The regulatory framework for linking customs tariffs and tax levies to the ASYCUDA system

The shift toward electronic collection through the ASYCUDA system represents one of the most important tools for modernizing customs and tax administration in Iraq, because it transfers import procedures from a model of “complex, multi-branch paper-based assessment” to a model of “data-driven settlement/accounting” by linking the customs tariff and tax deposits (guarantees) to a single unified platform that is auditable and traceable.

In this context, Council of Ministers Decision No. (957) of 2025 stands out as the main executive framework for adjusting the tariff and activating the collection of deposits through ASYCUDA, with direct integration with the controls and implementation mechanism of Council of Ministers Decision No. (975) of 2025 regarding the audit of the primary documents of companies in the Kurdistan Region and linking them to the analysis of customs declarations.

1- Adopting the new customs tariff schedule (Annex No. 1 to the decision) and applying it in all customs centers pursuant to Paragraph (First) of the above decision. This means obligating all border outlets/ports of entry to apply tariff fees according to the classification of each item, as the decision approved broad sectoral tariff tables (animal/plant/chemical/machinery/transport, etc.), which achieves two results:

• Unifying collection rates across all outlets, thereby reducing variation in application from one center to another.
• Enhancing automation capability: the more the tariff is codified within clear tables, the easier it is to translate it into calculation rules within ASYCUDA, reducing human discretion and limiting violations.
• Among the important provisions with direct practical impact is what the decision regarding food shipments: it required that the shipment items be, as far as possible, subject to a single tariff; and if the items differ within one container/truck/single bill of lading, the tariff is calculated according to the higher rate. This rule aims to reduce manipulation by combining low-tariff items with higher-tariff items, but it may raise implementation issues related to the description/classification of goods and the disaggregation of data pursuant to Paragraph (Seventh) of the decision mentioned above.

2- Adopting the tax deposit (guarantee) collection schedule (Annex No. 2). The deposits annex specified withholding rates deducted from the value of the goods for the purpose of the “deposit/guarantee” (not the final tax). The أبرز examples include:

• 1% for categories such as: medicines, veterinary vaccines, fertilizers, pesticides, seeds, feed materials, stationery, and solar energy equipment.
• 2% for categories such as: gold, jewelry, precious metals, machinery, and production, industrial, agricultural, and construction equipment.
• 3% for goods not included in the previous categories.

3- These rates are considered a preliminary measure to ensure that part of the tax obligations is collected in advance at the time of importation, thereby reducing the risks of evasion or delay, while emphasizing that the final settlement is conducted properly and in accordance with established procedures.

4- Activating their collection through the ASYCUDA system pursuant to Paragraphs (Second and Third) of Council of Ministers Decision No. 957 of 2025. Accordingly, the collection of tax deposits was reinstated at the border outlets after it had been suspended under previous decisions in 2023, on the basis that it is calculated according to pre-determined rates for all types of goods and collected electronically during customs clearance.

5- Emphasizing that tax deposits must be collected exclusively electronically and through the ASYCUDA system, while unifying the bank accounts of customs centers at Rafidain Bank to consolidate these amounts, which facilitates their later settlement between the Customs Authority and the Tax Authority.

6- Obligating the General Commission for Taxes to coordinate with the General Commission of Customs to open tax interfaces (portals) within the ASYCUDA system at the Commission’s headquarters and its branches (the Companies Department and the Large Taxpayers Department) pursuant to Paragraph (4) of Annex Two to the Council of Ministers Decision, so that tax employees can access customs declaration data electronically. This enables them to conduct auditing and follow up the deposit for each importer.

7- Establishing a mechanism for settling tax deposits (guarantees): All collected deposit amounts are transferred periodically to the Tax Authority’s accounts based on official receipts issued by the ASYCUDA system. Then, at the end of the fiscal year or when the trader settles their tax position, the actual tax due from that importer is calculated and compared with the amount of deposits paid.

• (1) If the final tax is higher than the deposits, the importer is required to pay the difference.
• (2) If the final tax is lower, the difference is refunded to the importer.

The Tax Authority was obligated to carry out this settlement and refund any excess amounts to the importer within a specified period: five business days from the completion of the annual audit, in accordance with the instructions.

8- Pursuant to Annex Two, the decision obligated the General Commission for Taxes to establish a permanent committee at the Commission’s headquarters to review requests for the refund of the remaining deposits after settlement and auditing, with completion of the request within 30 business days.

It also required the formation of another permanent committee to consider taxpayers’ objections to the decisions of the first committee, chaired by the Federal Board of Supreme Audit and with membership from oversight bodies (including integrity, audit, and internal control), with the objection to be resolved within 30 business days.

9- The implementation of certain previous exceptions or arrangements was extended until the end of 2025 to facilitate the transition, such as extending the application of a paragraph of a previous decision (No. 24565 of 2024) related to a specific simplification or a temporary exemption.

10- Cancelling certain old decisions that conflict with the new direction, such as cancelling Item (First) of Decision No. 23672 of 2023 and Item (5) of Decision No. 23085 of 2023. These cancelled decisions had imposed fixed fees on containers or suspended the collection of tax deposits during 2023 to ease the burden on traders; however, they have become inconsistent with the return to applying the comprehensive legal tariff and collecting deposits in 2025.

11- Not applying any decisions or circulars that contradict it, with specific exceptions, including those issued pursuant to the Iraqi Products Protection Law and Council of Ministers Decision No. 24413 of 2024. It also precisely specified the effective date: as of 1/1/2026, a date that aligns substantively with the state’s direction to adopt electronically collected deposits as a basis for settlement and auditing.

12- Requiring that customs exemptions (such as import exemptions granted to government entities or for certain materials) be registered on a dedicated electronic exemptions platform connected to the ASYCUDA system, to ensure transparency and prevent misuse of exemptions. Any entity granting an exemption without registration will bear legal responsibility, and the Customs Authority will conduct subsequent reviews to ensure that exempted goods do not leak into the markets in violation of controls, pursuant to Paragraph (Eighth) of the above-mentioned decision.

Through these regulatory and legal frameworks, the Iraqi environment has been prepared to apply ASYCUDA in a way that is supported by legislation. It is worth noting that implementation of the system began on a trial basis at some outlets since late 2023: the first phase started in the air cargo sector in October 2023, followed by a gradual expansion in 2024 to connect land and sea outlets and integrate the system with the databases of other government entities. This was accompanied by training national cadres and cooperation with experts from UNCTAD to ensure the transfer of technical knowledge.

Need guidance on ASYCUDA compliance, tariff application, or tax-deposit settlement? Contact Osama Tuma for Legal Services and Advisory—your trusted law firm in Iraq.