Iraq Tax Residency Guide

183-Day Physical Presence Test

• Primary test — 183 days: The primary test for the Iraqi tax residency is the physical presence. An individual who is present in Iraq for 183 days or more in a calendar year (1 January to 31 December) is treated as an Iraqi tax resident.
• Counting the days: The day of arrival and the day of departure are both counted as the days of presence. The presence does not need to be continuous; the cumulative days in the tax year are added up.
• Tax consequences: The residents are taxed on the worldwide income, while the non-residents are taxed only on the Iraqi-source income.

For example: a foreign employee who arrives in Iraq on 1 March and departs on 31 August (184 days) in 2026 is an Iraqi tax resident.

Intention to Reside and Permanent Home

• Intention test: In addition to the 183-day test, the Iraqi tax authorities may consider the intention to reside. An individual who has the intention to make Iraq the permanent or the habitual home may be treated as a resident even if the 183-day threshold is not met.
• Permanent home: Having a permanent home available in Iraq (an owned house, a long-term lease) is a strong indicator of the residency. The authorities may look at the centre of the vital interests (family, business, economic ties).
• No citizenship-based taxation: Iraq does NOT impose tax based on the citizenship. The Iraqi citizenship alone, without the physical presence or the intention to reside, does not create the tax residency. An Iraqi citizen living abroad for more than 183 days is generally treated as a non-resident.

For example: an Iraqi citizen who lives in Dubai for 10 months of the year and returns to Baghdad for 2 months is a non-resident, even though they hold the Iraqi citizenship.

Non-Resident Status — Iraqi-Source Income Only

• Non-resident definition: An individual who is present in Iraq for fewer than 183 days in the tax year and does not have the intention to reside is treated as a non-resident.
• Taxable income: The non-residents are taxed only on the Iraqi-source income. The Iraqi-source income includes: the employment income for work performed in Iraq; the business income from an Iraqi source; the dividends, interest, and royalties from the Iraqi payers; and the capital gains from the Iraqi assets.
• Withholding tax: The non-residents are generally subject to the final withholding tax on the Iraqi-source passive income (dividends at 10%, interest at 15%, royalties at 15%).

For example: a non-resident consultant who visits Iraq for 30 days in 2026 pays tax only on the fees earned from the Iraqi clients, not on the worldwide income.

KRG — 45-Day Presence Rule for Kurdistan Residency

• KRG residency — 45 days: The Kurdistan Regional Government has a separate residency rule for the tax purposes. An individual who is present in the Kurdistan Region for 45 days or more in a tax year may be treated as a KRG tax resident.
• Separate filing: The KRG tax authorities require the residents to file a separate KRG tax return and pay the tax to the KRG General Tax Authority, in addition to or instead of the federal Iraqi tax.
• Dual residency risk: A person who works in both the federal Iraq and the Kurdistan Region may be treated as a resident in both jurisdictions. The coordination between the federal and the KRG tax authorities is limited, and the double taxation is a real risk.

For example: a foreign contractor who works in Erbil for 50 days in 2026 is treated as a KRG resident and must file a KRG tax return, even if not a federal Iraqi resident.

No Exit Tax

• No departure tax: Iraq does NOT impose an exit tax (departure tax) on the individuals who cease to be the Iraqi tax residents. There is no deemed disposition of the assets upon emigration.
• No mark-to-market: Unlike some jurisdictions (the United States, Canada), Iraq does not require the emigrating residents to pay tax on the unrealised gains of the assets as if they were sold on the date of the departure.

For example: an Iraqi resident who moves to the UAE permanently does not pay any exit tax on the unrealised gains of the Iraqi assets.

Dual-Residence Rules Under DTAs

• Tie-breaker rules: Where an individual is a resident of both Iraq and another country under the respective domestic laws, and a DTA exists between the two countries, the tie-breaker rules of the DTA apply. The tie-breaker examines: the permanent home, the centre of the vital interests, the habitual abode, and the nationality.
• Limited application: Given Iraq's very limited DTA network, the dual-residence tie-breaker rules are rarely applicable. In most cases, the dual residence is resolved by the domestic law or by the practical enforcement considerations.

For example: a person who is a resident of both Iraq and Jordan under the respective laws uses the Iraq-Jordan DTA tie-breaker rules to determine the treaty residence.

FAQs

How is the residency determined for a company?

An Iraqi company is resident if it is incorporated under the Iraqi law or if its place of effective management is in Iraq. The foreign companies with a branch or a permanent establishment in Iraq are subject to the Iraqi tax on the Iraq-source income attributable to the PE.

Can a foreign diplomat claim the non-resident status?

Yes, the foreign diplomats and the consular staff are generally exempt from the Iraqi income tax on their official salaries under the Vienna Convention on Diplomatic Relations. They are treated as non-residents for the tax purposes.

What documents are required to prove the non-resident status?

The taxpayer should maintain the passport records (entry and exit stamps), the flight tickets, the employment contract showing the foreign workplace, and the evidence of the foreign residence (lease, utility bills). The Iraqi tax authorities may request these documents during the assessment.