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Mercans offers complete payroll, PEO and HR services in Iraq

Iraq occupies a pivotal position in the Middle East region and has hundreds of green and brownfield opportunities across multiple sectors such as agriculture, tourism, housing, telecommunications and healthcare. Its domestic market of 36 million people also offers significant opportunities to produce and sell goods and services. As stability and security continue to improve, displaced professionals are returning and re-entering the workforce. Further, Iraq boasts one of the world’s youngest populations with 83% under 40 and wage rates which are dramatically below those in the US and Europe.


Doing Business in Iraq

Highly dependent on oil, Iraq (which includes the Iraq Kurdistan Region) is open for business. Despite the high risk and challenging market, there is opportunity for potentially high returns for businesses. The NIC (National Investment Commission) highlights opportunities to the investor community, providing growth and significant returns to the country. Iraq has a number of FTA (free trade agreements) in place. Opportunities that foreign businesses can explore include energy, infrastructure, defense and security, healthcare and financial and professional services. An investment license from the relevant investment commission offers tax exemptions but this is not required in order to do business in Iraq.

Entity Registration and Incorporation Requirements

Setting up a new business or expanding an existing one in Iraq is straightforward. Choose how your company operates from a range of entity types which suit your individual circumstance.


Banking Hours: 8:00 am to 12:30 pm from Saturday to Thursday

Working Week

The standard working week is from Sunday to Thursday from 8:00 am - 5:00 pm

Labor Law

Iraq labor law applies to all employees working in Iraq regardless of nationality. For companies who operate multi-country payroll, take note that Iraqi labor law does not apply extraterritorially. Iraqi Labor Law No. 37 of 2015 applies to both foreign and national employees working in Iraq. This is the case regardless of the law chosen in their individual employment contracts.

Main Industries

Petroleum, chemicals, textiles, leather, construction materials, food processing, fertilizer, metal fabrication/processing

GDP Growth


Dates & Numbers


Official State Name

Republic of Iraq


40.22 million



Major Languages



Iraqi dinar

Internet Domain


International Dialing Code


Baghdad, IQ
6:53 am, July 13, 2024
temperature icon 32°C
clear sky
Humidity 17 %
Wind Gust: 0 mph


All employees should be properly documented and the full scope of work should be considered for each employee given the difficult nature of terminating an employment contract. A wage and overtime register shall be maintained which includes details on wages, wage deductions and net wages. All employees shall be paid in Iraqi currency unless otherwise stated. There is a minimum wage in place which can be changed by the Ministry of Labor depending on changes in the local market. Employers are also required to pay an employee for any unused annual leave.

It is acceptable to provide employees with online payslips




Employees are entitled to 21 days of paid annual leave

Annual Leave

The employee is entitled to 30 days of paid sick leave

Sick Leave

There are 14 weeks of paid maternity leave available but there are no provisions for paternity leave

Maternity & Paternity Leave

30 days’ notice is required for terminating an employee

Employee Termination

A 13th month salary is not mandated by law

13th month salary

IQD 350,000 per month

Minimum Wage

Employees must be compensated for overtime with an additional 50% of their regular salary


This is set at two weeks’ salary for each year of service provided.

Severance Pay


Tax and Social Security

The concept of tax residence is not recognized in Iraq. All income generated in Iraq is taxed in Iraq, whether the employee is based in Iraq or not. All employees must be registered with the Department of Social Security.


The range of personal income tax is between 3% and 15% of the employee’s salary. However, there may be tax exemptions which can be applied depending on the employee’s status.


Corporate Income Tax


Personal Income Tax


Sales Tax



Social Security

Social security tax is imposed on salaries and benefits of both local and expatriate employees, after deducting allowances.


Social Security Rate


Social Security Rate for Employers


Social Security Rate for Employees


Employment Law

Iraq is heavily unionized, guaranteeing employees the right to form and join trade unions. Further, collective bargaining is recognized.

Employment Agreement

Employment agreements may be oral or in writing. There are no terms implied in employment agreements. Any changes made to the agreement have to be mutually agreed as unilateral amendments cannot be made.

Working condition

For work performed during the day, the overtime pay rate is 50%. However, where the work is done at night, this rate is doubled. Employees may, in exceptional cases, agree with their employer to exceed the overtime limits for a certain period, provided that the average number of hours worked during this time does not exceed 48 hours.


Employees are entitled to full pay for feast days and official holidays that do not fall on a Saturday. After one year’s service, employees are entitled to 21 days fully paid annual leave which increases incrementally, according to labor law.

Employment termination

Termination, when permitted, requires 30 days’ notice. The law also requires employees to give employers 30 days’ notice on resignation. As for redundancy, these are generally not permitted under Iraqi labor law. The most common method of ending an employment contract is through mutual agreement. If an employee believes he has not been dismissed properly or there is cause for redress, the employee can approach the End of Service Committee or the labor courts.


30 days

Minimum notice period for terminating an employee


13 days

Total number of public holidays



Working hours per week


5 days

Total number of days for Compassionate and Bereavement Leave



Foreign entities are able to set up branches in Iraq and do business even if fully foreign owned. There are some sector specific rules which require full or partial national ownership to obtain certain licenses and approvals in order to operate. These include pharmaceutical companies.


Residency permits

A foreign employee must obtain a work permit and residency permit in order to work. Although time consuming, these are necessary for the employee’s legal right to work. All companies that hire a foreign employee must obtain a work permit for the employee. Once the employee obtains a visa and enters the country, the company must attend the Ministry of Labor and Social Affairs to apply for the work permit within 30 days of the employee’s arrival. The permit is usually issued within 45 days of the application. From January 2021, a new fee of IQD 1.5 million is collected by the Residency Department in the Ministry of Interior for each expatriate foreign employee in Iraq.

Work Permit validity

One year

Required Documents

completed visa application form

two color passport photographs

copy of the applicant’s valid passport

official letter of employment.

Compliant, reliable, error-free and touchless payroll in Iraq

Build the best team and hire top talent compliantly in Iraq. Get in touch with Iraq payroll outsourcing & PEO specialists for a free consultation!

This document was prepared for informational purposes only. As local laws & regulations keeps on changing. Please consult your tax & legal advisors as well.
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