The taxable year in Iraq is the calendar year.
The statutory time line for filing tax returns is 31 May of the year of assessment. If the self-assessment of tax is not accepted by the tax authorities, tax is assessed on the income of the taxpayer based on the information available to the tax authorities.
Failure to file a tax return may lead to an estimate of income and assessment of tax by the tax authorities; however, such an assessment does not relieve the taxpayer from responsibility for non-submission of the return within the statutory timeline stipulated by law.
Payment of taxes
Payment of the tax liability has to occur within three days from the assessment date by the tax authority. There is no requirement of quarterly payments during the taxable year.
Tax audit process
Tax inspection is mandatory in Iraq, as the tax authority will scrutinise the financial statements of the taxpayer to determine the tax liability and, accordingly, issue a tax clearance.
Statute of limitations
The statute of limitations is five years. However, the tax authority has the right to go back beyond five years in certain instances.
Topics of focus for tax authority
Obtaining a tax clearance from a tax audit/inspection is becoming increasingly important for importation and government bidding purposes, as well as for other areas that affect the continuation of operations.
The Iraqi tax law requires all taxpayers to maintain books and records in accordance with Iraq’s local unified accounting system (Iraqi GAAP).
These books shall constitute tax books/accounts. This accounting treatment will determine when income is accrued and costs are incurred for computing taxable profits.