The Double Taxation Relief (Taxes on Income) (The Hashemite Kingdom of Jordan) Order 2001

Explanatory Note

(This Note is not part of the Order)

The Convention with the Hashemite Kingdom of Jordan (which replaces the Agreement between the Contracting States in respect of profits and income derived from the business of shipping and air transport (Shipping and Air Transport Profits) (Jordan) Order 1979 No. 300) is set out in Part I of the Schedule to this Order.

The Convention provides for business profits not arising through a permanent establishment to be taxed only in the country of the taxpayer’s residence. Profits attributable to a permanent establishment may be taxed in the country in which the permanent establishment is situated (Articles 5 and 7).

Income from immovable property and gains derived from the alienation of such property may be taxed in the country in which the property is situated (Articles 6 and 13).

International shipping and air transport profits are generally to be taxed only in the country of residence of the operator (Article 8).

The Convention includes rules for determining taxable profits when a company in one country is related to a company in the other (Article 9).

The rate of tax imposed in the country of source on dividends derived by a resident of the other country is not to exceed 10 per cent. of the gross amount of the dividends (Article 10).

The rate of tax imposed in the country of source on interest derived by a resident of the other country is not to exceed 10 per cent. of the gross amount of the interest (Article 11). Exemption from source country tax is provided for interest derived by the Government of the other country, its Central Bank or other Government financial institutions.

The rate of tax imposed in the country of source on royalties derived by a resident of the other country is not to exceed 10 per cent. of the gross amount of the royalties (Article 12).

Capital gains arising from the disposal of movable property are normally to be taxed only in the country of the taxpayer’s residence provided he is subject to tax in respect of them there. Gains arising from the disposal of assets of a permanent establishment or fixed base which the taxpayer has in the other country may be taxed in that other country (Article 13).

The earnings of temporary business visitors and some other individuals are, subject to certain conditions, to be taxed only in the country of the taxpayer’s residence (Articles 14 and 15).

Fees received by a resident of one country in his capacity as a director of a company resident in the other country may be taxed in the latter country (Article 16).

Income derived from the activities of artistes and sportsmen may, with certain exceptions, be taxed in the country in which those activities are exercised (Article 17).

Occupational pensions (other than those paid in respect of Government service) and annuities are to be taxed only in the country of source (Article 18). Government service remuneration and pensions are normally taxable only by the paying Government (Article 19).

Certain payments made to visiting teachers, researchers, students and trainees are to be exempt from tax in the country visited (Articles 20 and 21).

Other income not specified in the Convention will be taxed by the country of which the beneficial owner is a resident, and may if derived from sources in the other country also be taxed there (Article 22).

Where income continues to be taxable in both countries, credit will be given by the country of the taxpayer’s residence in respect of tax imposed by the other country (Article 23).

There are provisions safeguarding nationals and enterprises of one country against discriminatory taxation in the other country (Article 24). Provision is made for consultation and exchange of information between the taxation authorities of the two countries (Articles 25 and 26).

The Exchange of Notes clarifies the intended interpretation of certain parts of the Convention.

The Convention will enter into force on the date of the later of the notifications by each country of the completion of its legislative procedures. The Convention is to take effect in the United Kingdom from 1st April in respect of corporation tax and from 6th April for income tax and capital gains tax in the calendar year next following that in which it enters into force. The date of entry into force will in due course be published in the London, Edinburgh and Belfast Gazettes.