Tax is an important legal obligation on both corporate and natural persons in the world.Iraq is no exemption to this rule. Tax is considered in almost every aspect of a company’s day-to-day operations in Iraq and compliance is required even if a company is not registered in Iraq. Failure to comply with Iraqi taxation law can lead to significant financial and legal exposure.
Iraqi tax obligations fall into one of the following categories:
Employee Income Tax (“PIT”)
Any income or revenue generated to any employee in Iraq (both Iraqi and non-Iraqi), is subjected to tax and an employer company is required to withhold a certain amount of the employee’s salary to be paid on monthly basis to the Direct Deduction Department at the Iraqi General Tax Committee. These deductions are provided in in Tax Instruction Number 1 of 2007.
Any company which awards a subcontract to another is required by the law to act as a withholding agent and retain a fixed amount of tax from the subcontractor’s payment. The amount is not to be released until the subcontractor has provided a tax clearance for the awarded contract. The rates of the retained amounts vary and depended on the nature of the activates carried out by the subcontractor – these can vary between 1.8% to 10% of the subcontractor’s payment.
Corporate Income Tax (“CIT”)
Under Income Tax Law Number 113 of 1982 (as amended), corporate income taxis imposed on all taxable profit from all sources arising or deemed to arise in Iraq. The rate of corporate tax is between 10% to 15%,with a special rate of 35% for oil and gas companies.Furthermore, a company is required to prepare financial statements made by a local accountant, and file it with the taxation authority on annual basis.
what we offer
- Providing legal advice on various tax matters in Iraq (contracts tax-ability, tax exemption, tax amounts).
- Advising on tax compliance (paying PIT, CIT, and preparing and filling financial statements).
- Advising on contract taxation for unregistered entities in Iraq.
- Efficient tax structuring for Iraqi projects.
- Acting on tax disputes and litigation.