According to the provisions of Article (sixty-one) of the Income Tax Law No. (113) for the year 1982
We issued the following instructions:
No. (1) for the year 2014
Instructions
The first amendment to the instructions for Tax for contracts concluded between Iraqi and foreign contracting sides
No. (2) for the year 2008
Article -1- the text of the article (1) is revoking from the instructions of the Tax for the contracts between Iraqi and the foreign sides No. (2) and replace it with the follows:
The article -1- first – It is trading in Iraq and subject to income tax Supply contracts concluded between Iraqi contracting sides of Iraqi natural and legal persons, including ministries and bodies not affiliated with a ministry, and between foreign sides of natural or legal persons executing those contracts inside Iraq, regardless of the place of delivery of the goods or residence, taking into account what’s coming: –
1- If the non-resident foreign supplier has a branch or office in Iraq and concludes the contract or is executed by the branch representative or office or one of its employees or any other person residing in Iraq authorized to conclude or implement it.
2- If the non-resident foreign processor authorizes a person residing in Iraq to sign and execute the contract on his behalf, the tax will be assessed in his name and on behalf of non-residents of Iraq in addition to his commissions achieved if he is a commercial agent.
If the contract meets its legal requirements in the name of the foreign supplier such as clearance of shipping lists, the K.K. fee, the expenses of opening the documentary credit, and related procedures in Iraq, even if it does not have a branch, office or agent in Iraq.
If the contract fees had BEEN paid, fully or partly in Iraq, in any currency.
If the contract fees had BEEN paid to the foreign supplier by trade.
Second -A- Income resulting from completed or complementary works contained in the processing contract or an independent contract such as installation, supervision, maintenance, or engineering work is taxed if carried out inside Iraq.
B- The main processing contract is taxed separately from completed or complementary work BY the provisions of article (first) of this article.
Third -A- Income resulting from the provision of the agreed experience or service in the processing contract or an independent contract is taxed if it is concluded inside Iraq and if the wages are paid outside Iraq, whether the experience or service is from a natural or moral person.
B- The main processing contract is taxed separately from experience or service BY the provisions of article (first) of this article.
Article -2- the text of the article (2) is REVOKED from the instructions and REPLACED with the FOLLOWING:
Article -2- It is a trade with Iraq and is not subject to income tax processing contracts concluded between Iraqi contracting authorities of Iraqi natural or moral persons, including ministries and entities not associated with a ministry between foreign natural and moral persons implementing these contracts taking into account the following: –
First – If the foreign supplier resides outside Iraq and the contract is concluded and meets its legal requirements on behalf of the Iraqi side, such as the clearance of shipping lists and the expenses of opening the documentary credit, it will be related to the procedures.
Second–A- If the foreign supplier is not residing in Iraq branch or office or agent in it and conclude the contract outside Iraq without the branch or office or agent being a party to its conclusion or implementation.
B- Commissions, wages, and other payments made to the branch, office, or agent provided for in paragraph (A) of this item are subject to income tax.
Third – If payments are made for the work of expertise or services provided outside Iraq and stipulated in the processing contract such as supervising shipping, inspecting equipment, or providing consultations
Article -3- the text of the article (first) from the article (4) is REVOKED from the instructions and REPLACED with the FOLLOWING: –
Article -4- first -A- The contracting authority deducts the percentages determined by the GCT annually according to taxes annually depending on the economic conditions and the reality of tax legislation from each advance or payment for the amounts achieved by contractors and contractors for their contracts subject to income tax, whether they are Iraqis or foreigners, and transfer them to the General Tax Authority.
B-1- The contractors should not disburse the last payment to contractors and contractors and not settle the final account of the contractor except with the written approval of GCT or deduct 10 percent of it and send it to GCT before the launch of the last payment whether the implementation of the contract in one or several payments
2- Contractors send the deductibles provided for in paragraph (a) of this item no more than (30) days from the date of completion of the work by registered mail, by approved hand, or by the person in charge of the method of the pin number.
Article -4- the text of the article (5) is REVOKED from the instructions and REPLACED with the FOLLOWING: –
Article -5- first – The contracting authorities should not disburse the last payment to the secondary contractor and not settle the final account except with the editorial success of GCT or deduct (10%) ten percent of it and send it to GCT before the last payment whether the implementation of the contract in one or several payments.
Second – The deductibles provided for in the body (first) of this article will be referred to GCT within not more than (30) days from the date of completion of the work.
Article -5- the text of the article (8) is REVOKED from the instructions and REPLACED with the FOLLOWING: –
Article-8- first – The natural and moral persons covered by the commercial bookkeeping system for the purposes of the tax system No. )2( of 1985 are obliged to provide financial statements and the financial authority to require them to provide analysis of the amounts paid during the fiscal year to third parties for the purchase of goods or services totaling at least )10,000,000( Ten million dinars per party per year if the tax accounting is not carried out by agreement between the taxpayer and the financial authority or if the audit by the financial authority calls for the submission of these analyses.
Article -6- The information form shall REVOKE Form (1) and the 2008 Instructions No. (2) provided for in section (second) of Article (3) of the Instructions and replace it with the form attached to this amendment.
Article -7- These instructions are published in the Official newspaper and implemented from 2015/1/1.
Personal Income Tax regulation
)Principles of Personal Income Tax (
1- The annual regulation for the estimated year 2016 is adopted as a basis for accounting for PIT the financial year 2016 and then as a context for the financial year 2017 and subsequential years, taking into consideration the approved contexts about contracts extending for more than one accounting period.
2- The Financial Instructions (PIT) No. (1) for the year 2007 shall be the basis for tax calculation on the salaries of the affiliates, provided that the annual tables and form D/4A are duly signed and accompanied by all supporting documents and records to grant the legal discounts and allowances that each affiliate is entitled to. In addition to social security statements with all payment receipts to match them with the authorized salaries. If the salaries and wages appearing in the accounts are higher than those declared in the annual tables, then the tax shall be collected on the difference.
3- If the company does not submit the annual tables with the names of the employees and the amount of their income, it shall be estimated based on the annual regulation. The tax calculated based on the controls is compared with the tax deducted on salaries and wages appearing in the accounts, depending on which is higher.
4- If the business owner directly manages the business without requiring the presence of a worker with him, or the nature of the activity does not require the presence of more than one person, the business owner is not subject to PIT.
5- In the case that the supply contracts contain other complementary works such as (set up, operating .... etc.), the value of the supply shall be estimated from the contract according to its own percentage, and the rest estimated according to the nature of those works. Provided that the dismissal is included in the contract initially and not with a subsequent endorsement from the employer, based on the table of quantities approved by the beneficiary or the warehouse entry voucher. In the case that separation is not possible, it shall be estimated by adopting the highest percentage among the clauses of the contract.
6- Unregistered companies
Trading contracts with Iraq are estimated as follows:
- If the contract is a supply only (and the place of delivery of the goods is at the border ports or on board a ship), the contract indicates that the contract is not subject to PIT, as there are no wages paid to the labor inside Iraq in the case that the goods are received by the direct beneficiary government entity.
- If the supplied materials are connected to the warehouses, the secondary contractor (the carrier) shall be estimated at a rate of 02.0% of the contract value for the wages paid to the carrier.
7- Authorized manager salary estimate
a- The authorized manager of an Iraqi company, who is of Iraqi nationality (non-shareholder), is estimated at (500,000) dinars per month, taking into account what is stated in the accounts regarding the salaries and wages paid to the authorized manager.
b- The authorized foreign manager of an Iraqi company, whether he is a shareholder or not (all or one of the foreign shareholders) is estimated at (1,000,000) dinars per month.
c- The foreigner, the director of the representative office or the branch of foreign companies, is estimated at an amount of (2,000,000) dinars per month.
d- The Iraqi director of the representative office or branch of foreign companies is estimated at an amount of (1,500,000) dinars per month, but if he is a shareholder, it is lowered from the estimate by the amount of his contribution to it for paragraphs (a, b, c, d)
8- Coordination is made between the companies and PIT sections regarding providing the latter with the companies’ estimates for the paragraphs that depend on the estimated profit and considering this as fixed work contexts.
Annual Financial Regulations 2021 (PIT)
|
No. |
Kind of the activity |
pledge ratio |
|
1 |
Licensing tour companies and companies that work as subcontractors with license tour companies / they estimated according to the results of the annual tables and calculating salaries and wages in the accounts and approving whichever is higher (refer to the circulars of the Department of Business and Professions No. 14 p. / 2548 in 2018/7/5) (Annex No. 12) in case Non-implementation of the aforementioned uncles, the controls are applied at a rate of 1.5% of the pledge |
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|
2 |
If the contract is for supply only, whether it is with licensed companies or with others, then the percentage of supply mentioned in the regulations below is approved, except in the case of complementary works, taking into account paragraph (5) of the special principles of PIT. |
|
|
3 |
Private banks / are estimated according to the results of the annual tables and the calculation of salaries and wages appearing in the accounts. |
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|
4 |
Construction works, building works, terminations, maintenance and rehabilitation of buildings, demolition, removal, painting, and electrical undertakings, whether the undertaking is for a complete work of the above or parts thereof, undertakings for pouring columns and pavements, and undertakings for removing mines and undertakings for water and sewage networks. |
0.8% |
|
5 |
Pledges and Other contracts |
0.7% |
|
6 |
Engineering and practical consultancy contracts, feasibility studies, training contracts and auditing companies |
0.5% |
|
7 |
Undertakings of transport, unloading, loading, clearance, and shipping of all goods, including petroleum, whether the contract includes one or more paragraphs, and whether the transport is land, sea, or air |
0.1% |
|
8 |
Companies, advertising offices, commercial agencies, distribution, television and film productions, radio broadcasts, and satellite channels |
0.2% |
|
9 |
Airline companies |
1% |
|
10 |
a- Security guards and cleaning undertakings for Iraqi companies b- Security guards and cleaning undertakings for foreign companies |
2%
4% |
|
11 |
Recruiting manpower, bringing in experts, and obtaining a visa If the salaries of workers (workers/experts) are paid by the employment and expert recruitment company |
4% |
|
12 |
importers Supply commitments only Commitments to processing ration card items |
0.1% |
|
13 |
Undertaking to process unprocessed foodstuffs |
0.1% |
|
14 |
Pledges for the processing of cooked food |
0.3% |
|
15 |
Cars supply commitments (except for those who import one car within a year, provided that the percentage is taken on the value of the goods from the permit) |
0.3% |
|
16 |
Undertakings for renting various types of machines and equipment, renting caravans, etc. |
0.2% |
|
17 |
The main companies for communications and Internet services (cellular and wireless communications) (refer to the uncles of the Department of Business and Professions No. 14/p/2548 on 5/7/2018( (Annex No. 12) |
0.50% |
|
18 |
Contracts of unregistered foreign companies that are exempt from tax and that include the use of limited labor |
0.14% |
|
19 |
Finance companies (refer to the uncles of the Department of Business and Professions No. 14/p/2548 on 5/7/2018) (Annex No. (12) |
|
|
20 |
Banking companies, tourism and Hajj and Umrah companies |
0.6% |
|
21 |
Offices providing Internet services and selling cards |
0.50% |
|
22 |
Export: - a -Export of petroleum products b - Export of all kinds |
0.1% 0.050% |
Annual Financial 2021 Regulations (PIT)
|
NO. |
Kind of activities |
The percentage of the estimate before granting legal Allowance |
|
1 |
All trades and professions. |
1% |
|
2 |
Industrial laboratories of all kinds |
1% |
|
3 |
Stone bakeries in the case that an annual schedule is not submitted with the names of the insured employees, it is estimated according to the following equation: - Estimated annual bakery profit 7,500,000 * 1% =75,000 dinar |
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|
4 |
The car and motor vehicles for which income is not counted in the regulations for the profession, a tax is calculated on salaries for each one of them according to the following equation: - Estimated annual profit 3,000,000* 1% = 30,000 dinar |
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|
5 |
brick coefficient |
3% |