I. Tax Assessment and Payment

According to the provisions of Article (14) of the Income Tax Law No. 113 of 1982, tax is levied on a company's income before any distribution to shareholders. The company and its manager are held financially liable for deducting and remitting the tax to the tax authority, and for submitting the required accounts, certificates, and all other necessary documentation.

Procedures:

Department of Companies

• Final accounts must be submitted annually to the General Commission for Taxes, Department of Companies, before June 1st of each year, pursuant to Article (27, Paragraph 2) of the Income Tax Law.

• Companies will be requested to submit their final accounts via email.

• Upon calculating the tax, companies will be notified of the payable tax amount via email.

• Daily reminders will be sent to the company until the due amount is settled.

Calculation Method:

• Tax is calculated by deducting 15% of the net profit, as per Council of Ministers Resolution No. (23527) of 2023.

• The assessment is subject to review by the Post-Audit Committee (Tax Compliance Committee).

• When a file is referred to the Tax Compliance Committee, the company must provide invoices for all expenses shown in the final accounts. The collaborating bank will also be contacted to verify revenues and the nature of the company’s business.

Department of Direct Deduction

• Annually, before March 31st, companies must submit social security schedules and income tax forms for their employees.

• Our legal team will calculate the tax forms, apply the statutory exemptions for employees to reduce the tax amount, and then submit them to the aforementioned department.

• This calculation is also subject to review by the Tax Compliance Committee.

• If a company is not covered by social security, a 15% deduction will be applied to the salary amounts declared in the final accounts.

Department of Major Taxpayers

This department is dedicated to taxpayers with high income, including foreign companies, banks, private universities, and NGOs. The procedures followed in this department are the same as those for the Department of Companies.

Note: For unregistered foreign companies, tax calculation is subject to the Trade and Business Regulations of 2023, issued by the Technical Committee of the General Commission for Taxes, and not to the Council of Ministers Resolution mentioned above.

Penalties and Late Payment Fees

Penalties

A penalty of 10% of the tax amount, not exceeding 500,000 Iraqi Dinars, is imposed on any company that fails to submit its final accounts before June 1st, as per Article (56, Paragraph 1) of the Income Tax Law.

Note: The tax authority imposes an additional fee of 10,000 Iraqi Dinars on each branch of a foreign company that is more than six months late in submitting its final accounts after the end of the fiscal year.

Late Payment Fees

• A late payment fee of 5% of the tax amount is imposed if the tax is not paid within a maximum of three days after the taxpayer or their agent signs the assessment notice, as per Article (45) of the Income Tax Law.

• This fee doubles to 10% if the taxpayer fails to pay the tax after 21 days have passed since the notice was signed, based on the same article.

II. Certificates of No Objection / Tax Clearance Certificates

According to the procedures of the General Commission for Taxes, Tax Clearance Certificates or Certificates of No Objection can be issued upon a company's request.

Requirements for Issuing a Certificate of No Objection / Tax Clearance:

1. Specify the exact official body to which the letter will be addressed (name of the ministry or department).

2. Clearly state the purpose of the certificate, such as:

   • Participating in a tender.

   • Receiving payments for a completed contract.

   • Facilitating the movement of goods.

   • Registering with the General Customs Commission system.

   • Opening a bank account.

   • Registering vehicle ownership.

3. If the purpose is to participate in a tender, open a bank account, or register with the General Customs Commission system, a stamped company form must be provided.

4. If the purpose is to receive payments, the contract must be provided to calculate and pay the tax amount before the Tax Clearance Certificate is issued.

5. If the purpose is to facilitate the movement of goods, the following must be provided:

   • The name of the project/contract.

   • A copy of the letter from the beneficiary entity, which includes the start and completion dates, duration, and amount of the contract.

6. If the letter is to be addressed to a government or private bank:

   • The full name of the bank must be provided. If it is a government bank, the certificate will be issued if the company's tax status is in good standing. If it is a private bank, it must also be verified that the bank's tax status is in good standing.

7. If there are multiple beneficiary entities:

   • The purpose of the certificate must be uniform and identical for all listed entities. Otherwise, the request will be rejected by the General Commission for Taxes.

Fees

• The fee for issuing a Tax Clearance Certificate is 7,000 Iraqi Dinars.

• The fee for issuing or renewing a tax ID card is 10,000 Iraqi Dinars.

• Any additional fee is based on the amount of tax due, which varies depending on the profit declared by the company in its final accounts.

Concluding Note: All fees and expenses related to tax assessment, issuing Tax Clearance Certificates, tax ID cards, and any other transactions are not included in the monthly legal consultation fees.

Contact us

For expert guidance on all tax and customs matters, do not hesitate to contact our team. Our law firm in Iraq specializes in providing comprehensive tax and customs services, ensuring full compliance and minimizing your legal risks. Let us handle the complexities of tax regulations so you can focus on what matters most—growing your business.