Guide for Free Zone Incorporation in Jordan

The incorporation of companies in Jordan is primarily governed by the Companies Law No. (22) of 1997. This law outlines the processes for establishing various types of companies, including Public Shareholding Companies (PLC), Private Shareholding Companies (PSC), and Limited Liability Companies (LLC). As Jordan’s economy continues to expand, the incorporation of Free Zone Companies (FZC) has become an attractive option for investors seeking to capitalize on the region's growth.

Understanding Free Zones in Jordan

Free Zones in Jordan are designated areas intended to attract investment and facilitate commercial activities. These zones offer unique benefits, including customs exemptions, which treat goods within the zones as being outside of Jordan for legal purposes. The framework for establishing FZCs is outlined in the Investment Law No. (30) of 2014, which aims to promote economic growth by easing regulatory requirements for businesses.

Key Steps for Incorporating a Free Zone Company

Drafting Necessary Documents: The initial step involves drafting a memorandum and articles of association, which outline the company’s objectives and operational guidelines.
Establishing Management Structure: Depending on the type of company, it’s essential to form a Board of Directors (for PLCs) or a Management Board (for PSCs and LLCs). This governance structure is crucial for compliance and operational efficiency.
Identifying Shareholders and Capital Contributions: Clearly defining shareholders and their capital contributions is mandatory. This ensures transparency and adherence to legal requirements.
Assigning Power of Attorney: It is advisable to assign Power of Attorney (PoA) to facilitate the incorporation process. This allows designated individuals to act on behalf of the company during registration.
Registration with the Ministry of Industry, Trade and Supply (MoITS): All required documentation must be submitted to the MoITS, along with the relevant registration fees. This step is critical for legal recognition and operational legitimacy.

Advantages of Free Zone Incorporation

1. Tax Benefits

One of the most significant incentives for establishing an FZC is the tax exemption on income derived from exporting goods and services outside Jordan, along with certain internal trade activities within the Free Zones. This stands in stark contrast to the 20% income tax imposed on companies operating in regulated areas of Jordan.

2. Exemptions from General Sales Tax (GST)

FZCs benefit from a 0% GST on all services consumed within the Free Zones, allowing businesses to reduce operational costs significantly. Additionally, certain vehicles and equipment purchased for use in these zones may also be exempt from GST.

3. Facilitated Importation Procedures

FZCs enjoy streamlined importation procedures, exempting them from customs fees on goods imported into the Free Zones, including necessary materials for establishing and maintaining their operations.

4. Licensing Fee Exemptions

The incorporation of FZCs often comes with exemptions from licensing fees for buildings and installations within the Free Zones, reducing startup costs for new businesses.

5. Currency and Profit Transfer

FZCs are permitted to transfer foreign currencies and profits without restrictions, enhancing their financial flexibility and making it easier for international investors to operate.

Limitations and Considerations

While the benefits of company formation in Jordan are substantial, there are limitations to consider. The registration is subject to specific criteria regulated by the Investment Commission, and businesses must conduct thorough analyses to determine the feasibility of operating in these zones.

Alternative Options: Aqaba Special Economic Zone (ASEZ)

For investors who find that Free Zone registration may not align with their business objectives, the Aqaba Special Economic Zone (ASEZ) offers an alternative. The ASEZ provides low-cost land, a skilled labor force, and financial incentives similar to those available in Free Zones, making it a viable option for many businesses.

Conclusion

The landscape of investment opportunities in Jordan is rapidly evolving, with Free Zones and the ASEZ presenting innovative pathways for incorporation. The Investment Law and the establishment of Free Zones aim to attract foreign investors by providing a supportive regulatory environment. Understanding the intricacies of Free Zone incorporation is essential for entrepreneurs looking to navigate the Jordanian market effectively. With careful planning and legal expertise, businesses can leverage these benefits to maximize their potential in this growing economy.