Cabinet ready with final version of income tax law

AMMAN – The Cabinet on Monday approved the final version of a draft law amending the Income Tax Law before sending it to the Lower House for endorsement, a Cabinet statement said.

A Royal Decree was issued later in the day, adding the bill to the list to be debated by the House in the second extraordinary session this summer, due to start on Wednesday. 

Other laws added by the decree to the session’s agenda include the illicit fortunes, e-crimes and access to information bills that entail changes to existing laws, a Royal Court statement said.  

The changes made to an earlier draft of the income tax law were “based on dialogues with associations, political parties and other institutions of civil society... including direct encounters with citizens across the Kingdom by Cabinet members” after the bill’s text was  posted online for feedback, according to the statement.

The most important amendments to the draft law include raising the threshold of taxable income for households by JD1,000 that should be covered by bills for health, education, loan interests, murabaha (an Islamic finance and investment instrument) and residential rent in 2020. Subsequently, the tax exemptions for families in this year will amount to JD18, 000 instead of JD17, 000, according to the draft law text announced by the Prime Ministry.

In the initial version, the threshold for households was set at 18,000 next year and 17,000 as of 2020, without any exemption for basic expenses. 

The previous version exempted from tax families whose yearly income does not exceed JD18,000, allowing no exemptions for medial or educational expenses. 

Under the existing law, the figure is JD24,000 for households, JD4,000 that can be covered by bills of medical and educational expense and JD12,000 for individuals, which has been lowered to JD9,000. 

In the latest draft, income tax on banks was raised from 35 per cent to 37 per cent and the threshold of taxable income for retirees was lowered from JD3,500 per month to JD2,500 per month.

The bill seeks to generate JD280 million in additional revenues in 2019, of which JD180 million will be collected as a result of expanding the taxpayers’ base, while the rest will be generated as an outcome of “effective combating of tax evasion”, officials have announced. 

Monday’s amendments also included exempting unions’ social solidarity funds from the income tax.

The principle of progressive tax was further stressed as the government added a new segment to those with a very high income, the statement said, explaining that those whose income exceeds JD1 million annually will be subject to a 30 per cent tax rate. Previously, the government set 25 per cent as income tax levied on those whose income is JD300,000 a year and above.  

Meanwhile, the income tax on manufacturing industries in developmental zones will start as of next year at 1 per cent to rise to a maximum of 8 per cent, instead of 20 per cent in the older version.

For establishments based in free zones, they will be subject to 6 per cent instead of 20 per cent, according to the text of the draft law that will be debated by the House in the upcoming extraordinary session.