Baghdad
EY
Mail address:
P.O. Box 6004
ey.com/globaltaxguides
+964 (1) 543-0357
Fax: +964 (1) 543-9859
Email: baghdad.iraq@iq.ey.com Baghdad Iraq
Street address: Al-Mansoor/Al-Ameerat Street Block 609 Street 3 House 23 Baghdad Iraq
Principal Tax Contacts
Mustafa Abbas
Abdulkarim Maraqa
Business Tax Services
Ali Samara
Business Tax Advisory
Jacob Rabie
Tax Policy and Controversy
Ali Samara
Jacob Rabie
A. At a glance
+964 (1) 543-0357
Mobile: +964 7700-824-139
Email: mustafa.abbas@iq.ey.com
+964 750-798-4444
Email: abdulkarim.maraqa@iq.ey.com
+962 (6) 580-0777
Mobile: +962 777-282-283
Email: ali.samara@iq.ey.com
+962 (6) 580-0777
Email: jacob.rabie@jo.ey.com
+962 (6) 580-0777
Mobile: +962 777-282-283
Email: ali.samara@iq.ey.com
+962 (6) 580-0777
Email: jacob.rabie@jo.ey.com
(a) The 15% rate is the general corporate income tax rate. The 35% rate applies to oil and gas production and extraction activities and related industries, including service contracts. The Kurdistan Region of Iraq has not yet adopted the 35% rate.
(b) This withholding tax is imposed on payments to nonresidents.
(c) See Section C.
Foreign branches that fail to submit the tax filing package by the due date in Iraq are subject to a penalty of IQD10,000. A similar penalty is not currently being imposed in the Kurdistan Region of Iraq.
For taxpayers not classified as large taxpayers in the Kurdistan Region of Iraq, the tax authority in the region has been sending the files of taxpayers that fail to submit their tax filing in a timely manner to a tax tribunal. The tax tribunal assesses late filing penalties, ranging from 10% to 25% of taxable income.
For taxpayers classified as large taxpayers in the Kurdistan Region of Iraq, failing to submit the tax filing package by the due date results in a penalty equal to 5% of the tax due for each late month, up to a maximum of 100% of the tax due and no less than IQD100,000 for branches and IQD500,000 for Iraqi limited liability companies.
Tax assessment and payment. For all taxpayers in Iraq and the Kurdistan Region of Iraq (except large taxpayers in the Kurdistan Region of Iraq), on the submission of an income tax filing, the tax authority will initially accept the filing and provide the taxpayer with a preliminary estimation memorandum based on the results reported in the financial statements. Subsequently, the tax authority may carry out a more detailed tax audit of the filing and potentially request additional information. If a secondary tax audit is carried out, the tax authority should issue a secondary tax assessment in an estimation memorandum. In general, payment of the tax is due after the tax authority and the taxpayer sign the estimation memorandum (preliminary or secondary) indicating their agreement with the tax assessment.
In Iraq, if the tax due is not paid within three days from the date of assessment notification, late payment interest equal to the current overdraft banking interest applied by Al-Rafidain Bank (currently 11%) applies. Except for taxpayers classified as large taxpayers in the Kurdistan Region of Iraq, if the tax due is not paid within 21 days after the date of assessment notification, a late payment penalty equal to 5% of the amount of tax due is imposed. This amount is doubled if the tax is not paid within 21 days after the lapse of the first period.
For companies classified as large taxpayers in the Kurdistan Region of Iraq, the payment is due together with the tax filing package based on the self-assessed tax liability declared in the tax return. The tax authority should accept the tax filing as selfdeclared by the taxpayer, and the tax authority may reopen the tax filing and perform a tax audit within a period of five years from the filing date. The penalties associated with late payment are equal to 10% of the tax due. Delay interest of 1% per month is also imposed, with partial months counting as a full month.
Dividends. Dividends paid to residents or nonresidents from previously taxed income are not taxable in Iraq.
Royalties and interest. Royalties and interest paid to nonresidents are subject to a withholding tax rate of 15%.
Foreign tax relief. A foreign tax credit is available to Iraqi companies on income taxes paid abroad. In general, the foreign tax
credit is limited to the amount of an Iraqi company’s income tax on the foreign income. Excess foreign tax credits may be carried forward for five years.
C. Determination of trading income
General. In general, all income generated in Iraq is taxable in Iraq (see Corporate income tax in Section B), except for income exempt under a valid tax law or resolution, the industrial investment law, or the investment promotion law in the Kurdistan Region of Iraq.
Business expenses incurred to generate income are allowable, with limitations on certain items, such as entertainment and donations. However, provisions and reserves are not deductible for tax purposes.
Tax depreciation. The Iraqi Depreciation Committee sets the maximum depreciation rates for various types of fixed assets. These rates are set out in several tables for various industries. In general, the following are the acceptable depreciation methods:
• Straight line
• Declining balance
• Other methods (with the approval of the tax authority)
If the rates used for accounting purposes are greater than the prescribed tax depreciation rates, the excess is disallowed for tax purposes.
Relief for losses. A tax loss from one source of income may offset profits from other sources of income in the same tax year. Unused tax losses may be carried forward and deducted from the taxable income of the taxpayer during the following five consecutive years, subject to the following conditions:
• Losses may not offset more than half of the taxable income of each of the five years.
• Losses may only offset income from the same source from which the losses arose.
To claim losses, a taxpayer must obtain appropriate documentation, including financial statements that support the loss and sufficient documentation to support the expenses that created such loss.
Groups of companies. Iraqi law does not contain any provisions for filing consolidated returns or for relieving losses within a group of companies.
D. Other significant taxes
The following table summarizes other significant taxes. Nature
duties; imposed on the total contract
(The stamp duty rates provided are the most commonly applied rates in Iraq and the Kurdistan Region of Iraq. In practice, the application of the stamp duty may vary.)