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IRAQ
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Iraq Payroll and Employer of Record: Employment Contracts
The Iraqi Labor Law distinguishes between Arab and foreign employees. Arab employees are treated as Iraqis and thus do not need to obtain work permits; instead, employees must notify the Labor office within 10 days of starting work for Iraqi employees and within 30 days for Arab employees.
Foreign employees, on the other hand, require work permits and may not begin employment until they obtain one. This rule does not apply to employees of foreign branches.
- Work Permits: This type of visa allows non-Arab foreign workers to work in Iraq. Foreign branch employees are not required to apply for a work permit. Work permits are valid for one year and must be renewed at least one month before they expire.
Article 12 of Iraqi Investment Law No. 13 grants investors and business owners the right to hire foreign workers. The following steps should be taken in order to obtain a work permit:
- Employee receives job offer
- Employer’s written request
- Review by a government department
PAID TIME OFF
Annual Vacation
Each year of employment entitles a worker to 20 days of paid leave. A worker employed in a dangerous work has 30 days of paid leave for each year of service.
Sick
Every year of employment entitles the employee to 30 days of paid sick leave. Sick leave granted under this subsection may be accumulated for a total of up to 180 days.
Maternity
A total of 14 weeks of paid maternity leave with 8 weeks before and 6 weeks after birth. Post-natal leave may be extended to 9 months in the case of labor difficulties, complications or the birth of more than one child. A working mother may take special unpaid maternity leave of one year to care for her child if the child has not reached the age of one year. During this time, the employment contract will be suspended.
Paternity
N/A
Family
Personal wedding – 5 days.
Wedding of son/daughter – 1 day.
Death of husband, wife, father, mother, son, daughter, brother, sister or one of the spouse’s parents – 5 days.
An employer may give their employee whose husband has died a fully paid leave of one 130 days for the requested period of waiting “iddat”.
National Holidays
Total of 20 paid public holidays.
Other Paid Time Off
An employee may be granted to an unpaid pilgrimage leave once during the period of his employment.
An employee is entitled to paid leave for public duties ( voting, attending/witnessing in court ) or trade union duties if stated within collective agreement.
STATUTORY EMPLOYEE BENEFITS
Unemployment
No unemployment benefits/fund in Iraq.
Workers Compensation
Sick leave and employment benefit :
A worker’s right to work and income should be protected when illness strikes. A sickness benefit may not be paid during the first three days of an employees absence. An employee should be paid at the very least during the first six months of their illness. The income should be half the minimum wage. (Countries are free to choose a system that guarantees 60% of last wages for the first 6 months or even the first year of illness.) An employee has the right to paid sick leave.
During illness, an employee is entitled to medical care at no extra cost.
Employees and their families must have affordable access to bare minimum medical care.
An employee may not be fired during the first six months of illness.
Social Security
Social security tax is calculated based on salaries and benefits of local and expatriate employees.
Net salaries – the employer contributes 12% and the employee contributes 5%.
Prime employers will contribute 25%.
Retirement
Men that are 60 years of age and women 55 years of age who has at least 20 years of contributions and men with 30 years of contributions and women 25 years will be terminated.
Compensation is calculated as follows : 2.5% of their average wage over the previous three years multiplied by the number of months contributed divided by 12.
A monthly pension of 54 dinars is the bare minimum with the monthly pension limited by 140 dinars.
Health
No health insurance programs in Iraq.
PRIVATE EMPLOYEE BENEFITS
Workers Compensation
N/A
Retirement
Private retirement/pension funding not available in Iraq.
Health
Private health insurance is available in Iraq.
Insurance
Private life insurance is available in Iraq.
PERSONAL INCOME TAX
Tax Year
1st January to 31st December.
Tax Tables
| 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 |
Taxation Method
Iraq uses a progressive tax rate for their personal income tax whereas, the effective corporate income tax (CIT) system presented is based on a statutory CIT rate of 15% at all income levels, with no progressive tax rate scale.
Double Taxation
Iraq has multiple double tax agreements (DTA) with other countries.
Residence Requirements
A person is considered a resident if they reside in Iraq for four a continuous months or for six months during the fiscal year.
Payroll Calendars
Payroll is done monthly in Iraq.
Rebates & Tax Credits
There are no tax breaks/incentives for individuals.
Health Insurance
No health insurance programs in Iraq.
Unemployment
No unemployment benefit in Iraq.
Social Security
Social security tax is calculated based on salaries and benefits of local and expatriate employees.
Net salaries – the employer contributes 12% and the employee contributes 5%.
Prime employers will contribute 25%.
PAYROLL ELEMENTS
Income
Both residents and non-residents must pay taxes on income earned in Iraq. The first IQD 1 million of basic salary is exempted in the Kurdistan region. The amount in excess of IQD 1 million is subject to 5% tax. In Kurdistan, income tax on salaries must be paid quarterly, by the 21st of the month following. Penalties for unpaid or late paid tax are generally limited to 5% to 10% of the tax liability, with a maximum annual penalty of IQD 75,000.
Bonuses
13-month payments are not required by law. Employers have the option to give out incentives at their discretion.
Allowances
Unless specifically exempted, most sources of income are considered taxable. This includes director’s fees as well as rent, school fees, and relocation costs paid by the employer.
Individual income in Iraq is taxed at the following rates (after legal allowances are granted to residents):
3% up to $250,000 ID
5% on amounts greater than ID 250,000 but less than ID 500,000
10% on amounts greater than ID 500,000 but less than ID 1,000,000
15% on amounts greater than ID 1,000,000
Benefits in Kind
Iraqi Labor Law does not provide for specific benefits in kind for employees.
Investment Income
Capital gains on depreciable assets are taxed at the standard CIT rate. Gains derived from the sale of shares and bonds that are not in the course of a trading activity may be exempt from tax, to the best of our knowledge and legal practice. Capital gains derived from the sale of stocks and bonds in the course of a business are taxed at the standard CIT rate.
Retirement Funding
Men that are 60 years of age and women 55 years of age who has at least 20 years of contributions and men with 30 years of contributions and women 25 years will be terminated.
Compensation is calculated as follows : 2.5% of their average wage over the previous three years multiplied by the number of months contributed divided by 12.
A monthly pension of 54 dinars is the bare minimum with the monthly pension limited by 140 dinars.
Health Insurance
N/A
Risk Insurance
The Iraqi Labor Law provides for certain types of risk insurance for employees.
Employers must take out insurance that covers the cost of treatment in the event of an occupational injury/illness.
The law also requires that employers provide compensation to employees who suffer from work-related injuries or illnesses.
Taxable Income
All income earned in Iraq is subject to taxation, regardless of the recipient’s residence.
Furthermore, income earned outside of Iraq by Iraqis and other residents, such as interest, commissions, investment returns, and profits from trading in currencies, precious metals, and securities, is taxable if earned from funds and deposits held in Iraq.
Allowable Deductions
The following are the deductible annual allowances for salaries received under the Iraqi tax law:
- Amount equal to the sum of all salaries received from the government, public institutions, and local governments.
- Contributions to a system of social security.
- The Iraqi tax authorities allow a tax exemption for ‘risk allowances,’ which should not exceed 30% of an employees basic salary.
PAYROLL TAXES AND EMPLOYER CONTRIBUTIONS
Payroll Taxes
Iraqi Social Security :
General rates are 12% for employers and 5% for employees with oil and gas companies at 25% for employers and 5% for employees.
Unemployment
There is no unemployment benefit in Iraq.
Social Security
In Iraq the general rates are 12% for employers and 5% for employees with the contribution rate for oil and gas companies at 25% for employers and 5% for employees.
Workers Compensation
Sick leave and employment benefit :
A worker’s right to work and income should be protected when illness strikes. A sickness benefit may not be paid during the first three days of an employees absence. An employee should be paid at the very least during the first six months of their illness. The income should be half the minimum wage. (Countries are free to choose a system that guarantees 60% of last wages for the first 6 months or even the first year of illness.) An employee has the right to paid sick leave.
During illness, an employee is entitled to medical care at no extra cost.
Employees and their families must have affordable access to bare minimum medical care.
An employee may not be fired during the first six months of illness.
ADMINISTRATION
Income
All income earned in Iraq is subject to taxation, regardless of the recipient’s residence. Furthermore, income earned outside of Iraq by Iraqis and other residents, such as interest, commissions, investment returns, and profits from trading in currencies, precious metals, and securities, is taxable if earned from funds and deposits held in Iraq.
Payroll Taxes
Iraqi Social Security: the rates are 12% for employers and 5% for employees while oil and gas companies have contribution rates of 25% for employers and 5% for employees.
Unemployment
No unemployment fund in Iraq.
Social Security
Social security tax is levied on the salaries and benefits of local and expatriate employees.
Net salaries – employers contributes 12% and employees contributes 5%.
Employers classified as prime will contribute 25%.
Employers must provide social insurance to Qatari workers but have no responsibility to do so for employees of other nationalities.
Workers Compensation
Sick leave and employment benefit :
A worker’s right to work and income should be protected when illness strikes. A sickness benefit may not be paid during the first three days of an employees absence. An employee should be paid at the very least during the first six months of their illness. The income should be half the minimum wage. (Countries are free to choose a system that guarantees 60% of last wages for the first 6 months or even the first year of illness.) An employee has the right to paid sick leave.
During illness, an employee is entitled to medical care at no extra cost.
Employees and their families must have affordable access to bare minimum medical care.
An employee may not be fired during the first six months of illness.
Statutory Benefits
Statutory benefits for those in Iraq are: 20 paid public holidays, maternity leave and paid annual leave.
Employee Benefits
Certain benefits are mandated by law. Iraq has 20 public holidays on which employees are excused from work, and a minimum of 20 days of leave per year. Employers are obligated to pay for sick leave (30 days). Maternity leave is 14 weeks in Iraq.
LEGISLATION
- Iraq Labour Law 2015
- Law of Pension and Social Security for Workers 1971
- Law No. 28 of 2012 on Combating Trafficking in Persons
STATUTORY BODIES
- The Ministry of Labor and Social Affairs
- The General Directorates of Labor
- The Labor Courts
- The General Federation of Iraqi Workers
