Your guide to doing business in Iraq
Broader economic development, long-term fiscal health, and sustained improvements in the overall standard of living still depend on the central government passing major policy reforms. Iraq's largely state-run economy is dominated by the oil sector.
The Iraqi Kurdistan Region's (IKR) autonomous Kurdistan Regional Government (KRG) passed its own oil law in 2007, and has directly signed contracts to develop IKR energy reserves.
Iraq is making slow progress enacting laws and developing the institutions needed to implement economic policy, and political reforms are still needed to assuage investors' concerns regarding the uncertain business climate, which may have been harmed by the November 2012 standoff between Baghdad and Erbil and the removal of the Central Bank Governor in October 2012.
The government of Iraq is eager to attract additional foreign direct investment, but it faces a number of obstacles including a tenuous political system and concerns about security and societal stability.
Under the Iraqi Constitution, some competencies relevant to the overall investment climate are either shared by the federal government and the regions or are devolved entirely to the regions.
Investment in the IKR operates within the framework of the Kurdistan Region Investment Law (Law 4 of 2006) and the Kurdistan Board of Investment, which is designed to provide incentives to help economic development in areas under the authority of the KRG. Inflation has remained under control since 2006 as security improved. However, Iraqi leaders remain hard pressed to translate macroeconomic gains into an improved standard of living for the Iraqi populace.
Company registration in Iraq on average takes around 3-4 months.
The requirements/actions for incorporating a limited liability company in the Kurdistan Region include:
All documents submitted to the Companies Registry must be in Kurdish, Arabic or accompanied by a translation. Documents signed outside Iraq must be notarized and legalized at the nearest KRG Representation Office or Iraqi Embassy.
The application to establish a company in Kurdistan may be filed in Baghdad, Erbil or Sulaimaniya, and foreigners may own up to 100% of the share capital in any company.
Once the legal entity has been established, to register for payroll the company has to apply to the tax/social security authorities and it may take around 5 working days till completion. A file name for the company will be given after tax/social security inspection visit to the company’s premises.
The registration of a limited liability company (LLC) in Baghdad takes about 3-4 months.
It is mandatory to have an in-country bank account in Iraq to process a payroll; however, the statutory payments to the applicable authorities can be made in cash, by certified check or through a designated bank.
The working week in Iraq is Sunday to Thursday from 8am to 5pm.
Full Name: Republic of Iraq
Population: 38.27 million (World Bank, 2017)
Major Language: Arabic - Kurdish
Major Religion: Islam
Currency: Iraqi Dinar
Internet Domain: .iq
International Dialling Code: +964
Hello (As-Salām 'Alaykum) مرحب
Good Morning (Ṣabāḥul KẖAyr) صباح الخير
Good Evening (Masā' Al-Khayr) مساء الخير
Do You Speak English? (Hal Tatakallam El-Ingliziyya) هل تتلم الانجليزية تلم هل
Good Bye (Bāy Bāy) باي باي, (Ma`A As-Salāma) السلامة مع
Thank You (Shukran) شكرا (
Dates are usually written in the day, month and year sequence. For example, 5th September 2015.
Numbers are written with a comma to denote thousands and a period to denote fractions. For example, 2,000.00 IQD (two thousand Iraqi Dinars).
The tax year in Iraq is 1st January to 31st December.
Residents and non-residents of Iraq are subject to tax on their income derived from Iraq.
Iraqi nationals are considered residents for tax purposes. In addition, a non-Iraqi national is considered resident for tax purposes if:
Tax residents may claim personal allowances.
Most sources of income are considered taxable, unless specifically exempted. This includes directors’ fees and employer-paid rent, school fees and relocation expenses.
The following tax rates (after granting the resident the legal allowances) are applicable to individual’s income in Iraq:
Individuals are granted the following deductions and allowances:
In order to obtain such allowances, proper supporting documents are presented to the concerned tax authority in order to be effective; otherwise, the tax authorities shall treat the taxpayer as a ‘bachelor’ and grant the annual allowance indicated above.
Employers are responsible for and should guarantee the payment of tax. Tax is withheld from the employees’ income for each month of the fiscal year. The withheld tax must be sent monthly to the General Commission for Taxes, one of its branches or to an authority designated by the tax authority by the 15th day of the month following the month of withholding.
If the tax is not paid by the due date, an addition of 5% of the tax amount is imposed on the employer after the lapse of 21 days from the due date. This percentage is doubled if the amount is not paid within 21 days after the expiration of the first 21-day period.
At the end of the fiscal year, reconciliation takes place as to the annual staff personal income tax with the total monthly amounts paid during subsequent months.
Income tax paid to a foreign country on income earned in that country may be credited against tax paid to Iraq. The amount of the credit may not exceed the amount of tax assessed in Iraq on the income earned in the foreign country at the rate in effect in Iraq. If taxes paid to a foreign country exceed the amount of this limitation, then the excess taxes may be carried to credit in five consecutive years subject to the limitation in those years.
In the Kurdistan region, the first ID1 million of basic salary is exempt. The amount exceeding IQD1 million is subject to tax at a rate of 5%.
In Kurdistan, the income tax contributions on salaries are required to be paid quarterly, by the 21st day of the following month. Penalties on unpaid or late paid tax generally are limited to an amount of 5% to 10% of the tax liability, up to a maximum per year of IQD 75,000.
Social security contributions are applied to the salaries and the benefits of both local and expatriate employees after a deduction of a portion of employee allowances (transportation, accommodation, housing and other allowances) up to an amount equaling 30% of the base salary. In general, the rates are 12% for employers and 5% for employees, however for oil and gas companies the contribution rates are 25% for employers and 5% employees.
Social security must be paid within 30 days following each month end.
Any late payment would entail a late payment penalty of 2% of the amount due for each month of delay.
There is no Government Pension Scheme in Iraq or Kurdistan.
Reports to the social security department should be sent monthly.
Reports to the Tax Directorate are to be submitted on an annual basis.
When submitting the relevant reports, the company’s registration paper is necessary, together with the name of employee, starting date, salary, allowances, overtime (if applicable), termination date, status and number of children.
The payroll provider on behalf of the client on condition to provide an attestation from the company can submit both monthly and yearly statutory reports.
These reports must be signed and stamped by the employer.
The new start must be registered with the Social Security Authority, however for some nationalities (i.e. Indian, Bangladesh, etc.); an additional registration with the Ministry of Labour and Social Affairs has to be completed.
The registration of the new start has to be done within the first 10 days of joining, however this timeframe appears to be flexible.
The details required to set up the new start are:
Documents required from expat new starts:
The local authorities should be informed about the termination of the employment contract during the following month after the termination, at the time of submitting the social security contributions.
The final payment should be made within seven days of the last working day.
The Labour Law includes a comprehensive list of the authorized grounds for termination. They are the following: -
The Labour Law also contains provisions concerning termination of illegal employment contracts. In addition, it is possible to terminate an employment contract in accordance with the general principles of the Civil Code.