ISTD releases templates for the new Transfer Pricing Regulations

2 January 2022, the Income and Sales Tax Department (ISTD) in Jordan released initial Transfer Pricing templates on its portal that are in line with the Executive Instructions issued towards the middle of last year. The templates are clear and informative, as they provide clarification on how the disclosure forms and documentations are expected to be completed and the key information requirements in each filing report.

A summary of the new requirements

On 7 June 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.

The Regulations apply to all taxpayers with total intercompany transactions of 500,000 JOD or more and cover any transaction between Related Persons or Persons Under Common Control. For more details regarding the definition of persons under common control, please refer to our previous tax alert available on the following link.

The Jordan Tax Authority, i.e., the ISTD, has recently issued the Transfer Pricing forms and templates on their portal for each of the documentation components and required disclosures below:

• Local File;
• Master File;
• Country by Country report; and 
• Disclosure Form

Forms and templates uploaded on the ISTD portal include all information required from taxpayers.

Local File

Taxpayers are obligated to prepare a Transfer Pricing Local File that includes basic and detailed information in connection with their dealings with related persons.

The contents of the Local file include but are not limited to the following:

• A description of the organizational structure, business activities and strategy of the taxpayer;
• Functional analysis and comparability analysis;
• A comprehensive analysis of the industry in which the taxpayer operates;
• The financial statements of the taxpayer in addition to any financial data related to transactions with related persons.

Master File

Taxpayers are obligated to prepare and submit 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.

The contents of the Master file include but are not limited to the following:

• The organizational structure of the subsidiaries of the group of companies and the geographical location;
• Description of the activities of the group;
• Information about the intangible assets of the group;
• Information about financing activities between the enterprises of the multinational group of companies; and
• Consolidated financial and tax position of the group.

Country by Country Reporting

The submission of a Country by Country report (CbCR) applies to MNE groups with consolidated revenue exceeding 600 million Jordanian Dinars. The taxpayer in Jordan who is part of such an MNE is obligated to file a notification locally in Jordan.

The basic information required in the CbCR contains the following elements:

• Revenue;
• Profit before tax;
• Cash tax paid;
• Current tax accrual;
• Capital and retained earnings;
• Net book value of tangible assets;
• Number of employees; and
• Complete list of entities and permanent establishments.

Disclosure Form

The taxpayer must have more than 500,000 Jordanian dinars (JOD) in the aggregated value of their transactions with related parties during a period of 12 consecutive months for the applicable Financial Year, for the submission of the Disclosure Form to apply to them.

The information required in the Disclosure form contains the following elements:

• Details relating to transactions with related parties, including the names of these parties, their countries of residence and their tax residence;
• Business restructuring information for multinational group companies or taxpayers;
• Information about the ownership of the counterparty/ies;
• Profitability of the counterparty/ies;
• Information about the type and nature of the relationship between the taxpayer and the counterparty/ies;
• A description of the nature of the business and commercial activities of the counterparty/ies;
• The method used for transfer pricing arrangements between the taxpayer and the counterparty/ies;
• The taxpayer’s declaration on whether an intra-group transaction was concluded between the taxpayer and the counterparty/ies with a non-cash consideration;
• The taxpayer’s declaration on whether it maintains transfer pricing documentation, including a Master File and Local File.

For more details related to the requirements of each of the documentation components summarized above and stipulated under the Jordanian Executive Instructions, please visit the following link to access the portal.