Introduction to E-Invoicing in Jordan

The Jordanian Ministry of Finance has been actively advancing its digital transformation in its tax administration by implementing a comprehensive electronic invoicing system known as JoFotara. This system is designed to enhance tax compliance, streamline financial transactions, and ensure transparency across all business operations. The JoFotara system is a key component of Jordan's efforts to modernize its tax framework, aligning with international standards and promoting economic growth.

Current Invoice Requirements in Jordan under Phase 1

As of now, Jordan is in the process of transitioning to a fully electronic invoicing system, with significant milestones achieved and more to come. The current phase of e-invoicing has already seen the integration of various businesses into the National Electronic Billing System (NBS), which is managed by the Income and Sales Tax Department (ISTD). This system allows businesses to generate and manage invoices, ensuring that all transactions are accurately recorded and reported to the tax authorities.

Key Features of the Current e-Invoicing System

1. e-Invoice Submission: Businesses can submit invoices through the JoFotara portal or by integrating their existing invoicing software with the system via API. This flexibility accommodates both large enterprises and small to medium-sized enterprises (SMEs).
2. QR Code Verification: Upon submitting an invoice, the ISTD issues a QR code that must be embedded in the final invoice. This QR code serves as verification, ensuring that invoices are correctly reported before payments are processed.
3. Compliance and Transparency: The system enhances tax compliance by enabling real-time invoice tracking, reducing fraud, and streamlining business operations. It also promotes transparency by ensuring that all transactions are accurately recorded and reported to the tax authorities.

Future E-Invoicing Requirements: Phase 2 of JoFotara Electronic Invoicing System

Jordan is set to launch Phase 2 of the JoFotara e-invoicing system on 1 April 2025. This phase marks a significant expansion of the system's scope and requirements.

Key Changes to the JoFotara Electronic Invoicing System in Phase 2

1. Mandatory Electronic Invoicing for Local Purchases: Starting 1 April 2025, all resident taxpayers with a turnover of more than JOD 75,000.00 JOD (approximately EUR 99,000.00) must issue all B2B, B2G and B2C invoices through the JoFotara system. The system will follow a centralised exchange model, where invoices are sent to the central platform then from the platform to the receiver. All invoices for locally acquired goods and services must be generated through the NBS to be considered valid for tax deduction purposes. This change aims to enhance supplier compliance and improve tax transparency.
2. Integration Requirements: All relevant entities must fully integrate their invoicing systems with the JoFotara system or an approved electronic system. This integration is crucial for ensuring accurate transaction recording and facilitating efficient tax audits.
3. Legal Framework: The implementation of Phase 2 will be supported by an amended billing regulation framework, yet to be formally published. This framework will establish that invoices issued under the new system serve as definitive proof of transactions for tax-deductibility purposes.

Benefits of Phase 2 of e-Invoicing in Jordan

1. Enhanced Tax Compliance: By mandating e-invoicing for all transactions, including local purchases, Jordan aims to reduce tax evasion and ensure that businesses adhere to stricter invoicing regulations.
2. Increased Efficiency: The national electronic invoicing system streamlines financial transactions, reducing administrative costs associated with paper-based invoicing and improving the speed of transaction processing.
3. Improved Transparency: The JoFotara system ensures that all transactions are accurately recorded and reported to the tax authorities, enhancing transparency and facilitating efficient tax audits.

Penalties

Non-compliance with Jordan's e-invoicing regulations can result in several penalties and operational challenges for businesses. Here are some key points regarding the penalties for non-compliance:

1. Financial Penalties: Businesses that fail to comply with the e-invoicing requirements may face fines of approximately JOD 500.00 per instance of non-compliance.
2. Operational Challenges: Non-compliant businesses risk being excluded from transactions with their partners, customers, and suppliers. This is particularly significant for B2G (Business-to-Government) transactions, which are restricted to entities registered on the JoFotara portal.
3. Tax Implications: Suppliers who do not comply with the e-invoicing mandate will not be entitled to deduct input VAT paid on their purchases.
4. Invalid Invoices: Invoices that do not meet the JoFotara system's standards will be deemed invalid for tax and financial purposes, impacting businesses' ability to claim deductions or credits.

To avoid these penalties, businesses are advised to register with the JoFotara system by the specified deadlines and ensure full compliance with the electronic invoicing requirements by 1 April 2025.

Conclusion

Jordan's transition to the comprehensive national electronic invoicing system is a significant step towards modernizing its tax framework and enhancing economic efficiency. The JoFotara system, with its phased implementation, aims to ensure that all businesses in Jordan operate within a transparent and compliant environment. As Phase 2 of the system comes into effect on 1 April 2025, businesses must sign up with a compliant e-invoicing service provider or prepare to integrate their invoicing systems with the JoFotara platform to ensure compliance with the new regulations. This transition presents both challenges and opportunities for businesses as well as the tax administration, but ultimately, it is poised to strengthen Jordan's digital tax ecosystem and support sustainable economic growth.

In the future, Jordan is likely to continue refining its e-invoicing system to address emerging challenges and capitalize on new technologies that can further enhance tax compliance and business efficiency. The success of this initiative will depend on the collaboration between government agencies, businesses, and technology providers to ensure a smooth transition and maximize the benefits of electronic invoicing.