Umbrella Company in Iraq
Independent contracting in Iraq isn’t always straightforward. You’ve got immigration issues, tax difficulties, and mountains of complex admin work. Even worse, missteps can cost you serious money, or even land you in legal trouble.
Before you consider taking a contract in Iraq, you should be aware of what you’re getting into – and how you can make it simpler
Difficulties of Contracting in Iraq
Generally, you need to have an employer sponsor in order to secure the appropriate work permit and work visa for Iraq.
If you’re working independently, it can be difficult to find clients willing to sponsor you. Moreover, even if your client can do this, you’ll need a new sponsor each time you decide to take on a new contract. Of course, every new sponsor will mean more paperwork.
Also, are you familiar with the intricacies of the tax system in Iraq, as well as your own country’s laws on overseas earnings? If so, good on you!
However, if you’re like the rest of us, figuring out (much less reducing) your tax liability in Iraq and your home country can seem like full-time work in itself.
How Umbrella Companies Work
Most freelance workers aren’t superheroes who successfully tackle these issues all on their own. There are companies who specialise in helping workers make the most out of their contracts.
They’re called Umbrella Companies (or, contractor management companies).
Basically, an Umbrella Company acts as your full-time employer, even though you maintain your independence as a contractor. They collect and filter payments from your clients, filtering out the necessary social security and fees. You send them your timesheets, and they send you payments.
Because they act as your “employer,’ they can sponsor you and provide a single work permit for multiple contracts in Iraq. Even better, most are experts in Iraqi and expat tax law, meaning they’ll also help you optimise your earnings in Iraq.
Although the Umbrella Company is technically your “employer,” you’re essentially freeing yourself to work even more independently. You still dictate your contracts, your hours, your schedule. The Umbrella Company simply filters out the time-consuming admin and immigration issues, allowing you to focus on your new contract.
Why Use an Umbrella Company in Iraq
Most people want to do their work, earn their money and enjoy their spare time without taking on loads of admin in a new country. That is why an umbrella company can help.
When you’re working through an Umbrella Company, you’ll essentially be outsourcing the admin and tax issues to specialists.
While the umbrella company will charge a fee, you’ll likely end up saving more money in the long run: you’ll be able to focus on your work, expertly reduce your tax liability, and comply with all laws and regulations in Iraq (which means avoiding fees, fines, or even worse penalties).
How We Can Help You
There’s a huge variety of Umbrella Companies with different specialities and advantages in Iraq. How do you find the right one for your circumstances?
We work closely with Umbrella Companies all throughout Iraq and match contractors with the right company for them. If you’ve already secured a contract in Iraq, we can help you find your best match (for free). Or, we can simply give you feedback on your situation (for free).
A Contractor’s Guide to Taxes in Iraq
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 in Iraq
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 Filing 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|
How to File Taxes in Iraq
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(link is external). The relevant tax forms for other regions can be found on the Iraqi Ministry of Finance’s website in Arabic, here(link is external).
Tax Figures in Iraq
|Currency||Iraqi Dinar (IQD)|
|Tax-free Threshold in Iraq||None|
|Income Tax Rates||
|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.
Other deductibles include:
Tax Residency in Iraq
When do you become a tax resident in Iraq
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.
Does the 183 day rule apply in Iraq
Am I taxed on my global income in Iraq
Residents are taxed on their global income. Non-residents are taxed on their Iraq-source income only.
Can you set up your own Limited Company in Iraq
|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)|