Business Compliance in Iraq

Local companies affairs are regulated as per the Company Law No. (21) for 1997 (as amended) whilst foreign entities and persons may engage in business actives inside Iraq as per the Foreign Branches Organization Law No. (2) for 2017 and the Investment Law No. (13) for 2006 with either establishing our purchasing a local company or registering a branch of the foreign entity inside the country while ensuring compliance with the following:

Ownership Limitations

Foreign ownership of a local company cannot exceed more than 49% of its capital, therefore, an Iraqi citizen or entity must own 51% at all times.
On-paper shareholder agreement is not enforceable in front of the Iraqi court; thus, personal guarantees is recommended to protect financial and legal interests.
A branch is fully owned and controlled by its mother company with no limitation.

Liability Considerations

In case of registering a branch, the mother company is liable for all actions of the branch as it is an extension of it.

Tax and Subscriptions Considerations

All generated income from Iraq will be due on the local company/branch and taxable as per the corporate income tax of 15% on the net annual income declared as per the audit report of the branch.
All branches and local companies must have at least a minimum of 2 workers registered at the Department of Social Security and Department of Direct Deduction Tax and pay the relevant monthly subscriptions.
The deadline for the submission of the annual audit report for all registered branches and local companies is 31st of May of each year.
All branches and local companies must have a legal representative appointed in front of the Iraqi Bar Association as per the Lawyers Law No. (173) for 1965.

Operations Considerations

All local companies and foreign branches must have a valid address that is approved and inspected by the Companies Registration Office and Department of Social Security. ALSAIF Law Firm provides its clients with fully serviced offices that meet all legal requirements while also ensuring convince and cost-effective solutions.
The branch manager or general manager of the Iraqi company can be of any nationality and need not to be an Iraqi citizen, however, be aware that some government institutions requiring having an Iraqi representative registered with them and available at all times such as the Ministry of Transportation.
All local companies and branches are required to open a bank account inside Iraq with a licensed bank, opening procedure requires the presence of the branch manager/ general manager for the first time.

Frequently Asked Questions:

1Does the registration of a company/branch require having a valid office address in Iraq?

Answer: As per Article 200 of the Companies Law No. (21) for 1997 and the MINISTERIAL INSTRUCTION NO. 196 DATED MARCH 15, 2004, Section 3 (2.c), Section (6) and Article (5/ A) of the Foreign Branches Organization Law No. (2) for 2017, all require a verified business during the registration process and the Companies Registration Office by practice requires all entities to submit a notarized address verification letter annually issued by the relevant local municipality, failure or delay in submission of the verification letter results in fines and penalties which could result to registration termination.

2Does the branch manager (and directors/officers) of a branch of a foreign company registered in Iraq must be an Iraqi citizen?

The branch manager (and directors/officers) can be of any nationality.

3Can a branch office of a foreign company registered in Iraq open a bank account?

As per Article (5/ B) of the Foreign Branches Organization Law No. (2) for 2017, a branch office similarly to local companies must open a bank account with an authorized bank inside Iraq and provides the Companies Registration Office with a confirmation letter from the Bank of the account opening.

4Does branch offices of foreign companies registered in Iraq liable for the annual corporate income tax?

As per Article (1/ 11) of the Iraq Income Tax Law No. (113) for 1982, all entities registered and not registered in Iraq including branch offices who have generated an income from Iraq from any source are liable for corporate income tax unless exempt as per the Investment Law No. (13) for 2006.

Corporate Income Tax in Iraq is fixed at 15% for all types of entities except for companies working in the upstream/downstream sectors of oil and gas projects who have specific rates.

5Does branch offices of foreign companies registered in Iraq need to appoint a legal representative in front of the Iraqi Bar Association?

As per Article (5/ D) of the Foreign Branches Organization Law No. (2) for 2017, a branch office similar to local companies must appoint a legal representative in front of the Iraqi Bar Association and provides the Companies Registration Office with a confirmation letter from the Bar of the appoint.

The legal representative must be an Iraqi citizen holding a degree in Iraqi law and cannot be a foreign lawyer/firm.

6Can branch offices of foreign companies registered in Iraq enter into all types of contracts?

As per Article (6) of the Foreign Branches Organization Law No. (2) for 2017, a branch office can engage in any contract with the Iraqi Government, Government Companies, and Mixed Companies while also having the ability to work with the Iraqi private sector but with a minimum value of 1,000,000 USD per year [contract/project value].

Certain additional sector-specific licenses might be necessary to undertake the needed business of which the license must obtain after registration completion and submit an confirmation letter to the Companies Registration Office from the sectorial-authority who issued the license verifying that the branch has indeed obtained the license.

Examples of such needed licenses are:

The Communication and Medica Commission License that is needed to preform most contracts includes importing, setting up, and usage of telecommunications and technological systems and equipment.
The License from the Iraqi Directorate of Mine Action for companies preforming the removal of mines and war remnants.
License for health services providers and medicine manufacturers and importers.

7Can foreign companies enter into partnership agreements and joint ventures with local companies for the performance of government contracts?

After registration of the branch office of the company, a contract can be signed with the local company or other foreign branches for the performance of the government contract and the contract can be notarized at the public notary in Iraq and submitted to the official authorities.

8Can branch offices of foreign companies registered in Iraq repatriate their earned profits [dividends] from the country to outside Iraq?

As per from the rights branch offices have inside Iraq is the ability to repatriate their dividends via the Iraqi bank which they have registered with and based on the declared profits showcased on the branch’s annual audit report.