Iraq Investment Income Guide 2026

Dividend Taxation

Dividends paid by Iraqi companies are subject to relatively favourable tax treatment:

• Resident individuals: Dividends received from Iraqi companies are generally exempt from additional tax. The company has already paid corporate tax on its profits, and the dividend is treated as tax-free in the hands of the individual shareholder.
• Resident companies: Dividends received from other Iraqi companies are generally exempt from corporate tax (participation exemption).
• Non-residents: Dividends paid to non-resident shareholders are subject to withholding tax at 5%, unless the rate is reduced under an applicable double tax treaty. Some treaties may provide for a 0% rate.

The final withholding tax system means that dividend recipients generally do not need to include dividends in their annual income declaration. The 5% WHT (where applicable) is the final tax.

Interest Taxation

Interest income from bank deposits and other financial instruments is subject to withholding tax:

• Bank deposits (individuals): Interest on bank deposits is subject to a final withholding tax of 5–10%, depending on the type of deposit and the bank. This WHT is the final tax liability, and the interest does not need to be included in the IIT return.
• Bank deposits (companies): Interest received by companies is included in taxable income and taxed at the corporate rate of 15%, with the WHT credited against the final liability.
• Non-residents: Interest paid to non-residents is subject to 10% WHT, subject to treaty relief.

The withholding tax is deducted by the bank at the time interest is credited or paid. Taxpayers who are exempt or subject to a lower rate under a tax treaty may apply for a refund or reduced withholding through the GCT.

Royalty Taxation

Royalties paid for the use of intellectual property, patents, trademarks, and similar rights are subject to withholding tax when paid to non-residents:

• Non-resident recipients: 5–15% WHT, depending on the type of royalty and the applicable double tax treaty. The standard domestic rate is 15%.
• Resident recipients: Royalties received by residents are included in ordinary income and taxed under the IIT schedule (individuals) or corporate rate (companies).

Iraq's double tax treaties with various countries may reduce the WHT rate on royalties significantly, often to 5–10%.

Government Bonds — Tax Exempt

Interest and capital gains from Iraqi government bonds (including treasury bills and development bonds) are fully exempt from income tax. This exemption applies to both resident and non-resident holders, making government bonds an attractive investment vehicle in Iraq. The exemption is designed to encourage investment in government debt and broaden the investor base for domestic capital markets.

Corporate bonds and sukuk (Islamic bonds) issued by private entities do not benefit from tax exemption and are subject to standard treatment for interest income.

Iraq Stock Exchange (ISX) — No Securities Transaction Tax

Trading on the Iraq Stock Exchange (ISX) is not subject to any securities transaction tax or stamp duty on trades. This is advantageous for active traders and investors compared to exchanges in many other countries that levy a small percentage on each transaction. The absence of a transaction tax reduces trading costs and encourages liquidity in the market. However, capital gains from ISX trading remain fully taxable as income (see capital gains guide).

Double Tax Treaties

Iraq has a limited network of double tax treaties, primarily with countries in the Middle East, Europe, and Asia. These treaties typically reduce withholding tax rates on dividends, interest, and royalties. Key treaties include those with the United Kingdom, France, Germany, Turkey, Iran, Jordan, Lebanon, and others. Taxpayers claiming treaty benefits must submit a certificate of residence from the treaty partner's tax authority.

FAQs

Is rental income considered investment income?

Rental income is classified as ordinary income, not investment income, and is taxed under the standard IIT rates (3–15%). It is not subject to withholding tax; landlords must declare rental income in their annual return.

Are foreign dividends taxable in Iraq?

Iraqi tax residents must declare foreign dividend income in their annual tax return. A foreign tax credit may be available for taxes paid in the source country, limited to the Iraqi tax attributable to that income.

Can I reclaim excess withholding tax?

Yes, if tax has been withheld at a rate higher than the applicable treaty rate, the taxpayer may apply to the GCT for a refund. The process requires documentation including a certificate of residence and evidence of the withholding.

Disclaimer

This guide provides general information about Iraqi investment income taxation 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.