Transfer Pricing in Jordan

The legal framework

Jordan legislated transfer pricing late and then legislated it thoroughly. The statutory hook is Article 20(D) of Income Tax Law No. 34 of 2014 as amended by Law No. 38 of 2018: in commercial transactions between related persons, the Income and Sales Tax Department tests whether terms differ from what independent parties would have agreed and adjusts income and tax "in accordance with the international standards". Article 20(E) and (F) allow artificial or fictitious transactions to be disregarded outright.

The machinery is Transfer Pricing Regulation No. 40 of 2021, made under Article 77(A) — eighteen articles gazetted on 7 June 2021, effective thirty days later — with Executive Instructions No. 3 of 2021 of 16 September 2021 supplying forms, thresholds and deadlines. The regime bites on periods beginning on or after 1 January 2021, so calendar-year taxpayers filed their first disclosure forms by April 2022 and their first local files, master files and country-by-country reports by December 2022. Nothing has been added since.

Two drafting features matter. Jordan does not say arm's length; it says fair price. Article 3 requires related-party terms to resemble comparable independent dealings, and Article 3(E) puts the first move on the taxpayer, who must adjust and declare the adjustment in the return. If it does not, Article 3(F) lets the Department direct the adjustment or disregard the transaction results.

Relatedness is broad. Articles 5 and 6 catch 50% direct or indirect control of capital, profits or voting rights, including through relatives to the second degree; Article 7 adds eight effective-control triggers, among them control of half the board, entitlement to half the profits, loans equal to 50% of the counterparty's loans plus capital, guarantees over 33% of its borrowings, dependence for 50% of its transactions, and commercial agency. Banks escape the loan and guarantee tests. Nothing confines the Regulation to cross-border dealings, so domestic intra-group transactions count toward the threshold too.

Methods, comparables and benchmarking

Article 12(B) prescribes five methods: comparable price, resale price, cost plus, transactional net margin and profit split. Article 12(A) asks for the most accurate and appropriate fair price on the facts. Article 12(C) is unusually taxpayer-friendly — no method has priority and there is no obligation to run a second as a sense check — while Article 12(D) requires the Department to accept the taxpayer's method where the conditions are met, and Article 12(E) admits an unlisted method where none of the five works. Article 13 allows aggregation of closely related transactions.

The trap is Executive Instructions Article 10(E): once adopted, a method must be applied in later periods. A method chosen casually in year one becomes a commitment. Article 10(D) also requires a certified accountant's disclosure on compliance with the group's transfer pricing policy and its effect on the financial statements, pulling the statutory auditor into the file in a way few regional regimes do.

Article 4(B) lists the comparability factors with an enumerated functional analysis. Article 4(E) states a clear preference for local data: foreign comparables are acceptable only where local ones are unavailable, and the taxpayer then proves comparability, accounting for economic and geographical differences. With a thin Amman Stock Exchange data set, regional screens are the practical answer, but the file must evidence the failed local search and the adjustments made.

Article 11(B) defines the fair price range as the figures produced by applying the methods to the most comparable independent dealings. Neither instrument prescribes the interquartile range or adjustment to the median; interquartile practice is imported convention, not Jordanian law. What is law is Article 14(A): the Department may not amend a transaction whose documented price falls within the range. Article 4(C) and (D) place the burden of proof on the Department beyond the taxpayer's own comparables and bar reliance on comparables without prior notice — Jordan's answer to secret comparables.

Documentation: what the ISTD expects

Four deliverables, one monetary test.

The disclosure form is due where related-party dealings exceed JOD 500,000 in any twelve consecutive months, filed with the annual return within four months of period end. Nine heads run from counterparty identity, residence and beneficial ownership through each transaction category — goods, services, leasing, R&D funding, licensing, financing — to the method used, non-cash exchanges, and whether master and local files are held.

The local file is due within twelve months of period end under Instructions Article 7. Regulation Article 8 says only "on request" and some commentary still repeats that, but the Instructions and the ISTD's implementation guide both impose the deadline: treat filing as mandatory. Content is heavier than a standard Action 13 file: beyond the functional and comparability analysis, every intra-group agreement and reconciliations from the financial statements to the figures used, the Instructions demand a full industry analysis — competitors, SWOT, supplier and buyer power, substitutes, barriers to entry, market share. Group templates routinely fail there.

The master file threshold is contested. Instructions Article 8 imposes it on "the taxpayer", defined in Article 2 by the JOD 500,000 test, and the ISTD guide's compliance table pairs the master file with that same marker, reserving JOD 600 million for country-by-country reporting alone. Big Four and BDO commentary says JOD 600 million. Adopting the adviser view means preferring secondary commentary to the Department's own guidance.

Country-by-country reporting applies above JOD 600,000,000 of prior-period consolidated revenue, filed within twelve months, fifteen data points across three tables mirroring the OECD template. Notification is the second conflict: Regulation Article 10(D) says four months, the ISTD guide says the reporting deadline; the Regulation is the higher instrument. Exchange matters here too. Jordan has been a party to the Convention on Mutual Administrative Assistance in Tax Matters since 1 December 2021, but it has not signed the country-by-country MCAA, so no exchange relationships are activated under that agreement and any exchange depends on bilateral competent authority arrangements. Local filing under Article 10(C) is a live expectation for Jordanian subsidiaries of foreign-parented groups.

Exemptions are narrow — natural persons and establishments under JOD 500,000. Records are kept four years under Article 23, longer while a dispute runs, and Article 16(C) requests allow at least thirty days. Templates are Arabic, and Article 23(C) permits English books but an Arabic version on demand: budget translation time for centrally produced files.

Audits, penalties and the enforcement climate

Regulation Article 17 is a single sentence pointing back to the Law. There is no documentation penalty, no percentage-of-adjustment penalty and no transfer-pricing-specific offence.

General sanctions are modest. Article 63 sets late-return fines up to JOD 100 for individuals, JOD 300 for most companies and JOD 1,000 for shareholding companies. Article 64(A) imposes additional tax of JOD 200 to JOD 500 for failing to keep or produce books and for a deficiency of 25% or more of the tax due, doubled on recurrence. Article 66(A) reserves a compensatory penalty equal to the whole tax difference for fraud.

The real cost is Article 36(A), a late payment penalty for each week or part week of delay. The rate is unreliable in translation — the ISTD's English text reads 0.04% per week, PwC reports 0.4% — and the Arabic governs; but on the higher reading the annualised charge on a multi-year adjustment dwarfs every fixed fine in the Law.

Capability was built deliberately. Auditors from the large taxpayer, medium taxpayer, development zone and cases directorates completed a three-week transfer pricing programme at the Tax Institute in September 2021, and a practitioner workshop for tax experts and agents followed on 27 March 2022. Expect enforcement to concentrate there. The development zone angle matters: rate differentials between zone and mainland entities make purely domestic adjustments worth the Department's time. There is no documentation-based penalty protection; Article 14(A) and a defensible in-range result are the substitute.

Dispute resolution and advance certainty

There is no advance pricing agreement programme — no types, thresholds, fees, tenure or rollback in either instrument. The only agreement-making power is Regulation Article 11(D), designating the Minister of Finance as competent authority for agreements implementing the Regulation, and the sole APA reference in the Instructions is to agreements struck with other administrations, which the master file must list. Certainty in Jordan is bought with documentation, not rulings.

Corresponding adjustment relief is properly drafted. Under Article 15, where a treaty partner adjusts a non-resident related party, the ISTD must adjust the Jordanian taxpayer's income if the foreign adjustment accords with the fair price principle in principle and amount, and must otherwise approach the other competent authority. The taxpayer applies with full support, using the reconcilement form published in 2022. Relief is barred where the Article 20 disposition rule applies or a court has finally decided the point, and dies once the Article 29 audit window lapses. Mutual agreement procedure otherwise rests on the bilateral treaty network, and the OECD's MAP statistics tell their own story: two transfer pricing cases sat in Jordan's inventory through the whole of 2022, none started and none closed, with average resolution times reported as "n.a.". The queue has never moved.

The domestic route is defined. Objection within thirty days to a committee of three auditors — one where the disputed tax is under JOD 5,000 or the disputed loss under JOD 50,000 — which must decide within ninety days; admitted tax must be paid or the objection fails. Then the Tax Court of First Instance, appeal within thirty days, cassation within a further thirty. Fees are 3% of the difference between assessed and admitted amounts, floored at JOD 30 and capped at JOD 300 per period per instance. Article 33(C) is the taxpayer's structural advantage: where the Department increases declared taxable income, it bears the burden of proving the source of that income. Limitation runs four years from filing, eight where fraud is evidenced.

No Jordanian transfer pricing judgment is publicly available. With a 2021 start and a four-year audit window, the first disputes are only now reaching the courts.

Pillar Two, Amount B and how practitioners should respond

Nothing structural has changed since 2021: the ISTD's transfer pricing library still lists two instruments, and PwC recorded no significant Jordanian corporate tax developments as at July 2026.

Pillar Two has not been enacted. Jordan is an Inclusive Framework member and a party to the Convention on Mutual Administrative Assistance in Tax Matters, but the Income Tax Law contains no income inclusion rule, undertaxed profits rule or domestic minimum top-up tax, and no GloBE instrument appears in the ISTD library; Jordan has not signed the GloBE Information Return MCAA either. For 2026, treat Jordan as non-implementing: top-up tax on low-taxed Jordanian profit will be collected by parent jurisdictions, which turns development zone and free zone rates into a Pillar Two cost exported abroad rather than a saving. Amount B has not been adopted either; Jordanian distributors stay in the five-method framework, benchmarked on TNMM.

Five things follow. Test the JOD 500,000 threshold on a rolling twelve-month basis, counting domestic dealings, non-cash exchanges and financing, not just cross-border trade. File rather than wait; the twelve-month deadline is real despite the Regulation's "on request" language. Choose the method as though it were permanent, because Article 10(E) makes it close to that, and draft the accountant's disclosure with the file. Document a local comparables search before defaulting to a regional set. Build the country-by-country position assuming no MCAA exchange will reach Amman. The regime is unlitigated but precise, and precision cuts both ways: a file that answers Articles 4, 12 and 14 on their own terms is hard to displace.