Insight into the Investment Environment in Jordan

The investment environment in Jordan has faced several internal and external challenges that adversely impacted the flow of foreign investments and the stability of existing projects. The drop in the investment level reflects precisely the magnitude of such challenges.

Therefore, the primary focus of the government’s strategy is to attract and retain foreign and local investments. The Jordanian Government has undertaken major regulatory reforms in order to establish a sound and conductive legal investment environment to revive investment and to avoid the economic and political risks for investors.

Jordan passed the Investment Environment Law No. 21 of 2022 which was published in the Official Gazette on 16 October 2022 and should come into effect after the lapse of ninety (90) days following its publication in the Official Gazette. The New Investment Law repeals Investment Law No. 30 of 2014 (the “New Investment Law”).

The New Investment Law defines the tasks and powers of the Ministry of Investment and established the Investment Council and the Incentives Committee, and regulate the establishment, supervision and management of development and free zones in Jordan, as well as develop and simplify commercial and economic activity.

The Policy of the New Investment Law

The policy of the New Investment Law is directed towards achieving economic and developmental goals to create job opportunities, increase the economic growth and improve the business environment according to the following principles:

1. equal and transparent treatment to both local and foreign investors.
2. guarantee of free money transfers overseas according to universal best practices.
3. protection of the investments and preventing the intervention in the investor’s activities, rights and interests as granted by the applicable laws.
4. digitizing and automating procedures and services to overcome administrative and procedural bureaucracy.
5. creation of an appropriate environment for the development of small and medium size enterprises.
6. promoting the investment in strategic and entrepreneurial undertakings, innovation, research and development.
7. reinforcement of competitiveness, consumer protection and banning monopoly.
8. adoption of the subsequent control and monitoring.
9. protecting the public health and safety, green economy and social standards.

Foreign Ownership

The general principle in Jordan is that foreign investment and ownership is accepted without limitations although some restrictions are applicable to specific sectors outside the free zones and development zones.

The New Investment Law has not repealed the Non-Jordanian Investments Regulation No. 77 of 2016 which provided that:

1. Foreigners are prohibited from wholly or partially owning investigation and security services, stone quarrying operations for construction purposes, customs clearance services, and bakeries of all kinds; and are prohibited from trading in weapons and fireworks.
2. Foreigners are limited to less than 50 percent ownership in certain businesses and services, including retail and wholesale trading, engineering consultancy services, exchange houses apart from banks and financial services companies, maritime, air, and land transportation services, and related services.

Incentives granted for projects outside free zones and development zones

Basically, the New Investment Law has exempted the fixed assets, production input and spare parts from customs duties irrespective of what is provided for under the applicable Customs Law.

As for the income tax, the Income Tax Law of 2014 as amended from time to time has halted any new income tax exemptions to be issued by the Council of Ministers.

However, according to the New Investment Law, if the project hires more than 250 Jordanian workers or it was established in one of the undeveloped areas and irrespective of the Income Tax Law, the project shall enjoy an exemption or a reduction of minimum 30% for a maximum of 5 years commencing from the commercial operation date.

The Council of Ministers upon the recommendation of the Incentives Committee are entitled to grant additional incentives relating to governmental lands, water and electricity tariffs and renewable energy projects.

1. hiring a minimum of 350 Jordanians.
2. hiring females not less than 50% of the total workforce.
3. strategic projects.
4. projects listed as public private partnership projects.
5. projects that target technology transfer.
6. projects with a minimum of 50% local value addition.
7. projects targeting export markets.
8. projects targeting poor and undeveloped areas.

Incentives granted for projects in the free zones and development zones

The ownership of the governmental lands located inside the free zones or development zones will be transferred to the Ministry of Investment.

The restrictions on the percentage of foreign capital do not apply in free zones and development zones.

As for the tax treatment, a sales tax of 7% applies on services sold for consumption in the development zone.

The registered entities in the development zones shall enjoy exemption from customs duties in respect of materials, equipment, machinery, supplies and construction materials.

Registered entities in a free zone shall benefit from the following:

1. Exemption from Income Tax on exporting goods and services outside Jordan.
2. Exemption from Income Tax on non-Jordanian employee salaries.
3. Exemptions from custom duties and taxes upon imported goods.
4. Exemptions of services provided by registered entities from sales tax.

One-stop-shop service for registration and licensing

The New Investment Law offers one-stop-shop service for registration and licensing of strategic and economic activities through a single window.

The license issued replaces all other licenses or permits required by any other applicable law.

The Investment Ministry has established an electronic portal to facilitate the licensing process.

Before cancelling or withdrawing any license, the authority should notify the investor and grant the investor a period to remedy the breach.

Protection against change in law events

The legislative instability was one of the most important challenges facing the investment environment in Jordan.

However, the New Investment Law guaranteed that investors who invest JD5 million or more in a project, or who employ at least 250 Jordanians, will not be affected by amendments or changes in legislative and regulatory provisions that adversely affect the investor.

The investor has the right to apply for the non-implementation of these provisions for a period of seven years.

Indemnification Rights

The investor shall be entitled to be indemnified against any losses incurred as a result of reliance in good faith upon any decision issued by any incompetent official authority.

The ownership of any investment cannot be confiscated except according to applicable laws and for a public and valid purpose in return of fair compensation.

1. in Jordanian Dinars or any exchangeable currency.
2. equal to the fair market value of the assets.
3. inclusive of the interest rate published by the Central Bank of Jordan.

Issuance of Investor Identification Card

The investor, family members and high management will be issued an Investor Identification Card to facilitate procedures and entry into Jordan.

Hiring Foreign Employees

Non-Jordanians can be hired in administrative and technical positions that require specialized skills.

Dispute Resolution

Disputes arising out of the investment contract can be settled by arbitration according to agreed terms and conditions.