Taxation

Question 1

Law No. 113/1982

Answer 1

Law No. 113/1982 regulates tax on the income of individuals and companies. However, CPA adopted certain orders to the law in 2003. For example, Order No. 49 lowered individual and corporate tax rates.

Question 2

The sources of taxable income

Answer 2

The tax law requires the identification of the income source to whether or not to tax the income. In other words, tax is imposed based on the source; how and where did you receive the income from?

Question 3

So, according to the Iraqi tax law, tax is imposed on the following income sources:

Answer 3

1) Profits from commercial activity

2) Interest, commissions, discount, and profit arising from trading in bonds and securities.

3) Rentals of agricultural land.

4) Salaries, pensions, and bonuses, for specified work in a limited period of time, allowances for workers including payments in cash or allowances for the taxpayer against his services, such as housing, food, and accommodation, are all considered taxable income.

Question 4

Tax Rate

Answer 4

Order No. 49 modified income tax rates in 1982

Law as follows:
Local and foreign companies pay a flat rate of 15% annually.

Question 5

Tax chargeable on companies

Answer 5

The tax shall be charged on the income of a company before any payment is made to shareholders.
As a general rule, the company shall be responsible to pay tax to the Financial Authority on the profits/income it made before the distribution of profits/income to its shareholders.

If a company has distributed dividends to its shareholders, then the company may deduct the tax payable on its aggregate income from the dividends they pay to shareholders.

Companies that distribute dividends to shareholders shall furnish the shareholders with a certificate showing the amount of dividend paid to each of them and the amount of tax that has been deducted or is entitled to be deducted from the said dividend.

Question 6

Duties Of Employers On Behalf Of Their Employees

Answer 6

The employer must deduct the tax due on his employees from payments made to them subject to tax, and shall pay the same to the Financial Authority.
The employer is responsible for paying to the Financial Authority the amount of tax even if he has not deducted it from salaries and allowances due to his employees. However, the employer may recover the tax paid from amounts which will thereafter become due to his employees.

Question 7

Every employer shall submit a declaration to the Financial Authority containing the following:

Answer 7

a) Names and addresses of his employees, salaries, allowances, and amounts paid to them.
(b) Names and addresses of those receiving, from or through him, pensions, allowances, and the amount thereof.
(c) The director or other senior official of the juristic person to whom the management is entrusted shall be considered as the employer