Iraq Corporate Tax Guide 2026

Overview — Corporate Tax in Iraq

Corporate tax in Iraq is governed by Income Tax Law No. 113 of 1982 (as amended) and administered by the General Commission for Taxes (GCT). A company is considered tax resident in Iraq if it is incorporated under Iraqi law or if its place of effective management is in Iraq. Resident companies are taxed on worldwide income; non-resident companies are taxed only on Iraqi-source income. The tax year follows the calendar year (1 January to 31 December), though companies may apply to use a different fiscal year.

Companies must register with the GCT within 30 days of commencing business and obtain a tax identification number (TIN). Annual tax returns must be filed by 30 April following the end of the tax year.

Standard Corporate Tax Rate — 15%

The standard corporate income tax rate in Iraq is 15% on taxable profits. This rate applies to all resident companies across all sectors except oil and gas. The 15% rate is one of the lowest corporate tax rates in the Middle East, making Iraq an attractive jurisdiction for business investment, particularly in non-hydrocarbon sectors.

Taxable profit is calculated as gross revenue less allowable deductions, including operating expenses, depreciation, interest costs (subject to certain limitations), and losses carried forward. Losses may be carried forward for up to five years; no carryback is permitted.

Oil and Gas Companies — 35%

Companies engaged in oil and gas exploration and production are subject to a higher corporate tax rate of 35%. However, the effective tax rate for international oil companies (IOCs) operating in Iraq is typically governed by Production Sharing Contracts (PSCs) with the Iraqi government or the KRG. These PSCs may contain stabilisation clauses that fix the applicable tax regime for the duration of the contract.

Oil companies are also subject to additional levies, including the reconstruction tax on imported equipment and materials used in oil operations. The interplay between PSC terms and domestic tax law is complex, and most IOCs maintain dedicated tax teams or external advisors specialising in Iraqi oil taxation.

Tax Holidays and Incentives

Iraq offers tax holidays to encourage investment in priority sectors. Under the Investment Law No. 13 of 2006 (as amended), qualifying projects may receive:

• Agricultural projects: Up to 15 years of tax exemption from the date of commencement of operations
• Manufacturing in industrial zones: Up to 10 years of tax exemption
• Other qualifying industries: Up to 5 years of tax exemption, renewable

Eligibility for tax holidays requires approval from the National Investment Commission (NIC) or the relevant provincial investment commission. Projects must meet minimum capital thresholds and employment targets. The holidays apply only to the income generated by the qualifying project, not the entire company's income if it has multiple business lines.

Depreciation Rules

Depreciation in Iraq follows the straight-line method. The General Commission for Taxes publishes standard useful life assumptions for different asset categories:

• Buildings and structures: 20–40 years (2.5–5% per annum)
• Plant and machinery: 10–15 years (6.67–10% per annum)
• Vehicles: 5 years (20% per annum)
• Office equipment and computers: 3–5 years (20–33% per annum)

No accelerated depreciation or bonus depreciation is generally available. Assets must be put into use before depreciation can commence.

Thin Capitalisation and Transfer Pricing

Iraq does not currently have statutory thin capitalisation rules limiting interest deductibility based on debt-to-equity ratios. However, the GCT may challenge interest deductions that are considered excessive or non-arm's length under general anti-avoidance provisions.

Transfer pricing regulations are in the early stages of development. Iraq has not yet adopted OECD transfer pricing guidelines or introduced formal documentation requirements, but tax authorities are increasingly scrutinising related-party transactions, particularly in the oil and telecommunications sectors. Multinational enterprises operating in Iraq should prepare transfer pricing documentation to support their pricing policies even in the absence of formal requirements.

KRG Corporate Tax

The Kurdistan Regional Government (KRG) generally applies a 15% corporate tax rate consistent with the federal rate. However, the KRG has its own tax administration, filing procedures, and registration requirements. Companies operating solely within KRG territory register with the KRG tax department rather than the federal GCT. For companies operating in both federal Iraq and KRG territory, tax allocation between the two jurisdictions can be complex and requires careful planning.

FAQs

What is the penalty for late filing of corporate tax returns?

Late filing attracts a penalty of 10% of the tax due, with additional penalties for continuing non-compliance. Late payment attracts interest at the Central Bank of Iraq discount rate plus 3% per annum.

Can a foreign company have a branch in Iraq and pay tax?

Yes, foreign companies may operate through a branch registered in Iraq. The branch is taxed at 15% on its Iraqi-source profits. Branches of foreign oil companies are subject to the 35% rate and PSC terms.

Are dividends paid by an Iraqi company subject to withholding tax?

Dividends paid to resident companies are generally exempt from withholding tax. Dividends paid to non-residents may be subject to 5% withholding tax, subject to relief under applicable double tax treaties.

Does Iraq have a General Anti-Avoidance Rule (GAAR)?

Iraq does not have a codified GAAR, but the GCT has broad powers to recharacterise transactions that are considered to have a tax avoidance purpose. The courts have upheld the tax authorities' ability to look through artificial arrangements.

Disclaimer

This guide provides general information about Iraqi corporate tax for the 2026 tax year. Tax laws and rates may change. Always consult with a qualified Iraqi tax advisor or the General Commission for Taxes for advice specific to your situation. InvestmentKit does not provide tax advice.