The income tax on foreign oil companies operating in Iraq is imposed under Law No. 19 of 2010. This law stipulates that the income generated from contracts made with these companies is subject to a 35% tax.

Scope of the Tax: The income tax on foreign oil companies covers all contracts related to oil and gas exploration and production activities, including:

• Contracts for the exploration, development, and production of exploratory blocks and oil and gas fields.
• Seismic surveys.
• Drilling wells.
• Well reclamation.
• Technical operations related to wells (such as casing, cementing, well stimulation, electrical logging, and well completion).
• Surface facilities for oil and gas extraction and production operations and related industries.
• Well injection facilities.
• Flow lines.
• Gas processing plants.
• Cathodic protection.
• Engineering inspection and quality control related to the oil industry.
• Oil well drilling.
• Systems related to extraction up to the point where oil and gas are ready for pumping to export terminals.

Direct Withholding Tax: The salaries and wages of both Iraqi and foreign employees working in foreign companies, their branches, offices, and subcontractors are subject to direct withholding tax, whether received inside or outside Iraq, according to Direct Withholding Instructions No. 1 of 2007.

Responsibility of the Foreign Company: Under the First Amendment to Instructions No. 2 of 2012, the foreign company must withhold the following percentages from the total payment due to the subcontractor:

• 7% for oil contracts specified in Clause (First) of Article (1) of these instructions.
• 3.3% for other contracts not specified in Clause (A) of this section.