Iraq taxes the profits of limited liability companies, private joint-stock companies and mixed joint-stock companies at a single flat rate of 15% of taxable income, under Income Tax Law No. 113 of 1982, as amended. Foreign oil companies contracted to work in Iraq's oil and gas production and extraction sector are instead subject to a higher, special rate of 35% on income realized in Iraq, under a separate law issued in 2010 for that sector.

The Same Rate Applies to All Three Company Types

The Income Tax Law sets the annual tax scale according to the nature of the taxpayer, and expressly states that companies operating in Iraq are subject to one flat rate, as follows:

Unlike individual income tax, which is progressive and starts at 3% rising to 15% on the top bracket, corporate tax is charged at one flat rate on the entire taxable income regardless of its size.

Who Is Responsible for Paying the Tax Within the Company?

The law provides that the tax becomes due on the company's income before anything is paid out to shareholders, and it holds the company and its manager personally financially responsible for deducting the tax, paying it to the tax authority, and submitting the required accounts and certificates and all other matters required under the law.

The Special Rate for Foreign Oil Companies

The legislature set a separate law for foreign oil companies, Law No. 19 of 2010, which imposes a 35% income tax on income realized in Iraq under contracts concluded with foreign oil companies working in Iraq, whether directly or through their branches, offices, or subcontractors, in the field of oil and gas production and extraction and related industries. The general Income Tax Law No. 113 of 1982 applies to these companies for everything not specifically addressed in the 2010 law.

Crediting the Tax Against Distributed Dividends

To avoid double taxation of the same layer of income, companies registered in Iraq are entitled to deduct the tax paid or payable on their total income from the dividends they pay to shareholders, provided this deduction is limited to the dividends on which tax has been paid or was due to be paid by the company in the first place.

Obligations of Foreign Companies' Branches

A company's obligations under the Income Tax Law are not limited to paying the prescribed rate; they also include specific procedural obligations, particularly for branches of foreign companies operating in Iraq. The law provides that the tax authority imposes an additional amount of ten thousand dinars on every branch of a foreign company operating in Iraq that is late in submitting its final accounts, audited by the Federal Board of Supreme Audit, to the tax authority more than six months after the end of that company's fiscal year, unless the branch proves the delay was due to a legitimate excuse confirmed by the Board.

Illustrative Example

Illustrative example with hypothetical figures for explanation only: if taxable income were IQD 100, the tax due from an ordinary limited or joint-stock company on it would equal IQD 15 (15% of the amount), while the tax due from a foreign oil company on the same income would equal IQD 35 (35% of the amount).

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