DOING BUSINESS IN THE REPUBLIC OF IRAQ

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Julia Patrick
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1 DOING BUSINESS IN THE REPUBLIC OF IRAQ

2 QUESTIONS? Please cntact us Iraqi Business Services and Cnsultancy Baghdad, Iraq Iraq Cell: +964 (780) Iraq Office: +1 (703) Fax: +1 (703) U.S. Office: +1 (703) r 17

3 Disclaimer This presentatin cntains general infrmatin nly and is based n the experience and research f the authr. The authr is nt, by means f this presentatin, rendering business, legal advice, r ther prfessinal advice r services. This presentatin is nt a substitute fr such legal advice r services, nr shuld it be used as a basis fr any decisin r actin that may affect yur business. Befre making any decisin r taking any actin that may affect yur business, yu shuld cnsult a qualified legal advisr. The authr, his affiliates, and related entities shall nt be respnsible fr any lss sustained by any persn r entity that relies n this presentatin. The authr gives his permissin t link, pst, distribute, r reference this presentatin fr any lawful purpse, prvided that attributin is made t the authr.

4 REPUBLIC OF IRAQ

5 HISTORY Iraq dates back t 4,000 B.C. (knwn in antiquity as Mesptamia) Iraq is the birthplace f many significant histrical achievements that cntinue t psitively impact the wrld tday

6 PESTEL ANALYSIS Plitics A new Iraqi Cnstitutin was adpted n Octber 15, 2005 It established a federal parliamentary republic It als called fr the decentralizatin f federal gvernment authrity Ecnmics Revenue is based mainly n il and gas exprts (Basra in suthern Iraq, Kirkuk in nrthern Iraq) Iraqi territry cntains ver 144 billin barrels f prven il reserves and trillin cubic meters f prven gas reserves The il sectr accunts fr 65% f Iraq's GDP, and 99% f Iraqi exprts are il, which cmprise 90% f gvernment revenue The Gvernment f Iraq (GOI) prvides mre that 40% f the jbs in Iraq and it is the largest wner f land and natural resurces Scial Religin plays a majr rle in Iraqi business culture Iraq is ne f the mst yuthful cuntries in the wrld - nearly half the ppulatin is under the age f 19 The rights f wmen and girls are prtected under the law

7 PESTEL ANALYSIS Technlgy Telephnes (78% f Iraqis have cell phnes); radi bradcast statins; televisin; internet access Envirnment Tw majr rivers, muntains in the nrth and east, desert in the west and suth, and sea prts in the suth Legal System Curt prceedings are available but are very time-cnsuming There are n juries; nly a single judge r a three-judge panel (depending n the case) All evidence submitted t the curts must be in Arabic

8 SWOT ANALYSIS Strengths Iraq culd benefit frm investment in all sectrs, including gvernment-designed prjects Gradual mvement twards private sectr participatin and partnerships in ecnmic develpment Nw mre than ever, Iraqi fficials are calling fr U.S. cmpanies t d business in Iraq Weaknesses Required refrms are underway, but prgress is slw A strnger netwrk within the business cmmunity is needed in rder t expand pprtunities Trust in the Iraqi business envirnment must be established t increase the number f business transactins Opprtunities Large imprt market Develping natural gas prductin and exprts Freign investment is nw permitted and prtected under Iraqi law Larger need fr defense and security services and equipment Threats Unstable plitical and security situatin Crruptin and bureaucracy Dependence n il exprt revenues in light f falling il prices

9 MARKET ENTRY Define the market Perfrm a market analysis Assess internal capabilities Priritize and select markets Develp market entry r expansin ptins

10 MARKET ENTRY Market Study & Netwrking Prpsal & Negtiatin Cntract Signing & Executin

11 OBTAINING VISAS Current Iraqi law des nt grant visas t nn-iraqis cnducting business in Iraq Obtaining a visa requires ne f the fllwing: 1. A direct cntract with the GOI; 2. A direct cntract with an embassy in Iraq; OR 3. An investment prject licensed in accrdance with Investment Law N. 13 f 2006

12 BUSINESS START-UPS The mst cmmn frms f businesses in Iraq are: 1. Limited liability cmpanies (LLCs); 2. Branch ffices f freign cmpanies (require GOI cntract)

13 OBTAINING PERMITS Additinal permits might be required t cnduct business in Iraq, such as: Envirnmental permits Cnstructin permits Radi frequency permits Special use permits Imprt permits

14 OBTAINING FUNDS Public and private banks have n institutinal capacity t prvide prject financing Generally, internatinal financial institutins require a svereign guarantee in rder t prvide financing in Iraq Certain licensed investment prjects under the 2006 Investment Law are eligible fr financing and ther banking facilitatins

15 PROTECTING MINORITY SHAREHOLDERS Minrity sharehlders are prtected frm cnflicts f interest and ther abuses by cmpany fficials, majrity wners, and thers with practical cntrl ver the affairs f the cmpany Cmpanies must prmte the prvisin f full infrmatin t wners in cnnectin with decisins affecting their investments

16 EMPLOYMENT OF LABOR Written emplyment agreements in Arabic are mandatry Only emplyees can request terminatin f emplyment agreements fr cnvenience Emplyers are respnsible fr withhlding their emplyees persnal incme taxes (PIT) and scial security cntributins and paying them t the GOI n a mnthly basis Cmpanies hiring freign emplyees must apply and btain wrk permits fr them

17 SOCIAL SECURITY Pensin and Scial Security Law N. 39 f 1971 was designed t limit the civil liabilities f the emplyer Scial security is the same thrughut Iraq Scial security cntributins reduce the amunt f taxable incme Scial security is 17% f an emplyee s salary (r 30% fr il and gas): 5% t be deducted frm the emplyee s cmpensatin; 12% t be paid by the emplyer (r 25% fr il and gas)

18 SOCIAL SECURITY Scial security payments are fixed and can be changed nce every year Failure t deduct and pay scial security n time makes the ttal payment due the respnsibility f the emplyer (and nt the emplyee) Penalties fr nt paying scial security n time 0.002% fr current emplyees 500% fr previus emplyees Other penalties als apply, including a mnthly capped penalty and daily interest

19 TAXATION All ecnmic activities in Iraq are subject t Incme Tax Law N. 113 f 1982 Cmpanies must appint an Iraqi lawyer, an Iraqi accuntant, an independent Iraqi CPA, and register with the Crprate Taxatin Department and the Direct Deductins Department at the General Cmmissin f Taxes Registratin must be updated and in full cmpliance befre taxes can be paid Exemptins frm taxes r fees must be in accrdance with the law Even if exempted, bkkeeping and financial statements are still required There is n dual taxatin treaty between Iraq and the U.S.

20 TAXATION Crprate taxatin is paid annually Crprate tax rate is a flat 15% (35% fr il and gas) Allwances reduce persnal taxable incme by up t 30% PITs are prgressive in Iraq: 3% n incme up t IQD 250,000 annually (arund $210) 5% n incme abve IQD 250,000 and up t IQD 500,000 annually (arund $420) 10% n incme abve IQD 500,000 and up t IQD 1,000,000 annually (arund $840) 15% n incme abve IQD 1,000,000 annually PITs in Kurdistan are set at 5% n incme abve IQD 12,000,000 annually (arund $10,000) Failure t pay taxes in Iraq results in severe penalties, including mnthly capped penalties and daily interest

21 TAX EXEMPTIONS Tax exemptins are prvided under the 2013 US-Iraq Agreement fr Ecnmic and Technical Cperatin (TIAS N ) Wrk perfrmed under this agreement and financed by the U.S. may be exempt frm Iraqi taxes Accrdingly, a prject qualifies fr the exemptin if the fllwing cnditins are met: 1. Ecnmic, technical, humanitarian and related assistance furnished in Iraq by the U.S.; 2. Assistance must be in accrdance with agreements between the GI and the U.S., U.S. agencies, NGOs, individuals, private firms, public internatinal rganizatins, r ther entities

22 TRADING ACROSS BORDERS As f June 2012, the GI resumed regulatin f imprt/exprt cntrls Any item imprted r exprted must have: An imprt identificatin card and an imprter s license An imprter s license is valid fr three mnths and may be renewed fr ne mnth thereafter New Tariff Law enacted in 2010

23 CONTRACT ENFORCEMENT New curts have been established t handle freign investr disputes: Curts f First Instance fr cmmercial claims Curts f First Instance fr prcurement claims Curts f First Instance fr investment claims Arbitratin awards are enfrced under Iraqi law and they are cnfirmed/certified by an Iraqi Curt f First Instance Iraq is a signatry t the Al-Riyadh, MIGA, and ICSID Cnventins

24 LIQUIDATION Cmpanies may liquidate after they cmplete their business bjectives in Iraq The liquidatin prcess is subject t Cmpanies Law N. 21 f 1997 and is regulated by the Registrar f Cmpanies in Iraq Liquidatin fr a cmpany with n pending bligatins/taxes due t the GI may take up t six mnths Lawyers and CPAs wrk hand-in-hand t cmplete liquidatin Upn liquidatin, a cmpany ceases t exist and the sharehlders cannt be held respnsible fr any labilities

25 REPATRIATION OF PROFIT The Central Bank f Iraq regulates currency exchange and mney transfers The funds must have a legitimate surce and destinatin The authrities must certify that the entity r the individual making the transfer has n tax r debt liability in Iraq The amunt f mney that can be carried in Iraqi exit prts is limited t $10,000 per Central Bank regulatins Iraqi law guarantees investrs the right f repatriatin f prfit

26 EXPROPRIATION Article 23 f the Iraqi Cnstitutin prhibits exprpriatin in Iraq unless it is fr public benefit and fr just cmpensatin The 2006 Investment Law als guarantees nn-seizure r natinalizatin f any investment prject cvered under the law, except in cases where a final judgment has been reached Iraq s Curt f First Instance is charged with reslving exprpriatin cases Over the past five years, there have been n gvernment actins r changes in plicy that wuld suggest pssible exprpriatins in the freseeable future

27 Freign Crrupt Practices Act (FCPA) High crruptin incidence rate Iraq was ranked 166 ut f 176 cuntries in Transparency Internatinal s 2016 Crruptin Perceptins Index Opaque and unevenly enfrced business rules Difficulty in identifying wh qualifies as an fficial fr FCPA purpses

28 FCPA Since 2006, at least 17 FCPA and related enfrcement actins brught by the DOJ have invlved activities in Iraq The chemical prductin, autmtive, and law enfrcement equipment industries were amng thse targeted in these actins Crpratins were frced t pay millins f dllars in fines, emply independent cmpliance mnitrs, and either plead guilty r adhere t the terms f deferred prsecutin agreements

29 POTENTIAL HARM FROM FCPA CASES In additin t financial penalties, such as fines and disgrgements: Reputatinal harm with custmers and regulatrs plus the lss f brand value Mandatry cmpliance mnitrs and increased regulatry scrutiny f Iraqi peratins (as part f deferred prsecutin agreements) Referrals t ther law enfrcement agencies, including thse in Iraq Lss f perating licenses in Iraq

30 MITIGATING EXPOSURE Understand the lcal market and the crruptin risks assciated with perating in Iraq and cntinuusly refine nging cmpliance effrts Develp specialized training prgrams Maintain accurate and cmplete bks and recrds Practively use due diligence t vet ptential business partners Cmpanies need t be able t demnstrate that they are taking a practive apprach t cmpliance with the FCPA and ther legal standards

31 OPPORTUNITIES Investment in husing, transprtatin, and energy prjects Gvernment-designed prjects are available t be implemented in accrdance with the 2006 Investment Law Jint ventures with SOEs are available and enjy additinal incentives Jint peratin f factries r prts

32 QUESTIONS? Please cntact us at: Iraqi Business Services and Cnsultancy Baghdad, Iraq Iraq Cell: +964 (780) Iraq Office: +1 (703) Fax: +1 (703) U.S. Office: +1 (703) r 17

HOC Works Program Requirements

HOC Works Program Requirements HOC Wrks Prgram Requirements Last Revisin: March 2018 INTRODUCTION The Husing Opprtunities Cmmissin f Mntgmery Cunty (HOC) established the HOC Wrks prgram in 2015 in rder t guarantee that HOC emplyment