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Payroll & Tax in Iraq

Iraq payroll & taxation

There are specific rules for payroll and taxation in Iraq, depending upon whether your company employs foreign nationals or local Iraqi employees. The primary concerns for a foreign company that needs to comply with tax laws in China are: Individual income tax (IIT) for employees in Iraq, social security costs, payroll tax, sales tax, withholding tax, business tax and permanent establishment concerns.

Iraq has some unique rules regarding employment, for example there is no government pension system, although both employers and employees make contributions to health insurance and their sick leave.

Your Payroll Options in Iraq

Remote Payroll

A remote payroll in Iraq is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Iraq. This applies to both local and foreign employees. The only option for a non-resident company to payroll its employees (local and foreign) in Iraq is to use a fully outsourced service like a GEO or FESCO which will employ and payroll the staff on their behalf.

Local Payroll Administration

In some cases, a company will register their business in Iraq under one of the forms available, (RO, WFOE or JV) but prefer to have another company administer its payroll.  This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations, but the payroll calculations, payments and filings can all be outsourced to the payroll provider. The Iraqi Government tends to pay attention to large sums of money paid into or from international accounts, so it is key to employ a reliable and trustworthy local payroll administrator.

Internal Payroll

Larger companies with a commitment to Iraq may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who have the background needed to manage a Iraqi payroll, and can fulfill all tax, withholding, and payroll requirements. They must have an Iraqi bank account.

This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Iraqi employment laws.

Fully Outsourced Payroll & Employment

Companies can outsource the employment and payroll of their staff in Iraq to a GEO, like Shield GEO. This is possible for both foreign workers and Iraqi nationals. This is the easiest, fastest and safest way to payroll staff in Iraq.

Shield GEO manages all aspects of payroll for workers in Iraq, including taxes, withholding, social security payments and other statutory requirements. Shield GEO becomes the Employer of Record and employs the staff on behalf of the client.

Staff are paid monthly with tax and social security deducted at source and paid to local authorities. Shield GEO will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions) and a Management Fee. Shield GEO provides the employees with payslips.

Read more about outsourced payroll and employment through Shield GEO.

 

 

 

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Setting up payroll in Iraq

Information Explanation
Currency ?

Iraqi Dinar (IQD)

Tax Figures

Information Explanation
Corporate Income Tax ?

15%

Income Tax Rate ?
Grossed income Tax Rate (%)
>0 15%
Payroll Tax ?

Employers are required to calculate and remit 15% of personal income tax.

Sales Tax ?

N/A

Withholding Tax ?

N/A

Employee Social Security (EE SS)

5%

Employer Social Security (ER SS)

12%

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