Doing Business Guide Understanding Iraq's Tax Position Doing Business Guide | Understanding Iraq's Tax Position

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Doing business guide Understanding Iraq's tax position Doing business guide | Understanding Iraq's tax position

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02 Doing business guide | Understanding Iraq's tax position

Contents

04 About Iraq

05 Market overview

08 Legal and regulatory

09 Taxation in Iraq

14 Immigration and labor landscape

03 Doing business guide | Understanding Iraq's tax position

About Iraq

The Republic of Iraq (“Iraq”), is the fourth Iraq has a federal parliamentary system of most populous country in the Middle East government with the country being divided and has the world’s fifth largest proven oil into governorates, four of which comprise the reserves. Iraq is predominantly a desert, semi-autonomous Kurdistan Region. Iraq has a made fertile by the Euphrates and Tigris mixed legal system of Civil and Islamic law. rivers. Iraq has a rich cultural heritage and in ancient times was referred to as the “Cradle of Civilisation”. The official languages of Iraq are Arabic and Kurdish.

04 Doing business guide | Understanding Iraq's tax position

Market overview

Country - overview Government • The global COVID-19 pandemic and the collapse of oil prices contributed to Iraq’s Geography economy contracting by around 9.5% in Government type Federal Parliamentary Republic 2020. • Production cuts following the agreement Chief of State Barham Salih, President with OPEC+ negatively impacted Iraq’s Head of Mustafa Al-Kadhimi, Prime Minister economy which is heavily dependent Government on oil revenues, resulting in a significant increase in public debt, pressure on the Legal system Mixed legal system of Civil and Islamic law exchange rate and central bank reserves 18 governorates (muhafazat, singular—muhafazah (Arabic); parezgakan, of the country. singular—parezga (Kurdish)) and one region; Al Anbar; Al Basrah; Al Administrative Muthanna; Al Qadisiyah (Ad Diwaniyah); An Najaf; Arbil (Erbil) (Arabic), • In response, the Central Bank of Iraq divisions Hewler (Kurdish); As Sulaymaniyah (Arabic), Slemani (Kurdish); Babil; devalued the Iraqi dinar by around 23% Baghdad; Dahuk (Arabic), Dihok (Kurdish); Dhi Qar; Diyala; Karbala'; Kirkuk; in December 2020. Despite anticipated Kurdistan Regional Government; Maysan; Ninawa; Salah ad Din; Wasit improvement in oil prices in 2021, lack of political stability and the devaluation of the Iraqi dinar are expected to Source: Central Intelligence Agency Factbook, The Economist Intelligence Unit weigh down consumption and disrupt commercial activity in the country. Economy — overview annual drop in 2020, averaging ~3mn • The International Finance Corporation Oil and Gas bpd. Due to the plunge in global prices, (IFC) supported multiple investments • The Iraqi economy is dominated by the annual revenues from oil also declined in the Iraqi healthcare sector in 2020. oil and gas sector. Oil accounted for to US$41.95bn, the lowest in more than The agency is also partnering with 43% of the GDP, 92% of the government a decade. the World Bank to promote economic budget revenues, and 96% of the • Iraqi oil output is forecast to partially diversification in private sector country’s exports in 2019. Iraq holds rebound in 2021, when OPEC cuts development and improve the energy, the world’s fifth largest proven crude oil are expected to ease; however, it is transport, as well as the financial sector reserves at 145bn barrels, representing anticipated that growth will be impeded in Iraq. 17% of proven reserves in the Middle by infrastructural bottlenecks, poor East and 8% of the global reserves. At • The macroeconomic outlook for Iraq relations between the government the end of 2020, Iraq’s proven natural remains uncertain and will depend on and IOCs, shortage of treated water gas reserves were the 12th largest in the the recovery of the global oil markets, for oilfield injections at southern world, at approximately ~132tn cubic feet. the potential of the Iraqi healthcare fields, and investment instability in the system to respond to the pandemic, and • Due to an improved security country. Additionally, Iraq’s flared gas is its economic reform processes. If the environment and increased investments the second-worst globally, because of conditions improve, growth is expected by International Oil Companies (IOCs), insufficient pipeline capacity and other to bounce back to 2-7% in 2021-2022, Iraq’s crude oil production exceeded midstream infrastructure. This deprives with non-oil economy projected to return the OPEC-agreed ceiling, reaching 4.8mn the country of the economic benefits of to an average of 4% during the same bpd in 2019 and ~4.4mn bpd during the utilizing the gas burned; however, owing period. first half of 2020. However, in the second to the economic slowdown, Iraq deferred half, Iraq was obliged to implement its target to eliminate natural gas flaring • To offset the economic effects of the significant production cuts to comply to 2025. pandemic, the Iraqi government is with the OPEC Agreement, in response focusing on reforming public finances, • On the other hand, the country is making to the oil price crash triggered by the and increasing gas explorations, in order swift progress with plans to boost its pandemic. to strengthen their power-generation refining capacity by 75% in the first capacity and to fuel industrial expansion. • Iraq’s oil exports also witnessed a 15% quarter of 2022, in order to reduce its

05 Doing business guide | Understanding Iraq's tax position

dependence on imports of gasoline and • The country also plans to develop its gas oil. Besides upgrading the existing non-associated natural gas fields with refineries, Iraq’s oil ministry is launching a target to increase its natural gas several new refineries, primarily in Basra, production by 750mn cubic feet per day, Kirkuk, Al-Fao, and Karbala provinces. within three years. • Iraq is also pursuing several projects to capture more natural gas and is negotiating agreements with U.S. firms, for capturing and processing natural gas, generating power, and developing the Ratawi oil field in Basra.

Iraq’s crude oil exports in 2019

Asia India China South Korea Other Asia

Europe Greece Italy Other Europe

Americas United States Other Americas

Africa & Middle East

Source: US Energy Information Administration

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Indicators for starting a business in Iraq Iraq's ranking on doing business parameters in 2019

Indicators Iraq MENA OECD

Procedures 8.0 6.5 4.9 (number)

Time 26.0 20.5 9.2 (days)

Cost (% of income 34.2 16.7 3.0 per capita)

Paid-in min. capital 14.6 8.9 7.6 (% of income per capita)

Source: Doing business report Iraq, 2020, World Bank Group

Source: Doing business report Iraq, 2020, World Bank Group.

Indicators for starting a business in Iraq

Number Procedure Time to complete Associated cost

Reserve a unique company name at 1 1 day IQD 250,000 the Baghdad Chamber of Commerce

Reserve a unique company name 2 at the Federation of Chambers of 1 day IQD 250,000 Commerce

Hire a lawyer to draft articles of About IQD 3 1 day association 1,500,000

Deposit the initial capital at a IQD 5,000 – IQD 4 commercial bank and obtain proof 2 days 25,000 thereof

Apply for registration at the IQD 250,000 - 5 15 days Companies Registry 350,000

Included in 6 Obtain the registration certificate 1 day procedure 4

7 Make a company seal 2 days IQD 20,000

Source: Doing business report Iraq 2019, World Bank Group

07 Doing business guide | Understanding Iraq's tax position

Legal and regulatory

Entering the market with non-Iraq residents are also specifically Types of legal entity covered by Instructions No. 2 of 2008 Broadly, a non-resident As a general rule, any non-Iraqi company (the “Instructions”), which broadly set out which is “carrying on business” in Iraq tests to define whether the non-resident would be considered is required to establish an Iraqi legal is “trading with” or “trading in” Iraq. In presence (e.g. company, branch office). summary, “trading with” Iraq should not to be “trading in” Iraq While there is no specific definition of what result in an Iraq tax liability, whereas when contracts are constitutes “carrying on business” in Iraq, “trading in” Iraq will. typically an obligation would arise when concluded in Iraq, a company obtains premises (including “Trading with” vs. “Trading in” Iraq payments for the rented premises) in Iraq, or retains Broadly, a non-resident would be personnel on a more than temporary basis. considered to be “trading in” Iraq when services are made Penalties may apply in respect of failure to contracts are concluded in Iraq, payments register the enterprise. for the services are made into an Iraqi bank into an Iraqi bank account, or services are physically provided account, or services There are a number of principal business in Iraq. Critically, this may also include cases entities in Iraq, including joint stock in which services are provided through a are physically provided company, limited liability company, joint business agent or subcontractor in Iraq. in Iraq. liability company, simple company, sole owner enterprise, representative office A contractor “trading in” Iraq will need and branch office. In practice, the most to register a legal entity in Iraq, register common form of entities for foreign for tax purposes and submit annual investors are the limited liability company corporate income tax filings. Information (LLC) and branch office. As per the on the contract should strictly be sent to amended Companies Law, Iraqi ownership the tax office, in order for the tax office of at least 51% is required to establish a to determine whether the contractor is new limited liability or joint stock company liable for tax, i.e. whether the contract in Iraq. is considered to be “trading in” Iraq, and therefore whether retentions should be Further to the issue of new foreign made on payments under the contract. branches regulation No.2 of 2017, it is now possible for entities that do not have As the Instructions are currently drafted, contracts with the government to register a there is no de minimis time limit for branch in Iraq. provision of services in Iraq – therefore strictly as little as one day spent working in It is difficult to predict the time taken Iraq should be considered to be “trading in” to register a legal entity in Iraq, but a Iraq, and therefore give rise to an exposure time frame of 6 to 12 months would be to tax in Iraq. typical. It is generally faster and more straightforward to register a branch of a foreign company than an LLC in Iraq.

Permanent establishment Iraq’s income tax law does not recognize the concept of permanent establishment. However, Iraq broadly takes a territorial approach to taxation. In addition, contracts

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Taxation in Iraq

Residence • Interest, commissions, discount and Article 8 of the Federal Income Tax Law sets An entity is resident if it is incorporated profit arising from trading in bonds and out certain expenses which are specifically under the laws of Iraq or has its place of securities; allowed as deductions in calculating management and control in Iraq. An entity • Rental of agricultural land; taxable income. As a general principle, is nonresident if it does not meet the it is stated that all expenses incurred by • Salaries, pensions, bonuses, wages of criteria for a resident entity. the taxpayer in order to produce income specified work in a limited period of during the year shall be deducted in time, allowances of workers including Tax administration calculating taxable profits. Any deductions payments in cash or allowances for the The main source of tax law in Iraq is the which are claimed should be supportable taxpayer against his services, such as Federal Income Tax law, Law #113 of 22 by appropriate documentation and it housing, food and accommodation; and November, 1982, as amended in 2003 (the is common for the authority to request “Federal Income Tax Law”). • Any other source not exempted by law any supporting documentation that they and not liable to any tax in Iraq. consider is necessary to gain comfort The tax authority in Federal Iraq is the Article 5 provides that “tax shall be with respect to the financial statements General Commission for Taxes (“GCT”). The imposed on income of the Iraqi person and tax calculation. In practice, the GCT GCT has two main divisions, the Corporate resident in Iraq which arises inside or frequently reverts to a deemed profit basis Division which deals with Iraqi companies outside Iraq, regardless of the place of of assessment, by applying a percentage to and the Large Taxpayer Department receipt.” “Person” in this context refers to the entity’s turnover to arrive at a deemed (“LTD”), which deals with foreign companies. both natural persons and legal persons (i.e. profit which is then subject to corporate companies, branches of foreign companies, income tax at the applicable rate. The GCT The tax authority in the Kurdistan Region etc.). has produced internal guidance which is the Income Tax Directorate (“ITD”). The sets out deemed profit rates for certain ITD has established a Large Taxpayer Tax is also imposed on the income of a industries, which is typically updated on Department to look after companies non-resident which arises in Iraq even if it an annual basis. We would note that the classified as “large taxpayers”. The tax year is not received in Iraq. internal guidance issued by the GCT is not in Iraq is the calendar year. legislation, and accordingly should not Basis of taxation be legally binding on the tax authority or Taxable income Entities registered in Federal Iraq are taxpayer. Taxable income is broadly total income required to prepare annual financial less allowed deductions. Taxable income statements, which should be prepared The percentage to be applied to the entity’s generally includes all income from in Arabic and in accordance with Iraqi revenues can vary, depending on the whatever source. The Federal Income Tax Uniform Accounting Standards (UAS). specific industry and activities performed, Law provides that expenses incurred in According to the tax law, if supporting but a percentage of around 20 - 25% would generating taxable income during a period books and records are maintained, be typical. This deemed profit approach should be deductible in calculating taxable corporate income tax should be calculated is more likely to be adopted by the GCT income. based on the accounting profits as per the where the entity is loss-making, or where taxpayer’s Iraqi UAS financial statements. the audited UAS financial statements As per Article 2 of the Federal Income indicate low profit margins. Tax Law the following types of income are considered taxable income:

• Profits from commercial activity or from activity of a commercial nature, vocations Taxable income is broadly total income less and professions, including contracts, undertakings and compensation for non- allowed deductions. Taxable income generally fulfilment thereof if not for making good includes all income from whatever source. a loss sustained by the taxpayer;

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Withholding tax Retentions of tax on payments for certain contractor has completed tax filings and Iraq has a complex legislative framework contracts must be made by the payer, at has obtained a tax clearance. with respect to withholding tax and tax various rates up to a maximum of 10% of retentions. In practice, there are few final the gross payments, depending on the withholding taxes, however specific focus nature of the contract/services performed, should be given to contracts which fall plus the whole of the final instalment There is no specific within the scope of Instructions No. 2 of payment. legislation that 2008, concerning contracts with foreign parties, and Instructions No. 5 of 2011, for Tax retentions under Instructions No. 2 addresses withholding upstream oil and gas contracts. of 2008 are not intended to be a “final” withholding tax. Amounts retained tax on payments for Dividends on installment payments should be royalties. In practice, there is no withholding tax on transferred to the tax authority within a dividends. period of thirty days from the completion of work. In addition, contracting entities Interest may not pay the final amount to Tax exemptions A tax of 15% applies to payments of interest contractors and contracting parties, unless Investment Law No. 13 of 2006 from an Iraqi LLC or branch to a non-Iraq with the written approval of the GCT. Investment Law No. 13 of 2006 provides resident (e.g. the foreign parent company Alternatively, where no tax clearance for certain tax exemptions and benefits for or non-resident bank). certificate is provided, the party making the investing in Iraq. The broad objective of the payment should be required to withhold Investment Law is to promote investment Rents and royalties 10% of the final instalment payment and and transfer modern technologies in order There is no specific legislation that remit it to the GCT, before releasing the to contribute to the development of Iraq addresses withholding tax on payments for final payment to the supplier. Tax clearance and diversification of its economy. royalties. However, there are provisions in will only be awarded once the supplier has Key highlights are as follows: the tax law which the tax authority could completed their tax filing obligations and use to argue that such payments should settled any due taxes in Iraq. • Exemption from ‘taxes and fees’ for a be taxable in Iraq i.e. if the income is period of 10 years. The period of the considered to be “income arising in Iraq.” To Tax retentions are not consistently tax exemption can be further increased the extent that payments for management applied in Kurdistan Region, other than on to a period of up to 15 years at the fees, technical services, rent etc. are made payments made by the public sector, which discretion of the National Commission by the Iraqi entity to a foreign entity, there often include a 5% tax retention. for Investment, subject to the level of is a risk that the tax authority could argue Iraqi participation in the project. that such payments are subject to tax Instructions No. 5 of 2011 - Oil and gas • Investment licences are granted on a in Iraq, on the basis that they relate to contracts project by project basis – rather than to “income arising in Iraq.” In practice, the tax Instructions No. 5 of 2011 and subsequent an entity as a whole. authority generally defers to the legislation amendments provide that subcontractors • The Investment License is granted under regarding tax retentions and we note our to whom the Oil and Gas Tax Law applies restricted conditions. comments below in this respect. should be subject to retentions of tax on their contract payments at a rate of Exemptions typically apply in respect of corporate income taxes only, and Tax retentions 7% of the gross amounts, for petroleum employment taxes in respect of individuals Instructions No. 2 of 2008 – Contracts contracts and at a rate of 3.3% for non- working under the project should remain between Iraqi and foreign contracting petroleum contracts. payable. parties The main provisions regarding tax The Instructions provide that the entity retentions are set out in Instructions No. making the payment should remit the 2 of 2008 and subsequent amendments, retained amounts to the tax authority which require that information relating within 30 days of making the payment, with to contracts with foreign suppliers be the amounts to be held by the tax authority disclosed to the GCT in order for the tax to be reconciled with the contractor’s final office to determine whether the contractor tax calculation. In addition, the whole of is liable for tax and to confirm the rate of the final instalment payment should be retention. withheld from the contractor until the

10 Doing business guide | Understanding Iraq's tax position

Cabinet Decision No. 167 of 2010 will be exempted from income tax and its first filing for corporate taxes by 30 Cabinet Decision No. 167 of 2010 provides stamp duty or other duties. Goods and June following the year-end and it is typical for an exemption from corporate income materials may be imported into the free to complete the registration with the tax tax and Iraq reconstruction tax (i.e. zones free of customs duties. Non Iraqi authority (for all taxes) at that time. customs duty) and other charges in relation employees’ income in the free zone is to contracts for projects that contribute to exempt from income tax. Filing and payment the development of Iraq. • 50% of the Iraqi employees’ income in The tax year in Iraq is the calendar year. the free zone is exempt from income tax. Financial statements must be prepared Free zones/neutral zones under Iraqi Uniform Accounting Standards The General Authority for Free Zones (“UAS”) in Arabic and audited by an Tax treaties (GAFZ) was established to manage the free accredited Iraqi auditor. Iraq currently does not have any tax zones in Iraq, and this authority sits within treaties in force. There is a treaty of the the Ministry of Finance. The audited UAS financial statements Arab Economic Union Council, of which Iraq should be submitted to the GCT, together is a signatory; however, we do not see this Decree No. 170 for year 1998 was issued with the corporate income tax return, applied widely in practice. on 19 October 1998, to exempt investment by May 31 following the year end, with projects which are conducted within the payment due following the tax authority’s Corporate income tax free zones, and the capital invested in the assessment of the tax return. Registration free zones, from income tax and stamp Following registration of the LLC or branch duty. In Kurdistan Region, the audited Iraqi UAS of a foreign company in Iraq, the entity is financial statements should be submitted required to register with the GCT in Federal According to the Decree: to the ITD, by 30 June following the year Iraq for corporate tax purposes. For the end. In addition, Large Taxpayers are Kurdistan Region, registration is typically • Investment projects in the free zones required to submit the completed self- completed for corporate tax at the time and the capital invested in them along assessment corporate tax return. of making the first corporate tax filing. i.e. with the profits and annual interest Electronic payment of taxes has now been the Kurdish entity will be required to make

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facilitated in Federal Iraq. In Kurdistan Social security at a rate of 1.5% per month. Region, payments of taxes are still made Social security applies to employees’ only through certified cheques issued by salaries at the rates of 5% for the employee Late payment of social security the government banks. contribution, and 12% or 25% for the contributions attracts a penalty of 2% of employer contribution. In practice, it is the amount of contrbutions due per month Tax rate possible to apply for a formal exemption of delay. Under the Federal Income Tax Law, the from social security for expatriate headline corporate income tax rate is a individuals who are working in Iraq. Visas/work permits/labor laws flat rate of 15%. A separate tax law was Foreign individuals working in Iraq are passed in March 2010, Law No. 19 of 2010 The social security contributions in the required to obtain a visa and work permit. (“the Oil and Gas Tax Law”), which applies Kurdistan Region are 5% for employees and The visa requirements in Iraq are subject to to upstream oil and gas companies, and 12% for employers. change and therefore it is recommended to supporting industries operating in Federal obtain specific legal/immigration advice in Iraq. Filing and payment this respect. Employers are required to withhold taxes The Oil and Gas Tax Law provides for an on behalf of employees and pay the tax to increased corporate income tax rate of the tax authorities by the 15th day of each 35% on contracts concluded with foreign month, and to submit annual tax returns The Oil and Gas Tax oil companies and their subcontractors on behalf of their employees. The annual Law provides for an operating in Iraq in the field of oil and gas employment tax declaration must be made production and associated industries. before 31 March of the year following the increased corporate tax year. income tax rate of A flat rate of 15% applies to all industries in the Kurdistan Region. At the time of writing, In Kurdistan Region, taxes withheld from 35% on contracts it is not expected that the Oil and Gas the employees should be remitted on a Tax Law will be enforced in the Kurdistan quarterly basis. The withheld taxes along concluded with foreign Region of Iraq; however, this position with the quarterly employment tax returns oil companies and should be monitored. are required to be submitted within 21 days following the end of the quarter. their subcontractors Personal income tax The annual employment tax declaration operating in Iraq in In Federal Iraq, personal income tax applies must be made before 1 March of the year on employees’ salaries at the following following the tax year. the field of oil and rates: • Up to IQD 250,000: 3% Social security contributions should be gas production and • Between IQD 250,000 and 500,000: 5% filed by the end of the month following the associated industries. month in which salaries are paid both in • Between IQD 500,000 and 1,000,000: Federal Iraq and Kurdistan Region. 10%

• Amounts in excess of IQD 1,000,000: 15% Penalties Penalties on unpaid or late paid Personal income tax is applicable for employment taxes for both Federal Iraq both Iraqi tax residents, and non-Iraqi tax and Kurdistan Region are as follows: residents who have Iraq-sourced income. 5% of the amount outstanding if payment Personal income tax is broadly levied on all is not made within 21 days of the due date; employees’ income, including basic salary an additional 5% penalty if the tax still is and allowances which are paid in addition outstanding after a further 21 days (i.e. to basic salary. Iraq’s tax legislation sets out 42 days in total). certain exemptions / deductions which are available in calculating taxable income. In the Kurdistan Region, penalties on late In Kurdistan Region, a flat tax rate of 5% filing generally are limited to an amount of is applied to employees’ salaries. The 10% of the tax liability, up to a maximum of Kurdistan Region tax authority generally IQD 75,000 per year. levies income taxes on basic salary plus any allowances in excess of 30% of the Interest on late paid taxes is applied at basic salary. Individuals are entitled to a a rate of 11% per annum on the amount tax-free legal allowance of IQD 1,000,000 outstanding in Federal Iraq. In Kurdistan per month. Region, interest on late paid tax is applied

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Indirect taxes Conversely, for contracts to which a In practice, the application of the customs Value added tax government is a party, stamp duty will duty has been largely inconsistent and Iraq levies sales tax on certain consumer typically be paid at signing unless an subject to the discretion of the IGCC. products, including five-star hotels, phone exemption is relevant. cards, tobacco and alcoholic beverages. Other taxes Customs duty Real Estate Tax Stamp duty In January 2018, The Iraq General Law No. 162 of 1959 and its amendments, Stamp Duty Law No. 71 of 2012 provides Commission of Customs (“IGCC”) Law of the Real Estate Tax, provides for a that the signing of contracts should be announced the unification of the tax on revenue derived from Real Estate subject to stamp duty at a rate of 0.2%. classification of goods into 21 main in Iraq. According to the Law, a basic tax categories and the applicable custom duty of 10% is assessed on the annual revenue In practice, the payment of stamp duty is rates to be between 0.5% - 30%. for all real estate. The annual revenue not common for contracts between private for each real estate is discounted by 10% parties, where the contract is not intended Additionally, the IGCC has announced for expenses and maintenance before to be presented to a court or official office. that effective January 2019, customs duty assessing the tax on that real estate. In such instances, the parties will not pay would be levied on all goods imported into the stamp duty at the time of signing the Iraq, including those imported by state contract, but only if it becomes necessary departments, public and mixed sectors, at a later date to either present the civil organizations and private parties. document to a court or an official office.

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Immigration and labor landscape

Unless working directly under a United and efficient than the traditional non-OSC-I In September 2020, the Iraqi Ministry States Department of Defense (DoD) route. OSCI-I is an American entity in the of Labor and Social Affairs has started contract, any foreign company wishing to American Embassy, which serves as a to impose a mandatory requirement sponsor visas for foreign nationals in Iraq coordination center for American and Iraqi for companies operating in the oil and must establish an entity in Iraq with the military forces. gas industry including those that are Iraqi Ministry of Trade. Foreign companies government contractors or supporting must have a physical presence in the Companies that wish to sponsor employees government services to secure work country or have current visas or work through the OSC-I route must be operating permits for their expatriate employees. The permits tied to a locally-registered business under a US DoD or DoS (Department of work permit application process can be entity that sponsors the employees. State) contract in Iraq. Qualified companies complex. Before a company can sponsor employees are required to submit an application to for a visa, the company must inform the the Ministry of Interior, which will verify Employer registration Iraqi Ministry of Interior (MOI) regarding the company’s OSC-I status and issue an All companies, local and foreign, intending particulars of the sponsoring entity, approval letter for the employee. Foreign to conduct business in Iraq are required to including who the in-country director of the nationals traveling with an approval letter register with the Companies Registrar at entity will be. from the Ministry of Interior do not require the Ministry of Trade. Contractors for the an entry visa and can enter Iraq at a DoD or DoS are required to register with designated airport and be issued an entry the Ministry of Trade, regardless of whether Work authorization stamp for a fee. Residence Permits with the work conducted is at a US military General requirements Work Authorization are issued as stamps in base or the US Embassy. Additionally, a All foreign nationals intending to enter Iraq the foreign national’s passport. Upon entry, company legal advisor and an auditor are generally required to obtain an Entry foreign nationals must undergo a medical must be appointed. The legal advisor and Visa prior to arrival and a work permit to examination and HIV screening. Upon auditor are only appointed for registration be secured after their arrival. Nationals of completion of the medical screening, and purposes. The legal representative certain countries may be eligible to obtain a submission of the results to the Residency and auditor must receive the minimum Visa on Arrival, though additional eligibility Office, the Residency Office will re-stamp salary for one year, which the Iraqi Bar requirements apply. Foreign nationals the foreign national’s passport indicating Association has established as US$ 2,545 with an Entry Visa or Visa on Arrival may completion of HIV screening. per year. conduct business activities, professional activities, and unremunerated work activities. Upon entry, foreign nationals who intend to perform work activities All companies, local and foreign, intending for more than 10 days should apply for a Residence Permit and a Work Permit (work to conduct business in Iraq are required to authorization). Foreign nationals staying in Iraq for more than 10 days are required to register with the Companies Registrar at the undergo an HIV test at a Ministry of Health- Ministry of Trade. certified center.

There are many ways to obtain work authorization in Iraq. It is recommended that companies eligible for OSC-I (Office of Security Cooperation – Iraq) approval seek Residence Permits for both Civilian and Defense employees through this immigration route. The OSC-I method is more reliable, streamlined, transparent,

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Payroll/contract requirements

Payroll requirement Local payroll

Local payroll Local contract

Contract requirement In some cases

Local contract In some cases

3rd party client site allowed None

Payroll/contract requirements

Educational and professional requirements None

Salary requirements None

Tenure requirements None

Maximum duration of stay 1 Year

Police clearance Not required

Medical clearance HIV blood test required within 10 days of arrival

Work permit duration and maximum Exit requirements authorized period of stay Residence Permits do not need to be Residence Permits with Authorization cancelled. However, it is recommended that to Work are generally valid for one all employers cancel Residence Permits year. Foreign nationals wishing to stay upon completion or termination of an longer than one year must submit a new employee’s work contract. application. Processing challenges Employer compliance Nationals of Israel are not permitted to Foreign nationals may begin employment enter or transit through Iraq. upon arrival in Iraq and receipt of an entry stamp. Foreign nationals are Industry specific regulations eligible to work while awaiting approval The oil and gas industry is regulated by of the Residence Permit. Penalties for multiple specialized government entities. noncompliance for foreign employees There are numerous regulatory bodies working in Iraq without the proper permits with authority over the oil and gas industry include detention while working in Iraq and in Iraq and employers are subject to possible detention when attempting to exit additional registration obligations when Iraq. sponsoring foreign employees.

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Deloitte in Iraq – how can you benefit? locally and to liaise with regulatory and Deloitte Middle East (DME) is committed tax authority personnel as required. Our to providing client insight and delivering tax practice is centrally headquartered in Deloitte has legal thought leadership to help our clients Dubai, with dedicated tax professionals entities registered in keep abreast of key developments in the available to travel as required to meet with tax landscape. Having been established in our clients in Iraq and the wider Middle Baghdad, Federal Iraq 1926, Deloitte Middle East is the longest East region. standing professional services firm in the and Erbil, Kurdistan region. Deloitte’s experts are dedicated Using our expertise to add value and Region with dedicated to providing confidence in markets and reduce risk finding innovative solutions that contribute We understand the risks and challenges resources on the to a stronger economy and healthier that your business faces in Iraq. We have a ground, available to society. Enabled by a team of local experts deep understanding of the Iraqi accounting based in Iraq and a global network of and tax compliance process and we meet with our clients valued services – built on decades of manage accounting and audit, corporate insight and experience – we can solve income tax, withholding tax, employment locally and to liaise tough problems, advise you on the local tax and social security compliance for some with regulatory and tax market and assist you in establishing your of the world’s largest companies operating business in Iraq while providing a full suite in Iraq. authority personnel as of services and end-to-end solutions. The required. high quality and efficiency of Deloitte Middle East's services have helped shape Knowledge and value the business landscape in Iraq. Due to the lack of developed systems and infrastructure in Iraq, the tax compliance Deloitte’s Middle East practice has been process is inherently more challenging awarded a Tier One ranking in tax than in many of the other jurisdictions in services since 2010 by the International which we operate. Our team has extensive Tax Review’s World Tax Awards. Top tier working knowledge of the Iraqi investment rankings are provided to firms that have and regulatory climate, and accordingly “an international network and leading will be well placed to provide support reputation” which is “reflected in the size with regards to corporate income tax, and quality of transactions” in the relevant employment tax and social security filing jurisdiction. obligations, and to create lasting value as your business develops its operations in Deloitte has legal entities registered in Iraq. Baghdad, Federal Iraq and Erbil, Kurdistan Region with dedicated resources on the ground, available to meet with our clients

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Want to do business in Iraq?

We are here to help Deloitte and Touche Management Consulting, W.L.L

Baghdad Al Mansour, Al Amirat Street Muhammad Imran Farooq Alex Law District #601, Street 15 Iraq Oﬃce Managing Partner Iraq Tax Leader Villa no. 41 [email protected] [email protected] Baghdad, Iraq

Erbil Empire Business Complex Block C1 – 5th Floor Erbil, Iraq

Tel +964 (0) 66 257 6200 www.deloitte.com

Fernand Rutten Brisida Acar We welcome the opportunity to discuss ME Customs and Global Trade Senior Manager, Tax your needs further and provide you with Advisory Leader [email protected] a better understanding of the issues [email protected] discussed in this material. Please feel free to contact one of our specialists.

The ‘Doing business guide’ series is supplemented by the Middle East Tax Handbook, which provides a summary of basic tax information in a country-by- country snapshot.

Srividya Viswanathan Atheer Aljuboory Senior Manager, Tax Senior Manager, Tax [email protected] [email protected]

17 This publication has been written in general terms and therefore cannot be relied on to cover specific situations; application of the principles set out will depend upon the particular circumstances involved and we recommend that you obtain professional advice before acting or refraining from acting on any of the contents of this publication.

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