New Transfer Pricing Regulations have been submitted for MNE groups

On June 7, 2021, the Hashemite Kingdom of Jordan published its official Transfer Pricing Regulations in the official gazette under regulations No. (40) for the 2021. The Regulations covers multinational entity groups (MNE groups) headquartered and/or operating in Jordan. This came after Jordan joined the Base Erosion and Profit Shifting Inclusive Framework (BEPS IF) on 29 October 2019 and is taking significant steps to implement the BEPS minimum standards.

When are the Regulations effective?

The rules are effective from 7 June 2021, the date of the publication in the Official Gazette.

To whom will the Regulations apply?

The Regulations apply to all taxpayers and cover any transaction between Related Persons or Persons Under Common Control.

The Jordanian Income and Sales Tax Department (ISTD) has the right to request Transfer Pricing documentation from any Person including Persons enjoying tax incentives or exemptions or from Persons exempted from submitting an income tax return.

The Regulations provide a detailed definition for Related Persons, which is broadly consistent with the Organization for Economic Co-operation and Development (OECD) standards. It is however worth mentioning that the rules establish (among other things) that two persons would be considered Related Persons if they are Persons Under Common Control or if one has Effective Control over the other.

Small enterprises whose transaction value with related persons based on the arm’s length principle, does not exceed 500,000 Jordanian dinars during a period of 12 consecutive months, does not need to maintain Transfer Pricing documentation.

Persons under Common control

Two or more juridical persons are deemed to be under common control if the Person or Related Persons, either individually or jointly, control directly or
indirectly 50% or more of such Persons.

Effective control

Effective control is the ability of a Person to control the business decisions of another Person as some of the points indicate below:

  • A Person or Persons have the ability to conclude an agreement to provide management services to the company or otherwise effectively perform the functions of management for it;
  • A Person or Persons have 50% or more of the board of directors or have the right to appoint or dismiss the representatives of management of the other Person or Persons;
  • A Person or Persons have the right to receive, directly or indirectly, 50% or more of the profits of the other Person or Persons;
  • A Person or Persons have provided loans reflecting 50% or more from the total loans and capital except undistributed dividends as per the financial statements for the tax year income tax return;
  • A Person or Persons have issued guarantees to cover 33% or more of the total borrowings of a Person as per the financial statements for the tax year income tax return;
  • 50% or more of a Person’s business activities depend on transactions with such other Person and as per the financial statements for the tax year related to the income tax return depending on transactions with that person;
  • A Person or Persons are related to the Person holding 50% or more of a juridical person or participating, in its management.
Disclosure Form

The taxpayer is obligated to file a ‘Disclosure Form’ together with the annual income tax return. The Disclosure Form will provide details of the tax payer’s related party transactions.

Local file

The taxpayer is obligated to prepare and maintain a Transfer Pricing Local File that includes basic and detailed information on all their dealings with related persons and submit it to the ISTD upon request.

Master file

The taxpayer is obligated to prepare and maintain a Transfer Pricing master file containing basic and detailed information on the global business and Transfer Pricing policies for the transactions of the multinational group of companies to which the taxpayer belongs and submit it to the ISTD upon request.

The ISTD will issue guidelines which will include specific deadlines and instructions for taxpayers in connection with the preparation of the local file and master file

Choice of methods

The choice of Transfer Pricing method is in line with OECD guidance and prescribed methods (comparable uncontrolled price, resale price, cost plus, transactional net margin and transactional profit split).


When assessing the comparability of transactions in support of arm’s length pricing, the Regulations suggest that the OECD’s “Five Factors” of Comparability should be applied (characteristics of property/services, functions/assets/risks,
contractual terms, economic circumstances, business strategies).

Corresponding adjustment

According to Article 15 of the Regulations, the ISTD may accept to perform a corresponding adjustment in case of cross border related party transactions after ensuring that the proposed adjustment is according to the arm’s length principle.

If the proposed adjustment is not compliant with the arm’s length principle, then Mutual Agreement Procedures shall be initiated between the ISTD and the counter country tax Authority.

Country by Country reporting

There is a requirement to submit a Country by Country report (CbCR) to the department within a period not exceeding (12) months following the tax period for groups with a turnover exceeding 600 million Jordanian dinars. 

Guidelines and instructions

The Ministry of Finance (MoF) will issue further guidelines and instruction for applying the Regulation provisions


Anyone who violates the provisions of the resolution will be punished with the penalties stipulated in law.

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