France
Kurdistan
French energy interests in Iraq are substantial and they are in the south, around the federal fields. They are not in the Kurdistan Region, and this page does not borrow them.
What makes the Region interesting from France is something narrower and considerably more precise: the Kurdish corporate rate and the French controlled foreign company threshold are the same number.
That is not a comfortable margin. It is a coincidence sitting exactly on a line, and it is worth understanding before anything is structured.
Key facts for French founders
| Question | Answer |
|---|---|
| Can a French resident own 100% of a Kurdistan company? | Yes. Full foreign ownership, unlike federal Iraq's 49% cap |
| France-Iraq double tax treaty | None |
| Kurdish corporate tax | 15% on net profit, all sectors |
| French privileged regime boundary | Broadly 15%, from a 25% French rate reduced by 40% |
| Article 209 B trigger | Holding more than 50% of an entity in a privileged regime |
| Effect of a Kurdish investment licence | Effective rate falls toward zero for ten years |
| Tax on dividends leaving the Region | None |
Fifteen against fifteen is not a margin. Any Kurdish arrangement that reduces the effective rate below the headline pushes the company across the French line rather than toward it.
The French analysis: article 209 B
Article 209 B of the Code général des impôts attributes the profits of certain foreign entities back to a French corporate shareholder.
| Element | Position |
|---|---|
| Who it applies to | A company established in France and subject to corporate income tax |
| Holding threshold | More than 50%, directly or indirectly |
| Condition | The foreign entity is established in a state with a privileged tax regime |
| Privileged regime test | The entity is not taxable there, or is subject to profit taxes at least 40% lower than the French charge would be |
| Consequence | The entity's profits are taxable in France as corporate income |
| Safeguard clause | Available, and outside the EU the burden sits with the French company |
Where the boundary actually falls
Take the standard French corporate rate of 25%. A tax at least 40% lower is a tax below 15%.
- Kurdistan taxes at 15%. That is not below 15%, so it is not, on the face of it, a privileged regime.
- Federal Iraq's oil and gas rate is 35%, comfortably outside the test.
- The Region has not adopted that 35% rate, so a Kurdish energy services company sits at 15% too.
- The margin is zero. Anything that reduces the effective rate crosses the line.
- The comparison is not a headline rate comparison. It is done on the tax actually borne, which is where an exemption matters.
The trap: the incentive is what triggers the rule
This is the part that no published guidance on the Region sets out, and it is the reason to read the two rules together.
Kurdistan Region Investment Law No. 4 of 2006 exempts a licensed project from all non-customs taxes and duties for ten years from the start of services or production. It is the strongest incentive the Region offers.
It also takes the effective Kurdish rate toward zero, which is squarely inside the French definition of a privileged tax regime.
The thing that makes the Region attractive is the thing that would bring article 209 B into play. That does not make the licence a mistake. It makes it a decision to model on both sides before applying, rather than a benefit to collect and explain later.
The safeguard clause, and why the Region supports it
Article 209 B is not absolute. The safeguard clause disapplies it where the foreign entity carries on a genuine activity, and outside the European Union the French company carries the burden of showing that the operations have principally an effect other than locating profits in a privileged regime.
The Kurdistan Region happens to force the evidence that argument needs:
- The managing director, legal agent and authorized employee must reside in the Region.
- Premises are verified by physical inspection as part of registration.
- A locally qualified lawyer and accountant are mandatory appointments, renewed annually.
- Audited accounts under the Iraqi Unified Accounting System are required from year one at any size.
- A Kurdish entity is reported not to trade in federal Iraq, so its activity is genuinely local rather than nominal.
Those are burdens when you are registering. They are documentation when the safeguard clause is argued.
No treaty, and no threshold
France has no double tax treaty with Iraq, which is more consequential than it sounds given how wide the French network usually is.
| What you might expect | What actually applies |
|---|---|
| A treaty allocating taxing rights | Nothing. Both sides may assess |
| A presence threshold before Iraqi exposure | None. Iraqi law has no permanent establishment concept |
| A treaty rate on non-resident withholding | The Region's Instruction No. 7 of 11 April 2022, at 15% on deemed profit |
| A mutual agreement procedure | None |
Sending a French engineer to commission equipment in Erbil creates Iraqi exposure from the first day of work performed there, regardless of duration. Set out in Kurdistan withholding tax.
The Kurdish side, in short
| Element | Position |
|---|---|
| Ownership | Up to 100%, the only route to that in Iraq |
| Registration | 2 to 4 weeks in practice |
| Minimum capital | IQD 1,000,000, fully paid, roughly USD 850 |
| Published government total | IQD 4,425,000 for a local company, including that capital |
| Corporate tax | 15%, with no 35% oil and gas rate in the Region |
| Filing deadline | 30 June, six months after year end |
| Territorial limit | Reported not to trade in federal Iraq |
Detail in company registration in Kurdistan and Kurdistan corporate tax.
When this makes sense from France, and when it does not
- You have contracts or clients in the Region. Full ownership is available and the entry is quick.
- You supply engineering, equipment or services on site. A local entity is how you contract for it.
- You are considering an investment licence. Model the French effect first, not after.
- You want a holding company. Wrong jurisdiction. The Region is operational and article 209 B is unforgiving of passive structures.
- You want a low tax base. At 15% with a mandatory audit, it is not one, and trying to make it one is what triggers the French rule.
- Your project is in the federal south. That is a federal entry, covered in Iraq company from France.
Common mistakes from France
- Reading 15% as comfortably outside the test. It is exactly on the boundary, with no margin.
- Taking the ten year exemption without modelling article 209 B. The incentive and the trigger are the same event.
- Assuming a treaty exists. France has none with Iraq, so unilateral relief is the fallback.
- Relying on the safeguard clause without building the file. Outside the EU the burden of proof is yours.
- Creating a fresh French holding company as shareholder. A foreign corporate shareholder is reported to need over a year of existence.
- Planning a Kurdish entity to serve all of Iraq. It is reported not to trade in the federal territory.
The bottom line, and how CorpSec helps
A French company operating in the Kurdistan Region at the ordinary 15% rate is, on the face of the test, outside article 209 B. It is outside by nothing at all, which means the analysis should be run rather than assumed.
The decision that genuinely matters is the investment licence. It is the Region's best incentive and it is also what would place the entity inside the French definition of a privileged regime. That is a modelling exercise for a French tax adviser before an application, not a discovery for an inspector afterwards.
CorpSec handles the Kurdish registration, the mandatory local appointments and the bank account sequence, and the substance requirements we have to satisfy anyway are the same evidence your French adviser will want for the safeguard clause.
Frequently asked questions
Can a French resident own 100% of a company in the Kurdistan Region?
Yes. The Region permits full foreign ownership, unlike federal Iraq where an Iraqi shareholder must hold at least 51% under Law No. 17 of 2019.
Is the Kurdistan Region a privileged tax regime for French purposes?
On the ordinary rate, no, but only just. A privileged regime is broadly one taxing at least 40% below the French charge, which from a 25% rate produces a 15% boundary, and Kurdistan taxes at 15%.
Does the investment licence change that?
Yes, and this is the point most often missed. A Board of Investment licence exempts a project from non-customs taxes and duties for ten years, taking the effective rate toward zero and inside the French definition.
When does article 209 B apply?
Where a company established in France and subject to corporate income tax holds, directly or indirectly, more than 50% of an entity established in a state with a privileged tax regime.
Can the safeguard clause help?
It can, and the Region's requirements support it. Outside the European Union the French company must show that the operations have principally an effect other than locating profits in a privileged regime, and the burden of proof is on the taxpayer.
Is there a tax treaty between France and Iraq?
No. Relief depends on French unilateral rules, and there is no treaty rate or mutual agreement procedure available.
How much presence can I have before Iraqi tax applies?
None, in the sense that there is no threshold. Iraqi tax law has no permanent establishment concept, so work performed in the Region is taxable regardless of duration.
Does the 35% oil and gas rate apply in the Region?
No. The Kurdistan Region has not adopted it, so an energy services company there is taxed at 15% like any other company, which is a genuine advantage over federal Iraq.
How long does Kurdish registration take?
Two to four weeks in practice, against six to twelve weeks or longer in federal Iraq, where every foreign shareholder needs Ministry of Interior clearance.
Can my Kurdish company work in Baghdad or Basra?
It is reported that a Kurdish entity does not operate in federal Iraq, and Board of Investment licences cover Erbil, Sulaymaniyah and Duhok only. Serving both markets means two entries.
Sources
- Article 209 B du Code général des impôts: attribution of profits from entities in privileged tax regimes
- BOFiP: the privileged tax regime test and the safeguard clause under article 209 B
- Iraq Britain Business Council: the 35% oil and gas rate has not been adopted in the Kurdistan Region
- Kurdistan Region Investment Law No. 4 of 2006: the ten year exemption for licensed projects
The comparison below turns on the standard French corporate income tax rate of 25% and the article 238 A test of a tax lower by at least 40% than the French charge, which produces a 15% boundary; reduced French rates, surcharges and the way the comparison is actually computed by the administration can move that figure, so it should be modelled by a French tax adviser rather than taken from this page. France has no double tax treaty with Iraq. The Kurdish corporate rate of 15% and the non-adoption of the 35% oil and gas rate in the Region come from the Iraq Britain Business Council. The effect of a Board of Investment exemption on the French analysis is a conclusion drawn here from the two rules read together, not a position stated by either authority. This is not legal or tax advice.