India
Iraq
Iraq is India's seventh largest trade partner, with bilateral trade of USD 27.51 billion in 2025-26, down 14.46% on the previous year because of the regional conflicts of June 2025 and February to April 2026.
That number tells you the corridor is real and that it is volatile. Indian companies are not exploring Iraq, they are already delivering there. What most of them have not settled is the entity question, because the rule that governs it changed in 2019 and a lot of Indian guidance has not caught up.
Key facts for Indian founders
| Question | Answer |
|---|---|
| Can an Indian own 100% of an Iraqi company? | Not a federal LLC. Capped at 49% since 2019 |
| Full ownership anywhere in Iraq? | Yes, in the Kurdistan Region |
| Iraqi corporate tax | 15%, or 35% in oil and gas, on the higher of deemed or actual profit |
| Tax on dividends leaving Iraq | None |
| Federal registration timeline | 6 to 12 weeks, driven by security clearance |
| Deploying Indian staff | Restricted to designated safe provinces under Indian policy |
The Iraqi constraint is ownership. The Indian constraint is where you may send people. Both need answering before the entity, not after.
The real reason Indian companies do this: they are already winning work
Not tax. Iraq's headline 15% is not a rate you would restructure for, and the deemed profit mechanism makes it higher in practice.
The corridor is delivery, and the evidence is specific:
- Shapoorji Pallonji Group constructed a Ministry of Youth and Sports funded hotel project in Basra.
- BHEL won an order for a compressor package for the Baiji Refinery, placed by Northern Refineries Company.
- Kalpataru has undertaken a USD 60 million power transmission lines project in southern Iraq.
- TARIL won a contract to supply electrical transformers to the Al Sabha group in March 2025, ongoing.
- An Indian pavilion at the 49th Baghdad International Fair, 1 to 7 February 2026, with 22 companies and around 40 businessmen.
The pattern is engineering, power and construction, delivered against Iraqi contracts. That is trading in Iraq rather than with it, which is what creates the tax exposure and, usually, the need for an entity. The distinction is in Iraq withholding tax for non-residents.
Can an Indian resident legally own an Iraqi company?
Yes, up to 49% of a federal LLC or joint stock company. Since Law No. 17 of 2019 amended Article 12 of the Companies Law, Iraqi shareholders must hold at least 51%.
- 1Branch, if you hold a contractEscapes the ownership cap, but federal Iraq generally requires a government contract or an investment licence, and the Indian parent must be at least two years old.
- 2LLC at 49%, with a real local partnerThe ordinary route for a business that intends to stay. The 51% holder must be a genuine shareholder, not a nominee.
- 3Kurdistan RegionFull foreign ownership permitted, registration in two to four weeks. Only if the project belongs there.
The routes and their trade-offs are set out in foreign ownership in Iraq. The one that will not work is a nominee arrangement: the Ministry of Interior clears every foreign shareholder, and the structure fails at the bank regardless.
The Indian side: the rule about people
The constraint most Indian companies meet first is not corporate, it is migration policy.
The Government of India restricts Indian nationals' employment in Iraq to designated safe provinces. That governs where you can lawfully deploy your own staff, which in turn governs where you can bid.
Practical consequences:
- Check the current designation before you tender, not after you win.
- Site location and entity location can differ, and the entity choice should not lock you out of provinces you may want later.
- Local hiring becomes strategic rather than incidental, because it is not subject to the same constraint.
- Confirm the position with the Embassy in Baghdad or the Ministry of External Affairs, since designations change.
Separately, an outbound investment into an Iraqi entity is an exchange control matter on the Indian side. Use the correct route through your authorised dealer bank and complete the associated filings, in the same way as any overseas direct investment.
The Iraqi side, in short
- Decide the route: branch, LLC at 49%, or a Kurdistan entity.
- Prepare the incorporation pack, including the memorandum of association and the appointment of an auditor and a manager.
- Clear the Ministry of Interior check, required for every foreign shareholder, with no published timeline.
- Deposit the capital of IQD 1,000,000 in an Iraqi bank, verified at registration.
- Appoint a managing director and a deputy, with a resident manager.
- Register for tax and with Daman, and obtain the tax identification number early.
Full sequence in how to register a company in Iraq.
The tax position for an Indian owner
| Layer | Iraq |
|---|---|
| Corporate income tax | 15%, or 35% in oil and gas and related industries |
| How it is calculated | The higher of deemed profit on revenue or the rate on actual profit |
| Contracting and services deemed profit | 20% of revenue |
| Withholding on dividends to India | None |
| Contract retention | Typically 3% to 5%, released on tax clearance |
Two points matter more than the rate. A contracting and services contract is deemed to yield 20% profit on revenue, so an engineering business with a thinner margin is assessed on the deemed figure. And there is no dividend withholding, so what constrains getting money home is the currency channel rather than tax. Both are covered in Iraq corporate tax.
When Iraq makes sense from India, and when it does not
| Situation | Verdict |
|---|---|
| Power, transmission or refinery equipment supply | Strong, this is the established corridor |
| Construction against a public or donor contract | Strong, and a branch may be the route |
| Long-running site presence with local hires | Strong, LLC at 49% with a real partner |
| Trading goods from India without local delivery | Possibly trading with Iraq, and no entity needed |
| Reducing Indian tax | No. Iraq is an operating jurisdiction |
| Deploying Indian staff outside designated provinces | No. Indian policy governs this |
Common mistakes from India
- Reading pre-2019 guidance. Full foreign ownership of an Iraqi LLC has not been available in federal Iraq since Law No. 17 of 2019.
- Bidding before checking the safe provinces designation, then discovering the deployment is not permitted.
- Assuming a branch is available. It generally needs a government contract or a licence, and the Indian parent must be at least two years old.
- Pricing from the 15% headline rather than from the deemed profit percentage for the contract type.
- Leaving the tax identification number late, which delays access to the official dollar channel.
- Using a nominee for the 51%. The Ministry of Interior clears every foreign shareholder and the bank looks again.
The bottom line, and how CorpSec helps
India already delivers in Iraq: power, transmission, refinery equipment and construction, against Iraqi contracts. What is usually unresolved is the vehicle, because the 2019 ownership change caught a lot of Indian guidance out and the branch route has conditions that a newly formed subsidiary cannot meet.
Settle three things before you tender: which route your contract supports, where you may lawfully deploy Indian staff, and how quickly you can obtain the tax identification number that gates the currency channel.
CorpSec structures Iraqi entries end to end, in federal Iraq and the Kurdistan Region, and works alongside your Indian advisers on the outbound investment side.
Frequently asked questions
Can an Indian company own an Iraqi company?
Up to 49% of a federal LLC or joint stock company, since Law No. 17 of 2019 requires Iraqi shareholders to hold at least 51%. Full ownership is available in the Kurdistan Region and is understood to be available through an investment licence.
Why is Iraq important for Indian business?
It is India's seventh largest trade partner, with bilateral trade of USD 27.51 billion in 2025-26. Indian companies are already delivering power transmission, refinery equipment, transformers and construction projects there.
Can I send Indian workers to Iraq?
Indian government policy restricts employment of Indian nationals in Iraq to designated safe provinces. Confirm the current designation with the Embassy in Baghdad or the Ministry of External Affairs before tendering, because it governs where you can lawfully deploy.
Do I need an Iraqi entity at all?
Only if you are trading in Iraq rather than with it. Supplying from India with the work performed abroad should not create an Iraqi liability. Performing installation, supervision or engineering on site does.
How long does registration take?
Six to twelve weeks in federal Iraq, driven by the Ministry of Interior security clearance that every foreign shareholder must pass. Two to four weeks in the Kurdistan Region.
What tax will my Iraqi company pay?
Fifteen percent, or 35% in oil and gas and related industries, charged on the higher of the deemed profit for your contract type or the rate on actual profit. A contracting and services contract is deemed to yield 20% profit on revenue.
Is there a tax on sending profits back to India?
Iraq does not tax the dividend again in the shareholder's hands. The practical constraint is access to the official foreign exchange channel, which requires a valid Iraqi tax identification number.
Can I use a branch instead of a company?
Only if federal conditions are met: a government contract or an investment licence, and an Indian parent that has existed for at least two years. In the Kurdistan Region, Erbil does not require a government contract.
What about the Indian exchange control side?
An outbound investment into an Iraqi entity should go through the correct overseas investment route with your authorised dealer bank, with the associated filings. Confirm the route before funds move.
Should I look at the Kurdistan Region?
Only if the project belongs there. It permits full foreign ownership and registers faster, but choosing it while your contract, site and counterparty are in federal Iraq solves the wrong problem.
Sources
- Embassy of India, Baghdad: India-Iraq bilateral relations and trade
- Ministry of External Affairs: India-Iraq bilateral brief
- Law No. 17 of 2019 amending Article 12 of the Companies Law: the 51% requirement
Bilateral trade figures, the ranking of Iraq among India's trade partners, the Baghdad International Fair participation and the named Indian contracts come from Indian mission and ministry sources describing 2025 and 2026 and are context rather than forecasts. The restriction of Indian employment in Iraq to designated safe provinces is Indian government policy and its current scope must be confirmed with the Ministry of External Affairs or the Embassy in Baghdad before deploying staff. The 51% Iraqi ownership requirement follows Law No. 17 of 2019, and the Kurdistan Region permits full foreign ownership following its January 2022 amendments. Indian exchange control treatment of an outbound investment follows the overseas investment rules and must be confirmed with an authorised dealer bank. This is not legal or tax advice.