By Nour Ali, regional tax consultant at DNV, Dubai
On September 16, 2021, Jordan issued executive instructions No. 3 of 2021 providing further implementation instructions relating to the recently introduced transfer pricing rules of June 7, 2021. Following the executive instructions, as well as the release of Regulation No. 40 of 2021, in the beginning of March 2022, the Jordanian Income and Sales Tax Department published formal transfer pricing compliance forms over a dedicated transfer pricing platform on its official website.
Transfer pricing disclosure form
The transfer pricing disclosure form will include qualitative and quantitative information relating to related party transactions taxpayers conduct in Jordan.
In terms of the qualitative information, taxpayers are required to include in the transfer pricing disclosure form their legal name, tax identification number, concerned tax period, as well as the currency used (this will usually be Jordanian Dinars). Additionally, specific information about the counterparty parties including legal name, the inter-linking relationship (whether a related party, unrelated party, or other), type and nature of the relationship (parent, subsidiary, branch, etc.), ownership percentage, jurisdiction of headquarters, jurisdiction of incorporation, jurisdiction of residence, legal name of ultimate owner, and beneficial owner.
With respect to the quantitative information, taxpayers are required to disclose the total figures of revenues, expenses, and profit or loss (as disclosed in the tax return), as well as total figures of purchases or sales of goods, provision or receipt of services, purchases or sales of fixed assets, agency services, leasing, financing of research and development, royalty and license agreement as well as financial transactions (loans and owners’ contribution in cash or in kind). Furthermore, they are required to declare the applicable transfer pricing methodology for such transactions (whether the comparable uncontrolled price, resale price, cost plus, transactional net margin method, or the transactional profit split method).
Finally, taxpayers must disclose any information regarding business restructuring impacting the multinational enterprise group or the taxpayer. This will include any cross-border reorganization of commercial or financial relations between related parties, including the termination or substantial renegotiation of existing arrangements, as well as an acknowledgement on the correctness of the information provided on the transfer pricing disclosure form, as well as confirmation on the maintenance of the local file and master file.
Transfer pricing reconcilement form
Taxpayers must use the transfer pricing reconcilement form when seeking department assistance with regard to claiming a corresponding transfer pricing adjustment.
Information to be provided on the transfer pricing reconcilement form includes the taxpayer’s legal name and tax identification number, as well as the legal name of the related party, jurisdiction of residence, nature of the transaction, previous and current value with difference, concerned tax period, as well as reconcilement reasons.
Country-by-country notification form
The country-by-country notification form consists of five sections that provides qualitative information about various entities in the multinational enterprise group that taxpayers must file.
The first section concerns information regarding the multinational enterprise group, including legal name, tax identification number, full address, jurisdiction of headquarters, jurisdiction of incorporation, jurisdiction of residence, concerned tax period, status within the group (whether the constituent entity or the ultimate parent entity), as well as whether this entity is responsible for submission of the country-by-country report to the department.
The second section provides information about the ultimate parent entity of the multinational enterprise group, including legal name, tax identification number, full address, jurisdiction of headquarters, jurisdiction of incorporation, jurisdiction of residence, and whether this entity is responsible for submission of the country-by-country report to the department.
The third section provides information about the designated taxpayer, including legal name, tax identification number, full address, jurisdiction of headquarters, jurisdiction of incorporation, jurisdiction of residence, and whether this entity is responsible for submission of the country-by-country report to the department.
The fourth section provides information about the surrogate entity of the ultimate parent entity of the multinational enterprise group, including legal name, tax identification number, full address, jurisdiction of headquarters, jurisdiction of incorporation, jurisdiction of residence and whether this entity is responsible for submission of the country-by-country report to its jurisdiction of residence along with whether the conditions of submission of the country-by-country report through it is fulfilled.
The fifth section provides information about other constituent entities (in case the country-by-country report is provided on their behalf) including their legal names, tax identification numbers, full addresses, jurisdictions of headquarters, jurisdictions of incorporation, as well as jurisdictions of residence.
Country-by-country report template
The country-by-country report template is consistent with Annex III to Chapter V of Action 13 of the OECD/G20 Base Erosion and Profit Shifting project with 3 main tables. Table 1 provides an overview of allocation of income, taxes and business activities by tax jurisdictions, table 2 provides a list of all the constituent entities of the multinational enterprise group included in each aggregation per tax jurisdiction and table 3 provides additional information supplementing information provided in tables 1 and 2.
Local file template
The local file template is consistent with Annex II to Chapter V of Action 13 of the OECD/G20 base erosion and profit shifting project, but with one main difference relating to industry analysis. That should provide high-level information on the taxpayer industry with a focus on key competitors, SWOT (strengths, weaknesses, opportunities, and threats) analysis and Porter’s Five Forces analysis for analyzing a taxpayer’s competitive environment.
Master file template
No changes were made to the master file template in accordance with Annex I to Chapter V of Action 13 of the OECD/G20 base erosion and profit shifting project.
Concluding thoughts
The Jordanian Income and Sales Tax Department published all of the transfer pricing-related information and templates on its dedicated platform in the Arabic language. Arabic will be the official language for all templates and submissions made to the department going forward.
Taxpayers must familiarize themselves with the content of the various forms and templates provided on the platform. In addition, taxpayers are urgently required to start preparing the information required for the successful submission of transfer pricing disclosure and country-by-country notification, will be due on the same submission day of the tax return.
Taxpayers will be required to submit master file and local file within 12 months from the end of the financial year concerned. Thus, it would be recommended to collate all necessary information required for the preparation of the master file and local file in advance and include it on the template provided on the platform.
Thank you Nour for your always-informative articles and for your expository writing style.
I would like to add one comment on the “Transfer pricing disclosure form” concerning the quantitative part where you mention “taxpayers are required to disclose the total figures of revenues, expenses, and profit or loss (as disclosed in the tax return)” That would not be entirely accurate/complete since these financials are not required for the taxpayer. However, they required for the related parties.
Happy to know your thoughts.
Thank You Rafik for your valuable comment and input. Indeed, this is correct!
In the technical sense, it was meant to be “taxpayers are required to disclose the total figures of revenues, expenses, and profit or loss for related parties (as disclosed in the tax return)”.