As a country that has been going through a long never-ending war with its neighboring country, Iran, tax is important in reforming and rebuilding the nation. According to the Iraqi taxation system, every resident has to pay taxes. All income made in the territory is subjected to a fixed tax rate, regardless of the residency status of an individual. Although, the amount of tax a person has to pay depends on where he or she resides. People living in the state must pay tax on their total income, this means all income earned here and abroad. However, those who do not live in Iraq have to pay taxes for the income made only in it. It is important to clarify the residential status of a taxpayer for every financial year before the income and taxes are calculated.
This is a comprehensive article, which provides detailed information about the tax system effective here.
Requirement for tax payment
Every resident living in the state pays taxes for income earned from working or business, either through the salaries earned monthly or by the filing of an annual tax return. Employees are charged personal income tax while business owners pay the corporate income tax for revenue generated here.
Types of taxes
There are several types of tax, which apply to different residents in the nation. They include corporate income tax, foreign oil company income tax, and personal income tax. The different forms of taxes have their specific tax rates distinct to each class of the income bound.
Corporate income tax (CIT)
The corporate income tax (CIT) system applies to businesses, corporations, or organizations conducting business here. It is based on a standard CIT rate of 15 percent at all income levels, without a progressive rate scale. This approach was adopted by the General Commission for Taxes (GCT) with the application of certain rates on the total reported revenue. Only companies who earn profits from activities here are subject to paying taxes. Branches of foreign corporations except oil companies may not pay taxes if they do not generate income within the nation. However, if the income is made from money originating from Iraq, a certain tax rate is charged and deducted.
Foreign oil company income tax
All income generated from contracts executed with foreign oil companies, their subsidiaries or offices, and subcontractors working in the Iraqi oil and gas production sector and related industries is charged a rate of 35 percent.
Local Income Tax
There are no local, state, or regional taxes charged for income in the nation.
Personal income tax (PIT)
Income earned by an individual in Iraq is charged a specific tax rate depending on the income class, regardless of where such a person lives. Also, revenue generated from overseas and other residents, including interest, commissions, investment returns, and profits from the transaction of currencies, valuable metals, and securities, is liable to tax if it was made from amounts of money and deposits owned in the state.
The personal income tax rate
Tax rates for persons working in the country are charged according to the following scale:
| Exceeding (IQD) | Not exceeding (IQD) | Excess (%) |
| 0 | 250,000 | 3 |
| 250,000 | 500,000 | 5 |
| 500,000 | 1,000,000 | 10 |
| 1,000,000 | 15 |
Tax year
It is a mandatory period (one year) when individuals file their tax returns. Also known as the calendar year, it begins from the 1st of January to the 31st of December. All tax returns have a due date of March 15. However, it is not compulsory to file a return when the income is not acquired from business activities carried out within the state.
