Iraq: law and taxes review

Hadeel Hassan, senior advocate in Iraq, is based in Baghdad.
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HH:Most international companies are located in the Green Zone and around the airport in Baghdad because these are very safe and well protected areas, plus there are all the services companies need around there. Although the situation is improving, it is still a little risky for foreigners to travel around Baghdad.

 Are companies fairly free to come and set up in Iraq?

NS: Until recently there hasn’t been a defined framework on this, but as of January 1st 2009, the Status of Forces Agreement came into place. Essentially this ushered in a new era of Iraq self-governance and giving rise to a plethora of questions regarding its impact on foreign contractors, which were previously granted immunity from Iraqi legal process in 2004 by order of the Coalition Provisional Authority.

The SOFA is silent on the status of foreign contractors, leaving the question open as to whether foreign contractors and companies doing business in Iraq must – for the first time in five years – pay taxes or formally register their company’s presence.

We recommend international companies register their presence through SOFA, which will cover entry and exit procedures, vehicle registration and the licensing of security companies, as well as
other issues.

The agreement is part of a piecemeal process, but it is encouraging, because it’s a first step towards getting incorporated as a local business, and that is a process that can take a few months. Currently, the timeframe in which it takes to incorporate foreign companies or nationals is between one and three months, so we’re recommending to all of our clients to begin all of these processes as early as possible.

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HH: Until 2009 there were no taxes. Right now it is 15%, which is even lower than other Middle Eastern countries. The overriding aim at the moment is to encourage foreign direct investment, so I don’t expect that taxation, even if it does come more into play, will be very high.  

Signs of opportunity

In early April Iraq signs a US $128 million oil refinery contract with Foster Wheeler.

Late March and Emirates International Investment Company ‘pre-announces’ potential investments in Iraq.

Rehabilitation works completed on rainwater drainage and sewage networks in Basra at a cost of over US $750,000, at the end of March.

Several months work lead to irrigation technicians completing works to dig canal in Missan, a province south of Baghdad, at a value of US $3.5 million.

Wassit Water Department finalises 16 projects worth a total of US $7.4 million. They include drinking water networks in al-Kut city. Kut, the capital of Wassit province, is 180 km southeast of Baghdad.