Jordanian personal income tax is progressive, applied to annual income, and calculated after both social security contributions and a set of personal exemptions have been deducted. For payroll purposes the whole thing resolves into a monthly withholding figure, but getting that figure right means doing the annual calculation first.
Start with exemptions
Before any tax is charged, a resident taxpayer deducts:
- Personal exemption: JOD 9,000. Automatic for every resident taxpayer.
- Family exemption: JOD 9,000. An additional allowance covering spouse and dependants.
- Documented expenses: up to JOD 4,000. For medical, education, rent or housing loan interest, and only where documented.
The maximum total exemption available to a family unit is therefore JOD 23,000. In practice the expenses element is the one most often left unclaimed, because it requires the employee to produce documentation and the payroll function to collect it.
Then the bands
What remains after exemptions and after the employee's social security contributions is taxable income, charged progressively.
| Band of annual taxable income | Rate |
|---|---|
| First JOD 5,000 | 5% |
| Next JOD 5,000 | 10% |
| Next JOD 5,000 | 15% |
| Next JOD 5,000 | 20% |
| Above JOD 20,000 | 25% |
Each band applies only to the slice of income within it. A common error is applying the top rate reached to the whole of taxable income, which materially overstates the charge.
The national contribution
A further 1% is levied on annual taxable income above JOD 200,000. It is separate from the bands above and applies only to the excess.
Severance and end of service
End of service payments are treated differently from salary, and the treatment depends on when the service was rendered.
- Service before 2010: fully exempt.
- Service from 2015 onward: the first JOD 15,000 is exempt, and the excess is taxed at a flat 9%.
Where an employee's service spans these periods, the payment has to be apportioned. This is one of the calculations most likely to be got wrong on a termination, and it is the one most likely to be noticed, because the employee usually checks it.
Turning it into a monthly withholding
The employer withholds monthly. The straightforward approach is to compute the annual charge on projected annual income and withhold one twelfth. That works cleanly for an employee on a flat salary for a full year, and less cleanly for everyone else: mid-year joiners, leavers, bonuses, salary changes and variable pay all require the projection to be revised and the withholding trued up.
Our calculator does the simple version, which is enough to size a hire. Real payroll needs the revisions, and that is what the monthly service is for.
A note on the portal. Access to the ISTD portal is restricted by regulation to certified personnel and is not transferable. Our tax practitioners hold that certification and operate the portal on the client's behalf. Where a client's scope does not extend to the full tax file and they need parallel access, that can be arranged through the official designation of an authorised agent, registered with the ISTD.
Where we come in
Income tax on employment income is computed, reported and remitted as part of our payroll service. Corporate income tax, sales tax and withholding tax on vendor payments sit within accounting and tax. Where an assessment turns into an objection or an appeal, that is legal work, and we work in association with Dar Al-Masri Law.
This note is general information, current at the date of publication, and is not advice on your situation. Rates and rules change. Speak to us before acting on any of it.