Iraq · Guide
Iraq's corporate income tax rate is 15%, flat, with no progressive scale. That sentence is true and it will mislead you into mispricing a contract.
The reason is that the General Commission for Taxes does not simply take 15% of your profit. It applies a deemed profit approach, treating a set percentage of your reported revenue as taxable profit depending on what kind of contract you signed, and then charges the higher of the deemed calculation or 15% of your reported profit.
For a consultancy contract, the deemed profit percentage is 50. Your actual margin does not enter into it.
Iraq Corporate Tax: the Short Answer
| Element | Rate |
|---|---|
| Statutory corporate income tax | 15%, flat, all income levels |
| Foreign oil companies, their branches, offices and subcontractors in production and related industries | 35% |
| What the GCT actually charges | The higher of deemed tax on revenue or the statutory rate on profit |
| Dividends paid by Iraqi entities | Not taxed again in the shareholder's hands |
| Investment licence holders | Exempt from taxes and fees for 10 years, up to 15 in some cases |
Model your Iraqi tax from the deemed percentage for your contract type, then check whether 15% of your real profit is higher. Whichever is larger is your bill.
The deemed profit table, which decides everything
This is the single most consequential table in Iraqi corporate tax and it is almost absent from general guidance.
| Contract type | Deemed profit % of revenue | Effective tax on revenue at 15% |
|---|---|---|
| Patent, copyright or logo | 75 | 11.25% |
| Research and consultancy | 50 | 7.50% |
| Marketing | 40 | 6.00% |
| Advertisement | 30 | 4.50% |
| Athletes and artists | 30 | 4.50% |
| Installation, establishment, operating, maintenance, or multi-activity | 25 | 3.75% |
| Contracting and services | 20 | 3.00% |
Three consequences follow, and they are worth more than the headline rate.
- Your real margin is irrelevant to the floor. A consultancy earning a 20% margin is still assessed as though it earned 50%, so the deemed figure will exceed 15% of actual profit and become the bill.
- Contract classification is a pricing decision. The gap between a licensing contract at 75 and a services contract at 20 is nearly four times the tax base. How the work is described in the contract matters commercially, not just legally.
- A loss-making year is not necessarily a nil year. Deemed profit is calculated on revenue.
The boundary between categories is applied administratively rather than by a published formula, which is exactly why the classification should be settled with an Iraqi adviser before the contract is signed.
The oil and gas rate, and who it reaches
Income realised in Iraq from contracts concluded with foreign oil companies, their branches or offices, and subcontractors working in Iraq in the oil and gas production sector and related industries is taxed at 35%.
Read the scope carefully. It is not limited to the operator. It reaches branches, offices and subcontractors, and it extends to related industries, so a services company that treats itself as ordinary because it is not drilling can find itself assessed at 35%.
| Situation | Rate |
|---|---|
| Foreign oil company, its branch or office | 35% |
| Subcontractor in production and related industries | 35% |
| Non-upstream industries contracted with oil and gas companies | 15%, plus retention on payments |
The retention that holds your cash
Two mechanisms operate alongside the tax itself, and both take money before any assessment.
Contract retention. The contractor withholds a share of the contract value and pays it to the tax office, released when the subcontractor obtains a tax clearance letter for that contract.
The rate is where published guidance and practice diverge, and the honest version matters:
- The ceiling commonly cited is 10% of the total contract value.
- The range runs from 1.8% to 10%, with the final payment withheld until the General Commission for Taxes gives clearance.
- In practice the rate applied is typically 3% to 5%, and practitioners describe the General Commission's application of it as inconsistent and often arbitrary.
Whatever the rate, the mechanism is the same: money sits with the authorities until clearance is produced, which makes tax clearance a cash flow instrument rather than a formality.
Oil and gas retention. Contracts listed in the Oil and Gas Tax Law carry a 7% retention, and other contracts relating to oil and gas carry 3.3%. Practitioners acknowledge that the boundary between the two is unclear, which is a real ambiguity rather than a gap in this guide.
Withholding on payments abroad
| Payment to a non-resident | Rate |
|---|---|
| Interest on debentures, mortgages, loans, deposits and advances | 15% |
| Annual allowances, pension salaries and other yearly payments | 15% |
| Payments to non-upstream industries contracted with oil and gas companies | 3.3% or 7% |
| Dividends paid by Iraqi entities | Not taxed again in the shareholder's hands |
The dividend position is genuinely favourable and worth stating plainly: Iraq does not tax the dividend again when it reaches the shareholder. What constrains repatriation is the currency and banking layer rather than the tax layer, covered in business bank account in Iraq.
The investment licence, and what exemption really means
A project licensed by the National Investment Commission under Investment Law No. 13 of 2006 is exempt from taxes and fees for ten years from the start of commercial operations, per phase of the project.
- Up to fifteen years where the Iraqi investor's share exceeds 50%, extended proportionally.
- Import exemption on equipment and raw materials needed for the project.
- Land, either ownership of state land allocated to housing and industrial projects, or a lease of up to 50 years, renewable, which practitioners describe as quasi-ownership.
- The right to transfer capital and profits, subject to Central Bank of Iraq instructions.
For a capital project, this is not a marginal incentive. Ten years of exemption changes the internal rate of return more than any rate arbitrage available anywhere else in this cluster, and it is the reason the licence route deserves examination even when the ownership question does not force it. Eligibility and the structure question are in foreign ownership in Iraq.
The Kurdistan Region taxes separately
The Kurdistan Region is an autonomous administrative entity with the right to issue its own tax regulations, and it uses it. The Ministry of Finance in Kurdistan issued instruction No. 7 on 11 April 2022 governing withholding in the Region, and treatment there can differ from the federal position.
If your entity sits in the Kurdistan Region, verify the tax position against KRI instructions rather than assuming the federal answer. Licensed projects there also benefit from their own tax holidays and customs exemptions. The rates, the holidays and what they actually cover are in Kurdistan corporate tax.
Two ambiguities worth knowing about
Reporting these honestly is more useful than papering over them.
- Permanent establishment is undefined. One regulation provides that foreign companies registered in Iraq, or otherwise having a permanent establishment in Iraq, are taxed at 15% on their Iraqi income. No other provision defines permanent establishment, so the concept sits in the law without content.
- Transfer pricing exists in outline. Article 21(2) of the Income Tax Law addresses a "special connection" between a non-resident and a resident that lets the non-resident exercise substantial control, where the resident reports lower income as a result. That is a transfer pricing principle without a developed framework around it.
Both point the same way: Iraqi tax outcomes depend more on assessment practice than on statute, which is why local advice is worth more here than in a codified system.
What is changing
The General Commission for Taxes has historically not applied all available penalties, for instance for failing to keep ledgers or submitting false reports. Practitioners expect enforcement to tighten, including stricter auditing of financial statements.
Books must be kept under Iraq's local unified accounting system, and the practical implication of tighter enforcement is that the accounting standard and the ledgers matter more each year. Filing obligations are in Iraq company compliance.
The bottom line
Iraq's 15% is a statutory rate, not a working one. What you will actually pay is the higher of 15% of reported profit or the deemed percentage of your revenue that attaches to your contract type, and those percentages run from 20 for contracting and services up to 75 for licensing.
Price the contract from the deemed table, settle the classification with an Iraqi adviser before signing, and if the project is capital intensive, model the investment licence properly, because ten years of exemption outweighs every rate consideration on this page.
Frequently asked questions
What is the corporate tax rate in Iraq?
The statutory rate is 15%, flat, with no progressive scale. In practice the General Commission for Taxes charges the higher of that rate applied to reported profit, or a deemed tax calculated on reported revenue using a percentage set by contract type. Foreign oil companies and their subcontractors pay 35%.
What is the deemed profit approach?
The tax authority treats a fixed percentage of your reported revenue as taxable profit, depending on the type of contract. Research and consultancy is deemed 50%, marketing 40%, contracting and services 20%, and patent, copyright or logo contracts 75%. Your actual margin does not change those figures.
How much tax does a consultancy actually pay?
On a deemed profit of 50% at a 15% rate, roughly 7.5% of revenue, unless 15% of actual profit is higher. A consultancy with a 20% real margin will therefore be assessed on the deemed figure.
Who pays the 35% oil and gas rate?
Foreign oil companies, their branches and offices, and subcontractors working in Iraq in oil and gas production and related industries. The scope reaches beyond the operator, so services companies should confirm their classification.
What is the 10% contract retention?
The contractor withholds 10% of the total contract value and pays it to the tax office. It is released when the subcontractor obtains a tax clearance letter for that contract, which makes tax clearance a cash flow question for subcontractors.
Are dividends taxed in Iraq?
Dividends paid by Iraqi entities are not taxed again in the shareholder's hands. What constrains getting money out is the currency and banking layer rather than the tax layer.
What does an investment licence exempt?
Taxes and fees for ten years from the start of commercial operations, per project phase, extendable up to fifteen years where the Iraqi investor's share exceeds 50%. It also covers import of equipment and raw materials, and gives land ownership or a renewable 50-year lease.
Does the Kurdistan Region tax differently?
It can. The Region issues its own tax regulations, including a 2022 Ministry of Finance instruction on withholding, and licensed projects there have their own holidays and customs exemptions. Verify the KRI position rather than assuming the federal one.
Is there a permanent establishment definition in Iraqi law?
Not a usable one. A regulation taxes foreign companies registered in Iraq or otherwise having a permanent establishment at 15% on Iraqi income, but no provision defines the term, so the concept sits in the law without content.
When is the tax return due?
The taxable year is the calendar year and the statutory filing deadline is 31 May of the year of assessment. Where self-assessment is not accepted, the authority assesses on the information available to it.
Sources
- PwC Worldwide Tax Summaries: Iraq taxes on corporate income and the deemed profit approach
- PwC Worldwide Tax Summaries: Iraq withholding taxes and deemed profit percentages by contract type
- Investment Law No. 13 of 2006: exemptions granted with a National Investment Commission licence
The 15% statutory rate, the 35% rate on foreign oil companies and their subcontractors, the deemed profit approach and the deemed percentages by contract type are drawn from PwC Worldwide Tax Summaries for Iraq as of September 2026. The deemed percentages are applied by the General Commission for Taxes and the boundary between contract categories is applied administratively rather than by a published algorithm, so classification should be confirmed with an Iraqi tax adviser before pricing a contract. The distinction between the 7% and 3.3% oil and gas retention rates is acknowledged by practitioners as unclear. The 10 to 15 year investment licence exemption follows Investment Law No. 13 of 2006. The Kurdistan Region issues its own tax instructions, including Ministry of Finance instruction No. 7 of 11 April 2022 on withholding, and its treatment can differ. This is not tax advice.