The impact of ASYCUDA on tax deposits at customs ports

By tax guarantees, we mean the amounts that the authorities collect from importers at border outlets in advance as a “deposit” on account of taxes, in order to ensure the early deduction of part of the profits or tax liabilities from importers who generate income from selling those goods. This mechanism is applied in Iraq to ensure that traders do not evade paying the taxes due on their profits later, and to provide the treasury with part of the revenues immediately.

Historically, the system for collecting tax guarantees has been subject to debate. It was suspended in some periods to reduce burdens on traders, or due to its incompatibility with incomplete electronic systems. For example, in 2023, a ministerial decision (No. 23085 of 2023) was issued that stopped or reduced the collection of guarantees at border outlets as an initiative to stimulate trade. However, by the end of 2025, the government decided to reactivate this system within the new reform package.

ASYCUDA came to provide the appropriate technical platform to apply the collection of tax guarantees efficiently and transparently. Cabinet Decision No. 957 of 2025 explicitly stipulated the resumption of collecting tax guarantees through ASYCUDA and according to specified tables and percentages. ASYCUDA allows for a field or item to be added in the customs clearance declaration through which the value of the tax guarantee is calculated automatically as a certain percentage of the value of the imported goods (after customs duties). Once the declaration is registered and customs duties are paid, the system also adds the amount of the tax guarantee required to be collected.

This process is carried out entirely electronically:

The system issues an official receipt for the value of the tax guarantee in the name of the importer.
These amounts are transferred daily, or continuously, to a dedicated account for the Tax Authority, as mentioned.

Legal perspective

From a legal perspective, these guarantees are not a new tax in themselves, as confirmed by the Customs Authority to avoid any confusion. The General Authority of Customs published an official clarification stating that no new taxes have been imposed on traders or imported goods; rather, what is currently being collected is guarantees that are transferred to the tax account. It also clarified that these guarantees will be settled at the end of the fiscal year with traders through the General Authority for Taxes.

In other words, when the trader submits their annual tax return for their business activities (including the sale of imported goods), they will find that what they paid in advance as guarantees will be credited toward the income or profit tax due:

If it turns out that the trader paid guarantees exceeding the tax payable, they will be entitled to a refund of the difference.
If what they paid is less, they will be required to pay the remaining balance.

This mechanism is similar to a withholding or advance deduction system, which is practiced to ensure tax collection at the source.

ASYCUDA contributes here to tightening and regulating the collection and settlement process through features that were not previously easily available:

First, the system ensures standardization in collecting tax guarantees from everyone without exception or room for personal discretion. The percentage is pre-defined in the system’s tables according to the type of goods or the importer’s classification.
For example, the percentage may differ between food items and construction materials, or depending on whether the importer is a registered company or an individual.
Second, the system provides transparency and traceability for the collected funds. Every amount collected as a guarantee is recorded under a specific importer’s name, with a customs declaration number and a specific date. This makes it easier for the Tax Authority later to match the revenues received with company files, and prevents any manipulation or concealment of these amounts.
Third, the annual settlement process has become a more organized administrative procedure than before. After the end of the year, the Tax Authority can, through ASYCUDA interfaces, extract a report showing everything each importer paid as guarantees throughout the year. It then compares that with what the importer must actually pay in taxes based on their tax return.
- If the importer does not submit a tax return, then what they paid in guarantees at least becomes revenue collected for the state treasury, with the possibility of legally demanding the remaining obligations or imposing penalties if they evaded.
- If they do submit the return, the differences are calculated as previously explained.
The regulatory instructions have also stipulated the obligation to complete settlements and refund differences within a specified time period, with the formation of committees to consider objections in order to ensure taxpayers’ rights.
Fourth, the system facilitated coordination between the Customs Authority and the Tax Authority through electronic linkage. The matter no longer requires paper correspondence and manual collection of receipts; instead, both entities now share access to information through ASYCUDA. This reduces errors and speeds up the completion of settlements, and it also enables easier detection of tax evasion cases.
For example: a company imported large quantities and paid very large guarantees, but did not submit an appropriate tax return—this would become clearly visible to the authorities.
Fifth, from an economic perspective, advance collection provided the government with immediate cash flow throughout the year instead of waiting for the tax assessment season. This helps finance the budget and partially mitigates the impact of a decline in oil revenues. We have seen that part of the motivation for reviving these guarantees was to address the growing budget deficit for 2023–2024, although experts confirm that the annual return from customs and additional taxes will cover only a limited portion of that deficit.

On the other hand, the application of tax guarantees has caused some controversy within commercial circles, especially when implemented simultaneously with an increase in customs duties. Traders now pay higher customs fees at the outlets, in addition to a calculated percentage of taxes in advance, which has created a greater financial burden on their liquidity. Some considered this a temporary double taxation until any surplus is refunded at the end of the year.

Although economists clarified that these guarantees are not a new tax but merely a distribution of the tax burden across the year, the prevailing sentiment among importers has been somewhat negative—especially because refunding excess guarantee amounts requires procedures and may face delays or bureaucracy. However, the government sought to reassure traders that the procedures are carried out smoothly through the electronic system, without adding any unlawful burdens.

Companies also had to take this advance tax payment into account in their financial planning. This means that the cost of importing is no longer limited to the price and customs duties; rather, there is an additional portion (for example, 3–5% of the value, depending on the item) that must be paid upfront as a tax guarantee, which affects importers’ cash flow. Financial reports advised companies to adjust their cash policies accordingly, because this change impacts working capital and requires better liquidity management.

On another front, linking ASYCUDA with the currency-selling platform (dollar auctions) contributed to combating currency smuggling. The Central Bank issued a directive stating that any trader requesting a dollar transfer to import goods must provide proof, via ASYCUDA, that customs duties and tax guarantees have been paid in advance.

As a result of this measure, demand for official dollars decreased among certain parties that had been exploiting it for speculation or smuggling, which led to a temporary rise in the dollar price in the parallel market. However, in return, the transparency of commercial operations increased: anyone obtaining dollars at the central bank rate became tied to a real import transaction that is officially recorded in the system. This reduced the phenomenon of fake, inflated invoices that had previously been used to move currency out of the country.

Experts attributed the slight increase in the exchange rate to these procedures, which “tightened the noose” around those with illegitimate aims and pushed them to resort to the black market—considering this a sign of successful oversight despite its temporary cost.

In general, the impact of ASYCUDA on tax guarantees can be assessed as a shift of this process from a space of chaos and discretionary practice into a structured institutional framework. The legality of collection became clearer to taxpayers (simply an advance payment to be settled later), and the guarantee funds became more secure in reaching their proper destination (tax accounts) instead of being exposed to leakage or corruption risks that can occur in a manual, decentralized system.

Finally, integrating this process into the comprehensive customs platform reflects the government’s approach to unifying financial and tax databases, paving the way for further steps in broader financial reform.

Conclusion

The implementation of the ASYCUDA system in Iraq represents a qualitative leap in customs and tax administration from the perspective of automation and e-governance. Through this system, the rule of law was enforced in the collection of customs duties in full, without reduction, in accordance with the official tariff schedules. It also organized the collection of advance taxes (guarantees) transparently and linked them to the financial transfer ecosystem. The experience so far has confirmed that when technology is paired with political will and the correct legal framework, it can multiply institutional efficiency; within just two years, Iraqi Customs was able to double its revenues by 100%, and levels of customs and tax evasion through border outlets declined noticeably.

Nevertheless, this experience highlighted the need to balance reform objectives with real economic considerations. Increasing revenues is important, but it must be achieved without causing severe harm to trade activity and economic growth. Perhaps the key lesson is the importance of gradual implementation and advance planning for major changes, as well as involving stakeholders (such as chambers of commerce and importers’ unions) in discussing implementation mechanisms to avoid any shocks.

On the legal level, it may be necessary to improve certain regulatory legislations as mentioned earlier, but the most important point is to continue supporting law enforcement through modern technology tools to ensure transparency and fairness.

Ultimately, ASYCUDA has provided Iraq with a strong platform to move toward a new era of data-driven, accurate financial administration. If this system continues to be developed and emerging challenges are addressed promptly, Iraq will have laid a solid foundation for maximizing its non-oil resources and supporting its national economy sustainably—within a modern legal framework that keeps pace with international standards and serves the public interest.

For legal guidance on ASYCUDA compliance, tax deposits, and customs disputes, contact Osama Tuma for Legal Services and Advisory, a trusted law firm in Iraq.