How to Set Up a Subsidiary Company in Jordan?

What are the Types of Subsidiaries in Jordan?

Foreign companies can choose between various subsidiary models based on control, investment, and legal responsibility when expanding into Jordan. Here’s an explanation of each type in depth, detailing their features, advantages, and potential challenges to guide you on how to establish a subsidiary company in Jordan:

1. Wholly-Owned Subsidiary

A wholly-owned subsidiary in Jordan is a company entirely owned and controlled by a foreign parent entity. It operates as an independent legal entity under Jordanian law and is subject to local corporate governance and tax regulations.

Key Features:

• 100% ownership and control by the foreign parent company.
• Operates as a distinct legal entity, limiting liability to the subsidiary’s assets.
• Can engage in various commercial activities permitted by Jordanian law.
• Subject to local registration, licensing, and compliance requirements.

Best For:
Foreign businesses that want full autonomy over operations, decision-making, and branding. It’s ideal for long-term investments and companies with the capital to support standalone operations in Jordan.

2. Joint Venture (JV)

A joint venture in Jordan is a business partnership between a foreign investor and a local individual or company. This structure allows both parties to pool resources, share risks, and capitalise on mutual strengths, especially when entering a new or regulated market.

Key Features:

• Shared ownership, management, and profits between foreign and local partners.
• Agreements can be tailored to define roles, contributions, and exit strategies.
• Enables easier market entry by leveraging the local partner’s expertise, network, and regulatory familiarity.
• Requires a well-defined contract to manage responsibilities and dispute resolution.

Best For:
Companies entering regulated industries (like telecommunications or defence), or those that benefit from a local partner’s market insight, customer base, or distribution channels.

3. Public or Private Shareholding Company

These entities are typically used for larger-scale business operations and may offer shares to public or private investors, including foreign shareholders. They are governed by Jordan’s Companies Law and subject to additional oversight depending on the nature of the business.

Key Features:

• Can be either public (offering shares on the stock exchange) or private (restricted shareholding).
• Minimum capital requirements apply (especially for public companies).
• Board of directors and shareholders’ meetings are mandatory.
• Suitable for businesses needing to raise capital or structure investments through equity.

Best For:
Businesses planning significant capital-intensive projects, such as infrastructure or energy, or those aiming for large-scale expansion and the ability to attract multiple investors.

4. Branch Office (Not a subsidiary, but a common alternative)

A branch office is an extension of a foreign parent company, not a separate legal entity. It operates in Jordan under the authority and name of the parent and is limited to the activities permitted by its registration.

Key Features:

• Fully owned and managed by the foreign company.
• Cannot engage in activities beyond those approved by Jordan’s Ministry of Industry, Trade and Supply.
• Liabilities extend to the parent company, as the branch lacks independent legal status.
• Requires appointment of a local representative and registration with relevant authorities.

Best For:
Foreign companies looking to maintain a presence in Jordan for market testing, client support, or limited operations without the complexity of forming a new legal entity.

Step-by-Step Guide to Setting Up a Subsidiary in Jordan

Understanding how to create a subsidiary in Jordan involves a well-structured legal process. Here’s a simplified breakdown of the key steps:

Step 1: Choose the Type and Legal Structure

• Decide on the form: LLC, Joint Venture, or Shareholding Company.
• Consider your ownership goals, industry, and risk appetite.

Step 2: Reserve a Trade Name

• Submit a name reservation request to the Companies Control Department (CCD).
• The name must be unique and comply with naming conventions (e.g., include “LLC” if applicable).

Step 3: Prepare and Notarize the Articles of Association

• This document defines the company’s business objectives, governance model, and shareholding structure.
• It must be notarized and submitted along with the registration application.

Step 4: Capital Deposit (if applicable)

• Deposit the minimum required capital (usually JOD 1,000+ for LLCs).
• For regulated sectors or shareholding companies, higher capital may be needed.

Step 5: Submit Application for Company Registration

• File documents with the CCD, including identification, application forms, and notarized Articles of Association.
• Pay the government registration fees.

Step 6: Receive Commercial Registration Certificate

• Once approved, the subsidiary receives a registration certificate, allowing it to operate in Jordan legally.

Step 7: Tax and Social Security Registration

• Register with:
  • Income and Sales Tax Department for a Tax Identification Number (TIN)
  • Social Security Corporation (SSC) if the company will hire employees

Step 8: Obtain Business and Sector-Specific Licenses

• Depending on your industry, you may require additional regulatory approvals.
• Examples: telecom (TRC), pharmaceuticals (JFDA), energy (EMRC)

Key Benefits of Establishing a Subsidiary in Jordan

Want to learn how to set up a parent company with subsidiaries in Jordan? Jordan presents several strategic, economic, and regulatory advantages for foreign businesses:

1. Strategic Geographic Position

• Acts as a gateway to the Middle East, North Africa, and Gulf regions.
• Proximity to Saudi Arabia, Iraq, Egypt, and Israel provides access to over 400 million consumers.

2. Liberal Investment Framework

• Foreign investors can own 100% of companies in most sectors.
• No restrictions on capital repatriation, profit transfer, or foreign currency operations.

3. Economic Zones and Incentives

• Qualified Industrial Zones (QIZs) and Development Zones offer:
  • Reduced or zero customs duties
  • Corporate tax exemptions
  • Simplified import/export procedures

4. Skilled Human Capital

• High literacy rates and a growing number of graduates in engineering, tech, finance, and languages.
• Competitive labor costs compared to GCC countries.

5. Strong Legal System and IP Protections

• Jordan is a signatory to international treaties like ICSID and WIPO.
• Foreign investors have legal protections under the Investment Law and bilateral investment agreements.

Essential Documents for Registering a Subsidiary in Jordan

For the business incorporation your subsidiary legally, you’ll need the following documents:

• Name Reservation Certificate from CCD
• Application Form for company registration
• Memorandum and Articles of Association (notarized)
• Identification Documents: Passport copies for foreign shareholders, Jordanian ID for local partners (if any)
• Board Resolution from the parent company approving the subsidiary formation
• Power of Attorney (if an agent is filing the application)
• Proof of Capital Deposit from a licensed Jordanian bank
• Lease Agreement or Address Proof for the company’s registered office in Jordan
• Tax Registration Forms from the Income and Sales Tax Department
• Sector-specific licenses or approvals (if applicable)

Legal Structures Available for Subsidiaries in Jordan

Choosing the right legal entity is very crucial for the incorporation and operational flexibility and compliance of your subsidiary:

1. Limited Liability Company (LLC)

The most commonly chosen legal structure for foreign subsidiaries due to its flexibility and limited liability protections.

Key Features:

• Allows 100% foreign ownership in most sectors.
• Owners’ liability is limited to their capital contribution.
• Minimum capital requirement varies by sector, with no general minimum unless otherwise specified.
• Simple corporate governance with fewer formalities compared to shareholding companies.

Best For:
Small to medium-sized businesses seeking an independent legal identity with limited compliance burdens.

2. Private Shareholding Company (PSC)

A suitable structure for businesses that require a more sophisticated ownership and capital framework.

Key Features:

• Requires at least two shareholders and a minimum capital of JOD 50,000.
• Not listed on the stock exchange.
• Allows for different classes of shares and greater flexibility in drafting shareholder agreements.
• Subject to moderate regulatory oversight.

Best For:
Enterprises with complex capital needs or partnerships that require clearly defined shareholder roles and rights.

3. Public Shareholding Company (PLC)

Ideal for large-scale operations or companies planning to list publicly in Jordan.

Key Features:

• Requires at least five founding shareholders.
• Minimum share capital of JOD 500,000.
• Shares can be offered to the public and listed on the Amman Stock Exchange.
• Subject to high standards of corporate governance, financial disclosure, and regulatory compliance.

Best For:
Large corporations, infrastructure ventures, or capital-intensive industries seeking public funding.

4. Foreign Branch Office

Although not a subsidiary in the legal sense, a foreign branch allows a company to operate in Jordan under its existing legal identity.

Key Features:

• Registered as an extension of the foreign parent company.
• Must appoint a local manager or representative.
• Only allowed to carry out activities approved by Jordan’s Ministry of Industry, Trade and Supply.
• The parent company bears full legal liability for the branch’s operations.

Best For:
Companies testing the Jordanian market or offering limited, controlled services without incorporating a new entity.

5. General Partnership

A simple business structure involving two or more partners who share unlimited liability.

Key Features:

• All partners are jointly and severally liable for the debts and obligations of the business.
• No minimum capital requirement.
• Not a preferred structure for foreign investors due to the personal liability involved.

Best For:
Local or low-risk ventures between trusted partners, typically in smaller or professional service businesses.

6. Limited Partnership

A partnership structure combining general partners (with unlimited liability) and limited partners (with liability limited to their contribution).

Key Features:

• General partners manage the business and bear unlimited liability.
• Limited partners contribute capital but do not participate in management.
• Offers a balance between control and liability for different investor roles.

Best For:
Investors seeking passive participation in a business without assuming operational responsibility or legal risk.

7. Limited Partnership in Shares

A hybrid structure that allows capital to be divided into shares, similar to a company, while retaining partnership characteristics.

Key Features:

• Includes both managing partners (with unlimited liability) and shareholders (with limited liability).
• Shares may be transferred under defined conditions.
• Must follow specific corporate governance rules.

Best For:
Businesses seeking to combine the advantages of partnerships and corporate shareholding, particularly where investment needs are high but management should remain with founding partners.

Taxation Rules and Incentives for Subsidiaries in Jordan

Understanding the taxation framework is crucial for financial planning when setting up a subsidiary company in Jordan. The country offers a structured tax regime, along with incentives for foreign investment, especially in development zones and priority sectors.

1. Corporate Income Tax (CIT) Rates

Corporate tax in Jordan varies by industry:

• A 10% withholding tax is applied to dividends, royalties, and interest paid to non-residents (subject to tax treaties).

2. Sales Tax (VAT Equivalent)

• General Sales Tax (GST): 16%
• Certain essential goods and services are taxed at reduced rates (4%, 8%) or are exempt.

3. Tax Incentives

Jordan offers various tax exemptions and reductions for subsidiaries operating in:

• Development Zones: Corporate income tax reduced to 5%.
• Free Zones & Qualified Industrial Zones (QIZs): Exemptions from:
  • Import/export customs duties
  • Sales tax
  • Income tax (in some cases)

Additional incentives:

• Investment Law of 2014 grants up to 10 years of tax exemptions for projects in underdeveloped areas or strategic sectors (e.g., tourism, energy, ICT).
• Depreciation, loss carryforward (up to 5 years), and R&D-related deductions are available under certain conditions.

These tax rules are essential to understand whether you want to understand how to start a parent company in Jordan or a subsidiary.

Regulatory and Compliance Requirements in Jordan

Once your subsidiary is operational, ongoing compliance is essential to avoid penalties and maintain good standing.

1. Annual Financial Reporting

• Companies must prepare audited annual financial statements, in Arabic and in accordance with International Financial Reporting Standards (IFRS).
• These must be submitted to the Companies Control Department (CCD) and the Income and Sales Tax Department.

2. Tax Filings

• Corporate tax returns are due annually by April 30 (calendar year).
• Monthly sales tax returns must be filed (if applicable).
• Withholding tax filings are required quarterly for payments to non-residents.

3. Social Security Contributions

• Employers must register employees with the Social Security Corporation (SSC) within 15 days of hiring.
• Monthly contributions must be filed and paid by the 15th of each month.

4. Labor Law Compliance

• Contracts must be in Arabic.
• Work hours, overtime pay, minimum wage, and termination procedures must comply with the Jordanian Labor Law.
• Employee insurance coverage is mandatory.

5. Licensing and Sectoral Regulations

• Certain sectors (finance, healthcare, telecom, etc.) require special licenses and approvals.
• Annual renewals and sector-specific filings may apply.

6. Beneficial Ownership Reporting

• Subsidiaries must disclose ultimate beneficial ownership (UBO) to the CCD, in compliance with anti-money laundering (AML) laws.

Do You Need a Physical Address for a Subsidiary in Jordan?

Yes, a physically registered office address in Jordan is mandatory for setting up a subsidiary. This address is used for:

• Official correspondence
• Tax authority records
• Legal service of notices

Options for Subsidiaries:

1. Commercial Lease or Owned Office Space
   • Most common option; must provide a lease agreement or title deed during registration.
2. Co-working Spaces or Virtual Offices
   • Permissible if they are licensed commercial premises.
   • Suitable for startups and companies testing the market.
   • Must still comply with zoning and licensing requirements.
3. Free or Development Zone Address
   • Businesses registering in zones must have a presence within the zone itself to benefit from incentives.

Operational Setup for a Subsidiary in Jordan

Once legally registered, the subsidiary must establish its day-to-day operations. This includes staffing, facilities, systems, and local vendor relationships.

1. Hiring Employees

• Recruitment can be done locally or via international mobility.
• Jordan has a large, educated, and multilingual labor force.
• Must issue local employment contracts and register employees with SSC.
• Compliance with minimum wage, work permits (for expats), and occupational safety laws is required.

2. Setting Up an Office

• Office space must comply with local municipal zoning.
• IT setup, security systems, and utilities must be handled with local service providers.
• Business signage must be in Arabic (can be bilingual).

3. Outsourcing and Local Vendors

• Common services outsourced:
  • Bookkeeping and payroll
  • Legal and regulatory compliance
  • IT infrastructure and local logistics
• Use of local accounting firms is highly recommended for tax and audit compliance.

4. IT and Digital Readiness

• High-speed internet and data services are widely available.
• Cloud computing services (AWS, Azure, etc.) are accessible in Jordan.
• E-invoicing is not yet mandatory but may be implemented in the near future.

How to Open a Business Bank Account for a Subsidiary in Jordan?

A business bank account is a core requirement for subsidiary operations in Jordan. It is necessary for capital deposit verification during registration, routine financial transactions and salary, tax, and vendor payments. Steps to Open a Business Bank Account:

1. Choose a Local Bank
   • Top banks: Arab Bank, Bank of Jordan, Jordan Ahli Bank, Cairo Amman Bank
   • Ensure they offer business-friendly services like online banking, multi-currency accounts, and international transfer options.
2. Submit Required Documents
   • Certificate of company registration
   • Articles of Association
   • Tax Identification Number (TIN)
   • IDs/passports of authorized signatories and shareholders
   • Board resolution authorizing account opening
   • Lease agreement or proof of address
   • Company stamp (commonly used for authorization)
3. Meet In-Person Requirements
   • Most banks require a face-to-face meeting with directors or authorized signatories.
   • Some banks may conduct a basic background or credit check.
4. Initial Deposit
   • Banks may require a minimum balance or deposit depending on account type.
5. Account Activation
   • Once approved, you will receive a checkbook, debit card, and online banking access.

Is an Operating Agreement Necessary for a Subsidiary in Jordan?

While not legally mandatory under Jordanian law for all company types, having an Operating Agreement (OA), also known as a shareholder or management agreement, is highly recommended, especially for foreign-owned subsidiaries.

When is an OA Needed?

• For Limited Liability Companies (LLCs): The Articles of Association are required by law and often serve as the OA, but a separate detailed agreement can clarify roles, profit-sharing, and conflict resolution.
• For Joint Ventures or Multi-Shareholder Entities: A formal OA is critical to define:
  • Voting rights
  • Decision-making protocols
  • Dispute resolution mechanisms
  • Exit strategies and ownership transfer terms

Importance of an Operating Agreement:

• Reduces risk of misunderstandings among stakeholders
• Clarifies management responsibilities
• Essential during regulatory reviews or audits
• Aids in cross-border governance and dispute handling

Opening a Branch vs. a Subsidiary in Jordan: What’s the Difference?

Foreign companies when setting up a subsidiary company in Jordan can choose between opening a branch office or setting up a subsidiary. Each option comes with different legal, operational, and tax implications.

How Commenda Can Help You Expand in Jordan

Setting up a subsidiary company in Jordan can be complex, but Commenda simplifies the entire process by offering end-to-end support for international businesses. Whether you’re launching a tech startup, retail outlet, or B2B venture, Commenda helps you build efficiently and compliantly.

Our Core Services:

• Entity Structuring & Legal Setup: Choose the right entity type (LLC, PSC, branch, etc.) and register it seamlessly.
• Local Compliance & Licenses: Ensure you’re always up to date on regulatory requirements, tax filings, and industry approvals.
• Banking & Finance Support: Assistance in opening corporate bank accounts, managing capital deposits, and financial reporting.
• Virtual Office Solutions: Get a registered address in Jordan with mail handling and compliance support.
• HR & Payroll Setup: Hire local talent, manage social security registration, and run compliant payroll.
• On-Ground Business Development: Market research, vendor connections, and government relations to accelerate your local growth.

With Commenda, you reduce legal risk, save time, and gain a trusted partner for your expansion in Jordan. Want to get started with setting up a subsidiary company in Jordan without any interruptions? Book a demo with us today!