One of the key issues in determining when a company becomes taxable in Iraq is whether the foreign company is considered to be doing business ‘in Iraq’ or ‘with Iraq’. In 2009, with Instructions No. 2/2008, and its amendment instruction #1 of 2014, the Iraqi tax administration provided a clearer distinction between business ‘in Iraq’ and business ‘with Iraq’.
Once the determination has been made that the company is trading ‘in Iraq’, the company should register with the GCT. A company that is registered with the GCT will be subject to CIT and will be required to file a CIT return.
Permanent establishment (PE)
It is important to note that the current Iraq income tax law does not clearly define a PE; consequently, it is important to monitor commercial activity being performed in the country to ensure compliance with the registration requirements and tax law. The company should consult with their internal tax department and external advisers if they have signed a contract to provide any type of services inside Iraq to determine if the company should have a legal registration and begin to file CIT returns.