9 April 2026 – Since the last couple of weeks, companies operating in Iraq have faced challenges impacting their resources in the country and the course of their business operations. Indeed, in the first days of the regional conflict, the market has witnessed the movement of a number of employees usually based on the ground, on permanent or rotational basis. 

The demobilization or repatriation of employees, mainly due to increased security threats and reduction of the business operations is not however without tax consequences for companies in Iraq. Our paper highlights the main considerations companies operating in Iraq should keep in mind from an employment tax and social security perspective.

Employment tax considerations

Companies are mostly facing two situations which would have the following impact on their employment tax obligations in Federal Iraq:

• Employees demobilized (exited the country and no longer working on the project):
  • Employment income earned by those individuals should not be subject to tax in Iraq from the day of their demobilization;  
  • However, this is subject to the condition that they no longer contribute to the execution of the project and therefore no employment costs are reported in the financial statements (“FS”) of the Iraqi entity/branch neither in the payroll.
• Employees repatriated (exited the territory but still working on the project remotely):
  • Employment income earned by those individuals remain subject to tax in Iraq; 
  • To the extent the individuals remain in charge of activities related to the project in Iraq (even if performed remotely) and their income is part of the local payroll / FS expenses, employment tax remain applicable to them.

Social Security considerations

Social security obligations during this context should also not be overlooked and the steps are required to be completed by the employer to ensure compliance:

• Employees demobilized (exited the country and no longer working on the project):
  • Those individuals should no longer be considered subject to social security contributions in Federal Iraq; 
  • However, their employer shall officially report them as a “leaver” within the social security online platform (and upload a termination letter). Failure to do so will result in the individual still being considered as employed in Federal Iraq and hence subject to social security contributions; 
  • If the demobilization is temporary and the individuals are mobilized again in Iraq, once the conflict resolves, companies would have to report them as “new joiner” to start contributing social security again.
     
• Employees repatriated (exited the territory but still working on the project remotely):
  • Those individuals should still be considered as employee of the company working on the project and hence continue to be subject to social security contributions in Federal Iraq;
  • Even if the individuals are not on the ground, they should not be reported as a leaver on the social security online platform. Statutory obligation to contribute to the social security scheme in Federal Iraq remains and companies shall therefore continue their usual payment of social security on their behalf.