates or miscalculating social security caps can result in fines. Use payroll software or consult local tax professionals to ensure accuracy.
  • Breaching Overtime Rules: Jordanian labor law sets a standard 48-hour workweek, with overtime rates of at least 1.25 times the regular rate for weekdays and 1.5 times for weekends. Failing to track or compensate overtime correctly can lead to disputes or penalties from the Ministry of Labour.

Tax Treaties and Withholding Taxes

Jordan’s Double Taxation Treaties

Jordan has double taxation treaties (DTTs) with over 20 countries, including the UK, France, and Turkey, to prevent taxing the same income twice. These treaties allow foreign workers and businesses to claim tax credits or exemptions for taxes paid in Jordan, reducing overall tax liability. Employers should verify applicable treaties via the ISTD to ensure compliance.

Totalization Agreements

Totalization agreements ensure expatriates contribute to only one country’s system (typically their home country or Jordan, based on residency) and receive benefits accordingly. However, Jordan does not have any of such agreements with any country.

Withholding Tax on Foreign Income

  • Dividends: Dividends paid to non-residents are subject to a 10% withholding tax, unless reduced by a DTT.
  • Interest: Interest paid to non-residents faces a 10% withholding tax, subject to treaty reductions.
  • Royalties: Royalties paid to non-residents are subject to a 10% withholding tax, unless exempted or reduced by a DTT.

Employers must file withholding tax returns and payments by the end of the following month via the ISTD’s online portal.

Jordan Payroll Tax Calculator

The Remote People Global Payroll Calculator is a handy tool that calculates payroll taxes for local and foreign employees in any country. It’s free to use!