For over a decade, Healy Consultants has assisted our Clients with business registration in Iraq. Our services include i) Iraq company incorporation ii) license registration iii) business bank account opening iv) employee recruitment assistance v) visa strategies and vi) office rental solutions.
Press the link headings below to read detailed, relevant, up to date information.
Advantages and disadvantages
Advantages of Iraq company registration
- Our Clients can incorporate a limited liability company in Iraq with 1 director and 1 shareholder and minimum paid up share capital of US$860 (IQD1,000,000). Furthermore, both the director and the shareholder can be non-resident foreign nationals. Lastly, our Client will not be required to travel to Iraq to complete the registration process. Unfortunately, it takes 8 months to register an Iraq LLC;
- Certain business incentives exist for resident Iraqi companies including:
- All Iraqi companies will be completely exempt from paying i) value added tax (VAT) on goods & services ii) withholding tax on dividend payments and iii) withholding tax on royalty payments. Furthermore, dividends received by Iraqi companies from other resident companies will also be exempt from corporate tax;
- Companies investing in the Iraqi free zones will receive additional benefits: i) 100% exemption from corporate tax, custom duties (for both exports and imports) and capital gains tax ii) no foreign exchange restrictions and iii) permission to buy/sell foreign currency within the zone without any restrictions;
- Iraq has signed multiparty agreements with 9 countries in the Arab League and bilateral agreements with 32 countries including Japan, Germany, South Korea, UK and USA to i) reduce withholding tax on repatriated profits; ii) provide for fair treatment of investors and appropriate compensation in case of expropriation; and iii) settlement of business disputes in accordance with internationally established norms;
- Iraq has signed free trade area (FTA) agreements with 11 countries including Egypt, Lebanon, Oman, Qatar and UAE to reduce (or eliminate) trade barriers between the countries.
- The National Investment Commission (NIC) of Iraq licenses projects with capital investments of at least US$250,000 which boost the Iraqi economy. All such projects will enjoy additional benefits including:
- NIC licensed projects will be completely exempt from all taxes and fees for a period of 10 years from the date of commencement of operations. These benefits can be renewed after 10 years for another 15 years if the Iraqi participation in the project increases to 50%;
- There will be no restrictions on capital account and current account transactions, if such transactions are supported by proper documentation. Hence, Iraqi resident companies will be allowed to i) transfer capital in and out of the country and ii) remit their annual profits to their home countries;
- All assets imported into Iraq for the development of a certain project will be exempt from all custom duties provided they are imported within 3 years from the licensing date. Similarly, assets imported for further expansion of the project will also enjoy the same exemption if the imports are made within 3 years of notifying the NIC;
- Companies engaging in projects involving hotels, hospitals, clinics, educational and research institutions will be allowed to import assets custom free once every 4 years for the sole purpose of modernising these establishments;
- Resident companies with NIC licensed projects will be allowed to lease land in Iraq for up to 50 years. Also, companies which wish to engage in construction of residential property will be allowed to buy and sell land specifically for that purpose;
- Unlike other projects, companies will not be required to give preference to local Iraqi employees when hiring new employees. Companies will be allowed to directly approach foreign workers without initially advertising for local qualified workers or requesting for permission from the authorities. Furthermore, new foreign employees will be allowed easy access to residence permit for working in Iraq;
- Resident companies engaging in NIC licensed projects will be allowed to fully insure their investment though an Iraqi or non-Iraqi institution of their choice.
Disadvantages of Iraq company registration
- Our Clients’ investments in Iraq are not secure because:
- The judicial system in Iraq is highly inefficient, with the World Bank negatively ranking the country as 122nd best in the world for enforcing contracts. Furthermore, the courts are likely to favour local entrepreneurs over foreign entrepreneurs in case of disputes. Consequently, our Clients will not be able to depend on the law for resolving business disputes;
- Iraq was ranked as the 6th most corrupt country in the world by Transparency International in their 2014 Corruption Perception Index. As a result, working with the authorities is likely to cost our Clients a lot of money (bribes) and time;
- There is recurrent political violence in Iraq due to i) Sunni Islamic group ISIS taking over 1/3rd of the country ii) lack of trust between the Shia-dominated Iraqi Government and the Sunni population including the Kurds and iii) flow of Sunni refugees from neighbouring Syria, another war torn country. This has led to massive upheavals in the country with civil strife, bomb blasts and brutal killings becoming the norm. This makes Iraq a very dangerous place to start a new business.
- While the Iraqi Government is opening the economy to foreign investors, it will still be very cumbersome to do business in the country because:
- The banking system is Iraq is seriously under-developed. Local private banks are extremely undercapitalized which discourages people from making deposits in these banks. Furthermore, the international private banks like Standard Chartered Iraq and T.C. Ziraat Bank are not-well established which limits basic services like issue of debit and credit cards; and presence of ATMs. Furthermore, internet banking facilities and customer care service will be poor for foreign entrepreneurs;
- Despite recording economic growth of 6% in 2014, the Iraqi economy is overwhelmingly dependent on the oil & gas sector as it is the source of 90% of the government revenue. In 2010, IMF named Iraq as the most oil dependent country in the Middle East and North Africa. As a result, the Iraqi economy is very perceptible to global shocks to the oil industry;
- For all the reasons listed above, the World Bank negatively ranked Iran as the 161st best country in the world in their annual Doing Business survey.
- There is a severe shortage of qualified labour in Iraq because:
- Iraq has lost more than two decades to wars and civil strife. As a result, there is a massive shortage of educated or qualified individuals amongst the current labour force. Our Clients will be affected by this shortage when they start operating in Iraq;
- Iraqi companies outside the free zones must give preference to Iraqi citizens and nationals for employment before considering other individuals. Legally, at least 50% of the labour force in a company must be Iraqi citizens and nationals;
- While English is the most commonly spoken Western language in Iraq, the level of conversational English skills remain poor, even among the educated elite. According to the US Department of Commerce, there is lack of training in conversational English at the school and university level which will make it harder for our Clients to work with local suppliers, employees and customers.
- It takes 8 months to register a new wholly foreign owned Iraqi LLC. However, Healy Consultants provides our Client fast turnkey solutions (click link).
- Time to incorporate: Five weeks
- Cost to set up: US$24,800
- Minimum capital: US$860
- Physical office required: Yes
- Shareholders: 1
- Directors: 1
- Company secretary: No
- Resident director: No
- Corporate tax rate: 15%
- Corporate tax base: Worldwide
- Shelf companies: No
- Main company type: Private Limited Liability Company