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Incorporation

Setting up a company in Iraq

When setting up a company you may want to consider these factors:

  1. Business Factors

    Business factors such as:

    • The industry and type of business
    • Nationality of the headquarters/individual(s) and
    • Presence of existing trade agreements or relationships
  2. Location

    Location will be another factor. Separate cities and regions may have different rules, costs and availability. It is always recommended to seek advice from relevant professionals, such as business or legal advisors, accountants and others depending on your needs.

  3. Regional Language

    Regional language may be an influence. Although Arabic is the national language, different locations in Iraq use different languages, such as Kurdish, meaning some terminology may be different in various regions.

Your Options

Foreigners may incorporate companies and trade representative offices or branches, operating in Iraq under the Companies Law 21 of 1997 – the Ministry of Trade Instruction No 196 of 2004 details the registration of Iraqi companies, while Regulation No 5 of 1989 explains the process for registration of branches or representative offices of foreign companies.

Foreigners must not engage in retail sales activities before meeting the below requirements:

  • Minimum US$100,000 deposit in a non-interest-bearing account with an authorised bank in Iraq at least 30 days prior to registration
  • Obtaining a certificate of authorisation from the Ministry of Trade

Representative Office/Branch

This is one of the relatively faster and simpler ways to set up a company in Iraq.

Steps Required:

  • Company submits application
  • OCR checks application for completeness and correctness
  • Company pays part of the registration fee
  • Company collects registration certificate of the branch or representative office 

Time: 2-3 days to register a foreign company branch office or 5-10 days to register a representation office.

Cost: IQD 126,250

The steps for setting up a branch or representative office are as follows:

1. Company submits application

The company initiates their application by filing and submitting two completed copies of the registration application form to the OCR, along with all requisite registration documents.

The application form contains the following information:

  • The company’s legal name
  • Type of business activity
  • Name, address, and any additional contact details of the branch or representative office’s manager – must be an Iraqi resident
  • Name, address, and any additional contact details of the paren company’s CEO
  • Amount of authorised or registered capital
  • Names and addresses of any owners whose holding are 10% or more of the company’s total equity

The following registration documents must also be submitted, in both English and Arabic:

  • A copy of the company’s Articles of Association and memorandum
  • A copy of a valid registration certificate of the company in its home country
  • List of the names of all Board Directors and their nationalities
  • A copy of the power of attorney of the Director who oversees the branch in Iraq
  • A copy of the parent company’s latest financial statements and report of the Board of Directors
  • A letter from the parent company accepting all liability for the representative or branch’s Iraqi obligations, both financially and legally
  • A letter of support from any relevant contracted government departments, mixed sector companies or cooperative unions

2. OCR checks application for completeness and correctness

The OCR will then verify the application and review all documents to ensure completion and compliance with legal requirements.

3. Company pays part of the registration fee

Payment may be made either via cash or certified check once the approval of the Minister of Trade has been obtained.

Fee: IQD 126,250.

4. Company collects registration certificate of the branch or representative office

Once the company’s application has been fully reviewed, they should attend the OCR to receive the decision, which is also published in the Official Gazette and Bulletin of the Registrar of Companies.

The registration certificate will then be supplied by the OCR to the General Taxation Commission of the Ministry of Finance, the Ministry of Labour and Social Affairs, General Commission for Customs, Bar Association, Iraqi National Intelligence Service, and the Pension and Social Security General Commission.

If an application is rejected, the company may appeal to the Minister of Trade within 30 days of rejection. If this appeal is then rejected, the company may further appeal to the relevant courts within 30 days.

Wholly Foreign-Owned Enterprise (WFOE)

WFOEs are limited-liability corporations organized by foreign nationals and capitalized with foreign funds. WFOEs are often used to produce the foreign firm’s product in Iraq later export to a foreign country.   The WFOE must go through the entire registration and incorporation process, and is the most costly and complex business structure to setup. In Iraq, there is a minimum capital requirement of IQD 1,000,000 to set up a WFOE.

Steps Required:

  • Prepare all legal documents i.e. articles of incorporation, bank references, name reservation, company seal and registration with the Commercial Registry
  • Deposit initial capital
  • Report to the tax authority and register employees for social security

Time: Approximately two months for joint stock companies, but for limited liability companies often less than 5 days if all documents are correctly submitted

Cost: From IQD 2,571,077 upwards.

A Wholly Foreign-Owned Enterprise (WFOE, sometimes incorrectly written as WOFE) is a common investment vehicle for Iraq-based business wherein foreign parties (individuals or corporate entities) can incorporate a foreign-owned limited liability company.

WFOEs are limited-liability corporations organized by foreign nationals and capitalized with foreign funds. This can give greater control over the business venture in Iraq, and avoid a multitude of problematic issues which can potentially result from dealing with a domestic joint venture partner.

Such problems often include profit not being maximized, leakage of the foreign firm’s intellectual property and the potential for joint venture partners to set up in competition against the foreign firm after siphoning off knowledge and expertise.

The steps are described in detail below.

1. Reserving a company name with the Baghdad Chamber of Commerce and Federation of Chambers of Commerce

The company name should be in Arabic. It is possible to search with a department within the Chamber of Commerce, Trade Names, to scan the database of existing names or reserved names of other companies. If the name is available, it may be reserved by payment of a nominal fee.

The Federation of the Chambers of Commerce is informed so that they may complete relevant checks to ensure the company name is not already engaged by other Iraqi chambers of commerce. This means that there will often need to be more than one visit to both chambers.

  • Company submits application
  • OCR checks application for completeness and correctness
  • Company pays part of the registration fee
  • Company collects registration certificate of the branch or representative office

Time: 2 days

Cost: IQD 500,000

2. Hiring a lawyer to draft the company’s articles of association

The cost of hiring a lawyer to draft the articles of association will, of course, vary based on who is hired. Lawyers are also often in charge of completion of the registration process since they are required to draft the articles of association. Any lawyers engaged to carry out this task are usually licensed by the Company Registrar as Company Registrar Agents.

Time: 1 day

Cost: Approximately IQD 1,500,000

3. Deposit the initial capital with a commercial bank and obtain relevant document evidencing completion

The company must deposit initial capital with a commercial bank and in return receive a confirmation receipt, which must be filed with the registration application to the Companies Registrar. These funds may be withdrawn immediately once the certificate of registration has been issued by the Registrar.

The fee varies depending on whether the company chooses to deposit with a public bank. Public bank fees are about IQD 5,000 while private banks may charge up to IQD 25,000.

Time: 2 days

Cost: IQD 5,000-25,000

4. Obtain the shareholders’ tax clearance certifications from the General Commission of Taxation

A tax clearance certificate must be issued by the General Commissioner of Taxation in order for the Registrar to be able to accept registration of the new company.

Time: 1 day

Cost: IQD 1,000 per certificate

Once you get in touch with us, one of our consultants will take all the work off your hands, coordinate with our local partners to get all the required permits organised, provide the processing time, costs, document-checklist and keep you informed through the process. Contact us to know more.

5. The Companies Registrar requires the following documents be provided:

  • Chambers of Commerce Union letter (to ensure the consistency of the company or trade name with other registrations)
  • Certified letter of capital deposit from the bank
  • Tax clearance for all the founders of the company
  • Iraqi identify cards, and Proof of Iraqi certified citizenship
  • Ration card revocation (food distribution form) by the Ministry of Trade
  • Lease (Address) certificate letter from the mayor’s office
  • Phone number(s), email address(es), and P.O. box number(s) of the company’s founder(s)

Once these are presented, the Registrar will circulate the registration certificate to the Social Security agency, Ministry of Trade, Central Bank, the tax authority and any other relevant agencies.

Time: 14 days

Cost: IQD 250,000-350,000

6. Obtain the registration certificate

This will be issued on successful completion of the above step. A company formation announcement will be published in an internal bulletin. At this stage, the company officially acquires its legal personality.

Time: 1 day

Cost: Included in the previous step

7. Create a company seal

A seal maker must be hired to create an official seal. They will often require a copy of the certificate of registration so that the exact name of the company is accurately reflected.

Time: 2 days

Cost: IQD 20,000

8. Register for taxes with the General Commission of Taxation

A Tax Identification Number will be assigned to the company.

Time: 2 days

Cost: IQD 450,000

9. Legalise accounting books

The General Body of Taxes will notarise or register the company accounting books and any new accounting books as necessary.

Time: 2 days

Cost: IQD 175,077

10. Register employees for social security

The cost of completing this step is contingent upon how many employees there are. The employer is required to deduct 5% from the employee’s salary in addition to 12% of the employee’s salary.

Time: 3 days

Cost: IQD 20,000.

Outsourcing Employment Through a GEO Employer of Record Service

Whether to incorporate in Iraq, and what sort of entity to setup are just two of the many choices companies must make when expanding into a new market.

If the company intends to have staff in Iraq they must also decide whether they will administer that employment internally or use a Global Employment Organization to handle payroll and Employer of Record responsibilities. A GEO Employer of Record solution is an attractive alternative where

  • the company is looking to setup an office quickly
  • the company wants to work within a defined budget
  • the company wants to limit its initial commitment in Iraq
  • the company needs help with tax, employment, immigration and payroll compliance in Iraq

The complexity of employment regulations in Iraq makes the use of a GEO advisable coupled with local legal counsel to ensure full compliance with employment laws, for example the drafting of local contracts for workers.

Shield GEO provides a comprehensive service in Iraq allowing companies to deploy their staff quickly with reasonable, clearly stated costs and timeframes. The company contracts directly with Shield to employ and payroll their staff on their behalf in Iraq.

Shield GEO then becomes the Employer of Record. Shield GEO assumes the legal responsibility for these employees, sponsoring them on work permits, complying with local employment law and running their monthly payroll. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Iraq. Read more about outsourced employment through Shield GEO.

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