Jordan operates several free zones, development areas, and a dedicated special economic zone in Aqaba, each offering distinct tax incentives and regulatory advantages. Understanding the differences between these zones is relevant for foreign investors when assessing the cost structure and operational arrangements of a proposed venture.
The Aqaba Special Economic Zone (ASEZ)
The Aqaba Special Economic Zone Authority administers a zone of 375 square kilometres at Jordan's southern tip, bordering the Red Sea along a 27-kilometre coastline. ASEZA operates under the Aqaba Special Economic Zone Authority Law and offers a distinctive package of incentives:
- Flat 5% income tax rate on most activities, compared with the general corporate income tax rate of 20% that applies elsewhere in Jordan under the Income Tax Law No. 34 of 2014 as amended by Law No. 38 of 2018, which rises to 24% for certain sectors and up to 35% for banks, alongside a National Contribution tax of between 1% and 7% on top.
- Exemption from customs duties on imports into the zone for goods used within it or re-exported.
- Exemption from sales tax (GST) on goods and services within the zone.
- Exemption from social service tax and most other municipal fees.
- 100% foreign ownership permitted in most sectors without the need for a Jordanian partner.
- Simplified registration through ASEZA's one-stop-shop investor services, which coordinates licensing, company registration, and building permits.
ASEZ is particularly suited for logistics, port-related activities, hospitality and tourism, light manufacturing, and services businesses that benefit from proximity to international shipping routes.
Jordan's Free Zones
Outside Aqaba, Jordan maintains a network of public and private free zones operated by the Jordan Free and Development Zones Group, an investment arm regulated by the Ministry of Investment. These zones are designed primarily for import, export, storage, and light industrial activities. Key features include:
- Exemption from customs duties on goods entering the zone.
- Exemption from income tax on profits generated from activities within the zone (for goods that are re-exported).
- Goods can be stored indefinitely without incurring duty.
- Foreign ownership is generally permitted without restriction.
The main public free zones are located in Zarqa, Sahab, Karak, and Queen Alia International Airport. Private free zones can be established by investors meeting minimum investment and area thresholds, subject to Cabinet approval.
Qualified Industrial Zones (QIZs)
QIZs are a product of the Jordan-Israel-US trade arrangement. Goods manufactured in QIZs with a minimum percentage of Jordanian and Israeli inputs can enter the United States duty-free, outside the normal quota system. QIZs are concentrated in the garment and textile sector but also accommodate light manufacturing. They do not offer the same domestic tax incentives as free zones or ASEZ, but the duty-free US market access can be significant for export-oriented manufacturers.
Development Areas
Jordan has established several development areas under the Investment Environment Law No. 21 of 2022 and supervised by the Ministry of Investment, which absorbed the former Jordan Investment Commission in 2021. These areas offer incentive packages tailored to specific sectors:
- Ma'an Development Area, focused on logistics, heavy industry, and renewable energy.
- Irbid Development Area, oriented toward technology, pharmaceuticals, and light industry.
- Dead Sea Development Zone, targeting tourism and mineral extraction.
- King Hussein Bin Talal Development Area (KHBTDA), ICT, business process outsourcing, and professional services.
Incentives in development areas may include reduced income tax rates, customs duty exemptions, and streamlined licensing. The specific package depends on the zone, the sector, and the investment amount.
Ownership and Labour Rules
In most free zones and development areas, 100% foreign ownership is permitted. However, if the company will also operate outside the zone in the domestic Jordanian market, standard foreign ownership restrictions for that sector may apply to the non-zone activities. Labour rules within ASEZ are more flexible than elsewhere in Jordan, with different Jordanisation ratios and streamlined work permit procedures for foreign employees. In standard free zones, regular Jordanian labour law applies, including the requirement to maintain a minimum percentage of Jordanian employees.
Matching the Zone to the Activity
The right zone depends on the nature of the business activity:
- Export manufacturing for the US market: Consider a QIZ for duty-free access.
- Regional logistics and warehousing: ASEZ or a free zone near Queen Alia Airport.
- Technology and services: KHBTDA or ASEZ.
- Tourism and hospitality: ASEZ or the Dead Sea Development Zone.
- Storage and re-export: Public free zones in Zarqa or Sahab.
Tax Considerations
While zone incentives are substantial, they come with conditions. Goods sold into the domestic Jordanian market from a free zone are subject to customs duties and sales tax at the point of entry into the customs territory. Income tax exemptions may be limited to specific activities conducted within the zone. Investors should model the full tax impact carefully, taking into account transfer pricing rules, withholding taxes on dividends and royalties, and the interaction between zone incentives and Jordan's tax laws.
When to Speak With a Lawyer
Zone selection has long-term consequences for the cost structure, regulatory burden, and ability to access the domestic market. A foreign investment lawyer can compare the practical benefits of each zone, engage with the zone authorities, structure the entity around the applicable incentives, and maintain ongoing compliance with zone-specific regulations.
Abdullah & Partners advises foreign investors on zone selection and structuring in Jordan. Contact the firm for matter-specific guidance.
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