Accounting and tax

Iraq corporate tax

  1. All Iraqi resident companies will pay corporate tax at the standard rate of 15%. However, companies operating in the oil & gas sector will pay tax at a higher rate of 35%;
  2. The Iraqi government does not levy value added tax (VAT) on goods and services;
  3. Capital gains from the sale of assets will be taxed at the normal corporate rate of 15%;
  4. Dividends received by Iraqi resident companies from other resident companies will be completely exempt of corporate tax. However, dividends from non-resident companies will be taxed at the corporate rate of 15%;
  5. The Iraqi government does not levy withholding taxes on dividend payments and royalty payments. However, interest payments from an Iraqi company to a non-Iraqi company will be subject to tax at 15%;
  6. Businesses are allowed to carry forward their losses for a maximum period of 5 years. Also, the losses can only offset up to 50% of the company’s annual income;
  7. Tax returns will be filed annually by the 31st of May. Payment of the tax amount will also be done once within 21 days of the assessment of the returns by the General Commission for Taxes;
  8. Employers will be required to withhold up to 15% of their employee’s salary every month as their personal tax. This amount will then be remitted by the employer to the tax authorities;
  9. 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 reduce withholding tax on payments abroad;
  10. Healy Consultants Compliance Department will assist our Clients with i) documenting and implementing accounting procedures ii) implementing financial accounting software iii) preparation of financial accounting records and iv) preparing forecasts, budgets and sensitivity analysis.
  11. For an active trading company, the Healy Consultants’ fees to efficiently and effectively discharge our Client’s annual company accounting, auditing and tax obligations is US$2,300. Following receipt of a set of draft accounting numbers from our Client’s company, Healy Consultants will more accurately advise accounting and tax fees. For a dormant company, Healy Consultants’ fee is only US$950.

Legal and compliance

Incorporation Regulations

  1. An Iraqi LLC can be setup with 1 director and 1 shareholder, while an Iraqi JSC will require 5 directors and 5 shareholders. There is no requirement for either director(s) or shareholder(s) to be Iraqi nationals;
  2. While the minimum share capital required to register an Iraqi LLC is US$860, the government can request for higher capital when incorporating in specialized fields. For example – the share capital required to register an LLC in the oil & gas sector is US$860,000;
  3. All foreign directors and shareholders of an Iraqi company will go through a security check by the Ministry of Interior before the registration process can be completed. The security check will be completed within 3 to 6 months;
  4. To register a branch office or a representative office, our Clients will be required to submit i) audited annual financial statements of the parent company for the previous year and ii) copies of the contract signed between the company and the government;
  5. Every Iraqi JSC will have a Board of Directors which will have between 5 and 9 members. Two amongst the members will be appointed as the chairperson and vice-chairperson of the company;
  6. A branch office and a representative office must have a manager and a deputy manager duly appointed by the parent company;
  7. A company meeting must be convened within 30 days from the date of issuance of the Certificate of Incorporation. Following this, the company name will be registered with the local Chamber of Commerce;
  8. In order to sell their holdings in an LLC, all shareholders must first approach the other shareholders through the director. Only after 30 days have lapsed since this notification, can the shares be sold to individuals outside the company;
  9. If the company registration application is rejected, our Clients will have the option of appealing to the Ministry of Trade within 30 days of the notification. In case, the appeal also gets rejected, our Client can approach the applicable Court of First Instance, whose decision shall be final;
  10. Before a company can begin operating, it must register all its employees for social security and pay i) a social security deposit and ii) an estimated payroll amount for 3 months to the Ministry of Labour;

Labour Regulations

  1. While all foreign workers will require a work permit to operate in Iraq, Arab workers will be treated as Iraqi workers and so, will not require a work permit;
  2. An employee can only be made to work on probation for a maximum period of 3 months. After this period, the employer must either hire the employee on a full-time basis or fire him/her;
  3. Employment contracts in Iraq can either be i) indefinite term contract (for permanent work) or ii) fixed term contract (for temporary/seasonal work)
  4. In Iraq, employees cannot be forced to work longer than 6 days per week at a maximum of 8 hours per day. However, overtime work is permitted, provided the employees are compensated with an additional 50% of their hourly wage;
  5. Employees are entitled to 20 days of paid annual leave for every year of work which must be used by the employee as no carry forward is allowed. The leave will increase by 2 days for every 5 years of work in the company;
  6. Employees are also entitled to 30 days of paid sick leave for every year of work. It is important that employees produce a medical certificate on the subsequent day to avail of the sick leaves;
  7. All employers must contribute 12% of their employee’s salary to their social security account;
  8. An employee’s contract can only be terminated under the following conditions i) both employee and employer mutually agree ii) employee was hired on a limited period contract and the period has ended iii) employee wishes to end the contract iv) employee has been ill and has been unable to work for the past 6 months v) the employee has become handicapped due to an accident and cannot perform his/duties and vi) the employer can show that the employee’s position has become redundant;

Reporting Regulations

  1. All Iraqi resident companies will submit audited annual financial statements to the Iraq Registrar of Companies. JSCs will additionally include the following information: i) details of all significant contracts concluded by the company in the previous financial year and ii) other holdings of all shareholders who own at least 10% in the JSC;
  2. Companies are also required to file their social security returns quarterly;
  3. Branch offices and representative offices will also submit their annual financial statements to the Registrar of Companies. Additionally, branches will submit i) financial statements of their parent company for the financial year and ii) an affidavit informing the Registrar of any changes including changes in the board of directors or the head office of the parent company;

Miscellaneous Regulations

  1. All companies must reserve 5% of their profits every year until it reaches an amount equivalent to 50% of the paid-up share capital;
  2. Due to prevailing currency controls, the amount of currency that can be carried out of Iraq in bank notes without approval from the Central Bank is US$10,000;
  3. All entrepreneurs who wish to import goods into Iraq will apply for an import license which will be valid for 3 months. Extension of only 1 month can be granted upon request.

External articles

Contact us

For additional information on our accounting and legal services in Iraq, please contact our in-house country expert, Mr. Seth Ochieng, directly:
Director of Client Engagements - Seth
  • Mr. Seth Ochieng
  • Director of Client Engagements
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Ministry of Trade Ministry of Foreign Affairs Iraq stock exchange central bank of Iraq iraqi trade information center baghdad chamber commerce