Iraq

In general, all expenses incurred by the taxpayer in order to produce income during the year are deducted from income, provided that such expenses are confirmed by acceptable documents, with some exceptions.

Depreciation

The Iraqi Depreciation Committee sets the maximum depreciation rates for various types of fixed assets (please contact us for additional information regarding the specific rates). If the rates used for accounting purposes are greater than the prescribed rates, the excess is disallowed.

The depreciation method is either a straight-line method or declining-balance method.

Goodwill

Iraqi tax law does not contain a provision that covers the deductibility of goodwill.

Start-up expenses

Iraqi tax law does not contain a provision that covers the deductibility of start-up expenses. However, as per Iraqi GAAP, such cost will be capitalised and amortised once the operation is started.

Interest expenses

Iraqi tax law does not contain a provision that covers the deductibility of interest expenses.

Bad debt

Bad debt is deductible if it was included in earlier income and there is proof of the unsuccessful steps to collect it.

Charitable contributions

Charitable contributions to the Government and Socialist Sector departments and to scientific, cultural, educational, charitable, and spiritual organisations, which are legally recognised (provided that the Minister of Finance has issued a list containing the names of these organisations), are deductible.

Bribes and illegal payments

Bribes and illegal payments are not allowed or deductible.

Fines and penalties

Broadly speaking, fines and penalties are not deductible items.

Taxes

Broadly speaking, taxes are not deductible items.

Net operating losses

Under the tax law, losses of a taxpayer from some sources of income arising in Iraq, substantiated by legally accepted documents, are generally deducted from profits arising from other sources.

Losses that can be settled in this manner shall be carried forward and deducted from the income of the taxpayer over five consecutive years, provided that losses may not offset more than half of the taxable income of each of the five years and the loss is from the same source of income from which it has arisen.

Losses cannot be carried back.

Payments to foreign affiliates

Iraqi tax law does not contain a provision that covers the deductibility of payments to foreign affiliates.