Tax In Iraq

A Contractor's Guide to Taxes : 

One of the most consistently challenging aspects of contracting in Iraq is complying with the country’s tax system. As well as paying tax in Iraq, you might also still be eligible to pay some tax in your home country, and understanding the legislation behind this can be a challenge.

How do I calculate my taxable income: 

If you’re working in Iraq under a permanent contract, many employers will handle your tax under the PAYE (pay-as-you-earn) system. This means that they calculate and process your taxes in Iraq for you and then send you a net wage. Your income tax, public health insurance, social security and other deductions will all be covered by this payment. This is the easiest way to handle your income tax in Iraq, but contractors may not be offered this service because of their short stay with each employer.

Anybody who can’t pay their tax in Iraq through PAYE is left with the prospect doing everything themselves.

Do you know much about Iraqi Tax Law? Does Iraq have a tax treaty with your home country? You will need to find out or find someone who can help! Income tax in Iraq can range from 3 to 15 percent, and you need to be sure you are placed in the correct tax brackets.

Tax Calculator: 

If you are a contractor and want a calculation on your tax and net retention in Iraq, we can supply it to you free of charge.

Using an Umbrella Company for Income Tax : 

Contractors in Iraq are faced with masses of paperwork and numerous wasted hours filing a tax return unless they find an alternative option. An Iraqi umbrella company can act as your employer during your stay in the country whilst still allowing you the freedom of a contractor. The only difference is that you submit your timesheets to them; they’ll calculate and pay your taxes as you earn, and then you receive a net wage (as well as documentation for your records).

The companies are experts in Iraqi taxation, and they’ll ensure that you keep the largest proportion of your earnings whilst complying with local laws. They can deal with any issues with the Iraqi tax office or tax department directly including processing your tax refund if you are eligible.

How We Can Help You with Tax: 

We work with numerous umbrella companies in Iraq, many of whom are experts in tax and immigration laws. If you have any questions about tax in Iraq, we’ll get the answers from them directly so you can rest assured you’ll be getting accurate information. We have comprehensive knowledge of the different services they provide, and can help you find the right company to handle your income tax. We help oil and gas workers, software developers, IT project managers, testers, business analysts and telecommunications contractors get tax efficient payments and sponsorship for their Iraqi work permit.

Our advice is 100 percent free, and comes with no obligations. You will be paying taxes in Iraq but without the overhead of directly dealing with the Iraqi tax authorities. Get in touch with us today for some reliable advice on tax in Iraq!

When Do You Need to Lodge Your Tax Return?: 
31 March (1 March in the Kurdistan region)
Tax Filing Deadline : 
31 March (1 March in the Kurdistan region)
Can you file it online? : 
No
Currency: 
Iraqi Dinar (IQD)
Tax-free Threshold in: 
None
Grossed Income: 
0 - 250,000
Tax Rate: 
3%
Grossed Income: 
>250,000 - 500,000
Tax Rate: 
5%
Grossed Income: 
>500,000 - 1,000,000
Tax Rate: 
10%
Grossed Income: 
>1,000,000
Tax Rate: 
15%
How long does it take to set up: 
26-27 days
How much does it cost: 
IRD2,295,000 – IRD2,415,000
Is it easy? : 
Starting a Business Rank: 154/190 (Source: World Bank)
How to File Taxes in: 

Your employer is required to withhold taxes for you and file tax returns on your behalf.

If you are employed in the Kurdistan region, your employer will file your taxes on a quarterly basis (as of 21 April, 2017). The due date for each quarter’s filing and payment is the 21st day after the end of the calendar quarter (i.e. 21 April, 21 July, 21 October, and 21 January).

If you are employed in other regions, your employer is required to file and pay taxes on your behalf by the 15th day of every month.

The relevant tax forms for the Kurdistan region can be found on the Kurdistan Ministry of Finance’s website in Arabic and Kurdish, here. The relevant tax forms for other regions can be found on the Iraqi Ministry of Finance’s website in Arabic, here.

Notes: 

Taxes for the Kurdistan Region: In the Kurdistan region, a 5% tax is imposed on basic salary and any allowances in excess of 30% of the basic salary.

Deductions: Individuals receiving employment income from the private sector are entitled to annual deductible allowances at the following amounts, based on age and/or marital status.

  • Personal allowance for bachelor: IQD2,500,000
  • Personal allowance for married person: IQD4,500,000
  • Age allowance (if over 63 years of age): IQD300,000
  • Child allowance (where the child is under 18 years of age, engaged in full-time academic studies, and has no income): IQD200,000

Other deductibles include:

  • All employment income received from the government, public institutions, and local authorities;
  • Social security contributions; and
  • ‘Risk allowances’ (not exceeding 30% of the basic salary).
Does the 183 day rule apply in: 

Yes

When do you become a tax resident in: 

You become a resident in Iraq when you:

  • You stay in Iraq for a continuous period of 4 months; or
  • You stay in Iraq for a total of 6 months during the income tax year.
Am I taxed on my global income in: 

Residents are taxed on their global income. Non-residents are taxed on their Iraq-source income only.

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