Kurdistan Company from India 2026: LRS and the ODI Route

India's relationship with the Kurdistan Region is a labour and services relationship, not a capital one. Indians work in the Region in construction, hospitality, healthcare and oilfield services, alongside larger Pakistani, Bangladeshi, Nepali and Filipino workforces.

That shapes what an Indian entity in Erbil is usually for: employing people, holding contracts and invoicing locally, rather than deploying capital into a project.

It also means the binding constraints are mostly on the Indian side.

Key facts for Indian founders

The Region will let an Indian founder own the whole company. Whether the money can leave India for it, and under which rule, is the question that actually decides the file.

The Indian analysis: LRS, ODI and TCS

This is where the structure is set, and the choice between the two routes is not cosmetic.

The rule that matters most in the Kurdistan Region

An Indian resident investing under the LRS may not invest in a foreign entity engaged in real estate activity. Gambling and instruments linked to the rupee are similarly barred.

That restriction lands on exactly the sector the Kurdistan Board of Investment has stopped licensing, because it considers the commercial and residential markets oversaturated.

1. 1
   The Indian sideUnder the LRS, a resident individual may not invest in a foreign entity engaged in real estate activity
2. 2
   The Kurdish sideThe Board of Investment has moved away from licensing commercial and residential real estate as those markets are oversaturated
3. 3
   Where the Region is openThe Board prioritises tourism, manufacturing and agriculture, none of which the LRS restricts
4. 4
   Where an operating company worksThe LRS permits operating entities, and a trading, services or contracting company in Erbil is exactly that

The TCS is a cash flow question, not a tax

Tax collected at source applies at 20% on remittances beyond INR 10 lakh in a financial year, for purposes other than education and medical treatment.

• It is creditable against your Indian tax liability, so it is not an additional cost.
• It is deducted at the moment of remittance, so it is very much an additional cash requirement.
• Budget the gross, not the net, when planning the capital deposit of IQD 1,000,000.
• The refund arrives at assessment, which can be a year later.

No treaty, which changes the analysis

India has no double tax treaty with Iraq. Nor do most origins, but Indian founders often assume otherwise given India's wide treaty network.

• Relief depends on India's unilateral credit rules, not on a treaty article.
• There is no treaty rate to reduce Kurdish withholding on a non-resident.
• There is no mutual agreement procedure to resolve a double taxation dispute.
• Document where work is performed, because that is the test that decides Kurdish liability.

The Kurdish side of this is in Kurdistan withholding tax, which also explains why there is no permanent establishment threshold to plan around.

The Kurdish side, in short

Detail in company registration in Kurdistan and Kurdistan company registration cost.

The labour corridor, honestly described

Indian workers are part of a large South Asian workforce in the Region, alongside an estimated 25,000 Nepalis and a Pakistani population reported in the tens of thousands. Wages in the general labour market run at USD 15 to 25 per day.

Two consequences for an Indian business:

• Recruitment and deployment services have a real market, and a local entity is how you contract for them.
• The KRG introduced a framework regulating the employment of foreign workers on 8 March 2024, so this is a regulated activity rather than an informal one.

Note also that Iraq has signalled tighter security screening for visitors from India, Pakistan and Bangladesh, which is a scheduling risk for deployment rather than a legal barrier.

When this makes sense from India, and when it does not

• You have contracts or clients in the Region. A local entity is the right answer and full ownership is available.
• You supply labour, services or equipment into Erbil. Worth a local vehicle once the work is performed on site.
• You want a property play. Blocked on both sides. Do not start.
• You want a holding company. Wrong jurisdiction. The Region is operational.
• You want a low tax base. 15% with a mandatory audit is not that.
• Your buyers are in Baghdad or Basra. That is a federal entry, covered in Iraq company from India.

Common mistakes from India

• Remitting the net and short-funding the capital deposit, because TCS was not budgeted.
• Missing Form FC, which is due within 30 days of the investment.
• Assuming a treaty exists. It does not, and unilateral relief is the fallback.
• Creating a fresh Indian holding company to hold the Kurdish shares. A foreign corporate shareholder is reported to need more than one year of existence.
• Planning a Kurdish entity to serve all of Iraq. It is reported not to trade in the federal territory.
• Treating the mandatory lawyer and accountant as setup costs. Both are annual, and both must be local.

USD 250,000annual LRS limit per resident individual, per financial year

20%TCS on remittances above INR 10 lakh, creditable but deducted upfront

30 daysto file Form FC after making the investment

The bottom line, and how CorpSec helps

For an Indian founder the Kurdish side is the easy half. Full ownership is available, registration runs two to four weeks, and the tax position is a flat 15% with no border tax on dividends.

The work is on the Indian side: choosing between the LRS and the ODI route, budgeting the TCS as cash rather than as cost, filing Form FC on time, and staying clear of the real estate restriction that both jurisdictions happen to impose.

CorpSec handles the Kurdish registration, the mandatory local appointments and the bank account sequence. Your Indian authorised dealer bank and a chartered accountant handle the remittance side, and the two need to be sequenced together rather than in series.