Business law in Jordan
Business Law in Jordan
Jordan has a well-developed legal framework for conducting business, and its laws are designed to encourage both local and international business activities. The country has a blend of civil law traditions and Sharia law, with a significant influence from international law in commercial matters. Business laws in Jordan are governed by the Jordanian Commercial Code, various regulations, and other sector-specific laws. Here’s an overview of key aspects of business law in Jordan:
1. Legal System
Jordan's legal system is based on civil law, influenced by the French and Egyptian legal systems. The country also applies Sharia law in specific matters such as family law and inheritance, but this does not extend to general commercial law. The Jordanian Constitution forms the foundation of Jordan's legal system, ensuring the protection of rights and freedoms.
Key institutions governing business law in Jordan include:
- The Jordanian Parliament (Majlis al-Nuwaab): The legislative body that enacts business and commercial laws.
- The Jordanian Judiciary: The court system resolves disputes, including commercial cases.
- The Ministry of Industry, Trade, and Supply (MIT): Responsible for overseeing the implementation of business regulations.
- The Jordanian Investment Commission (JIC): Facilitates and regulates foreign investment in Jordan.
2. Business Structures
Jordan offers several business structures for both local and foreign investors:
a. Limited Liability Company (LLC)
- The Limited Liability Company (LLC) is the most common business entity in Jordan, particularly for small and medium-sized businesses.
- The company must have a minimum of two shareholders and a maximum of 50 shareholders.
- The liability of shareholders is limited to the amount of capital they contribute.
- The company is governed by the Jordanian Companies Law (No. 22 of 1997).
b. Public Shareholding Company
- A Public Shareholding Company (PSHC) is a company whose shares can be publicly traded. It is usually established for larger companies, particularly in sectors such as banking and industry.
- It requires a minimum of seven shareholders and must have a capital requirement of JOD 50,000.
c. Private Shareholding Company
- A Private Shareholding Company is similar to a public shareholding company but with restrictions on the transfer of shares.
- It requires a minimum of three shareholders and has a higher capital requirement than an LLC, typically JOD 30,000.
d. Branch of a Foreign Company
- Foreign businesses can establish a branch in Jordan. The branch is considered part of the parent company and must be registered with the Jordan Investment Commission (JIC).
e. Sole Proprietorship
- A sole proprietorship is an individual business entity, and the owner is personally liable for the debts and obligations of the business.
f. Joint Ventures
- Joint ventures are commonly used by foreign and local companies to collaborate on specific projects. The terms of joint ventures are typically regulated by the contract between the parties involved.
3. Business Registration and Licensing
To establish a business in Jordan, entrepreneurs must comply with a series of registration and licensing requirements:
Company Registration: Businesses must register with the Ministry of Industry, Trade, and Supply (MIT). The registration process involves submitting the company's name, objectives, and shareholders, along with a memorandum of association or articles of incorporation.
Commercial License: Businesses need a commercial license to legally operate. The MIT reviews and issues licenses for the establishment of businesses in Jordan.
Tax Registration: Companies must register with the Income and Sales Tax Department for taxation purposes and receive a Tax Identification Number (TIN).
Social Security Registration: Employers are required to register with the Social Security Corporation to ensure their employees have access to social security benefits such as health insurance, pensions, and unemployment benefits.
4. Foreign Investment
Jordan actively encourages foreign investment and has implemented several initiatives to create a favorable environment for investors:
a. Jordan Investment Law
- The Jordan Investment Law (No. 30 of 2014) is designed to attract foreign investment and provide incentives such as tax exemptions and customs duty exemptions for projects in specific sectors like agriculture, tourism, and information technology.
b. Investment Zones
- The Jordan Investment Commission (JIC) manages special investment zones, which provide tax incentives and exemptions to foreign investors, such as tax holidays and reduced tariffs on imported machinery and equipment.
c. Foreign Ownership
- Foreign investors can generally own up to 100% of a Jordanian company in most sectors, although some strategic industries may require joint ventures with local partners.
d. Restrictions on Foreign Investment
- Some restrictions exist in certain sectors, such as defense, national security, and telecommunications, where foreign ownership may be limited.
5. Taxation in Jordan
Jordan offers a progressive tax system for businesses and individuals. Key taxes that affect businesses include:
a. Corporate Income Tax
- The corporate income tax in Jordan is generally set at 20% for most companies, though different rates apply to specific industries.
- For example, the banking sector is taxed at 35%, while companies in the natural resources sector may be subject to higher tax rates.
b. Sales Tax (VAT)
- Jordan imposes a Sales Tax (VAT) at a standard rate of 16%. Certain goods and services may be subject to exemptions or zero-rated VAT.
c. Personal Income Tax
- Personal income tax rates are progressive, ranging from 7% to 20%, depending on income level.
d. Capital Gains Tax
- Capital gains from the sale of shares are taxed at 10%. Gains from the sale of real estate may be subject to different tax rates.
e. Customs Duties
- Customs duties are levied on imported goods. The rate depends on the nature of the goods and can range from 5% to 30%. However, customs duties may be exempted for businesses operating in certain investment zones.
6. Labor and Employment Law
Jordan has a robust labor law system designed to protect both employers and employees. The key legislation is the Jordanian Labor Law (No. 8 of 1996).
a. Employment Contracts
- Employers are required to provide written employment contracts outlining the terms and conditions of employment, including salary, working hours, and benefits.
b. Minimum Wage
- Jordan sets a minimum wage for employees, which is updated periodically. As of 2023, the minimum wage is JOD 260 per month.
c. Working Hours
- The standard working week is 48 hours, typically divided into six days. Employees are entitled to one full day of rest per week.
d. Overtime and Benefits
- Overtime pay is required for hours worked beyond the standard workweek, typically paid at 1.25 times the regular hourly rate.
- Employees are entitled to benefits such as vacation leave, sick leave, and maternity leave.
e. Social Security
- Employers are required to contribute to social security for employees, which provides benefits such as healthcare, pensions, and unemployment support.
7. Intellectual Property
Jordan provides protections for intellectual property (IP), including patents, trademarks, and copyrights. The primary laws governing IP in Jordan include the Patent Law (No. 15 of 2000) and the Trademarks Law (No. 33 of 1952).
a. Patents
- Patents are granted for new and innovative inventions that provide solutions to technical problems. Jordan is a member of the World Intellectual Property Organization (WIPO) and the Patent Cooperation Treaty (PCT).
b. Trademarks
- Businesses can register trademarks in Jordan with the Jordanian Industrial Property Department to protect brand names, logos, and symbols.
c. Copyrights
- Copyright protection is available for original works of authorship, including books, films, music, and software, under the Jordanian Copyright Law.
8. Dispute Resolution
Jordan has an established legal system for resolving business disputes, with options for both litigation and alternative dispute resolution (ADR).
a. Litigation
- Commercial disputes are generally heard in the Jordanian courts, which include specialized commercial courts for business-related matters.
b. Arbitration and Mediation
- Arbitration is commonly used in Jordan for resolving business disputes, especially those involving international businesses.
- Mediation is also a popular alternative for resolving disputes amicably.
9. Conclusion
Jordan offers a favorable business environment with a stable legal and regulatory framework, making it an attractive location for foreign investment. The country’s commercial laws are designed to provide clear rules for business formation, tax regulations, employment practices, intellectual property protection, and dispute resolution. While there are some restrictions and regulatory requirements, Jordan remains one of the leading business hubs in the Middle East.
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