Iraq payroll guide (2026): tax, social security and KRG

Two jurisdictions

Federal Iraq and the Kurdistan Region (KRG) run separate tax, labour inspection, residency and social security systems. Payroll follows the employee’s work location. The currency is the Iraqi dinar (IQD). USD is widely used in contracts, but the Central Bank of Iraq restricts USD cash and pushes settlement in dinars.

Income tax (federal Iraq)

Iraq taxes employment income under Income Tax Law No. 113 of 1982, as amended. The tax year is the calendar year, and employers withhold monthly.

Annual allowances: single IQD 2,500,000; married IQD 4,500,000; IQD 200,000 per child; IQD 300,000 from age 63. Without supporting documents, the employee is treated as single.

Taxable income after allowances (IQD)	Rate
0 – 250,000	3%
250,000 – 500,000	5%
500,000 – 1,000,000	10%
Above 1,000,000	15%

PwC does not state whether these bands are annual or monthly. Long-standing practice treats them as annual, which means almost all salary above the allowances is taxed at 15%.

Kurdistan Region: a flat 5% applies to the monthly net pay of public and private employees earning over IQD 1,000,000 a month. Pay below that is exempt.

The Workers’ Retirement and Social Security Law No. 18 of 2023 took effect on 1 December 2023, replacing Law No. 39 of 1971.

	Employer	Employee
Standard	12%	5%
Oil and gas companies	25%	5%

Law 18/2023 adds an 8% contribution that the state funds for Iraqi nationals. For foreign employees, sources differ. WTW reads it as employer-funded for expatriates registered in Iraq unless home-country coverage is recognised. Deloitte considers it likely not to apply to expatriates outside Iraqi social security. Get a written position from the local office.

We found no published insurable wage ceiling. Expatriates are covered unless home-country coverage is recognised.

The KRG continues to run its own social security administration at 12% employer and 5% employee. Whether Law 18/2023 applies in the Region is not confirmed, so check with a KRG adviser.

End of service

Sources indicate there is no statutory lump-sum gratuity for workers enrolled in social security. Benefits come from the fund as a pension or lump sum under Law 18/2023. For unlawful dismissal, the labour court sets compensation under Labour Law No. 37 of 2015. Contractual gratuities are common for expatriates. These points come from HR guides rather than the law text, so confirm with local counsel.

Wage payment rules

We found no private-sector wage protection system. Monthly-paid staff must be paid at least monthly. Bank transfers in IQD are the safe default. The government’s salary localisation programme (tawteen) moves public-sector payrolls to bank cards.

Working time and leave

These entitlements come from law-firm and HR guides on Labour Law 37/2015:

Hours: 8 a day and 48 a week, or 7 a day for hazardous work. Shorter hours in Ramadan are customary.
Overtime: at least 50% extra on normal days and 100% on rest days and public holidays.
Annual leave: 21 paid days after one year, or 30 days for hazardous or arduous work. An older guide cites 20 days under the pre-2015 law.
Maternity leave: 14 weeks fully paid, extendable for complications.

Minimum wage

The federal minimum wage is IQD 350,000 a month, in place since 2018 according to WageIndicator. No 2026 change was found. Secondary sources report that the Kurdistan Region raised its minimum to IQD 450,000 from 1 August 2025; confirm with the KRG.

Gotchas for foreign employers

Tax and social security clearance (bara’at dhimma) is needed to release final contract payments and to renew residence and work permits. Unpaid payroll taxes can block exits.
Foreign workers need a Ministry of Labour work permit and Ministry of Interior residency. The KRG has its own residency and visa regime.
Localisation quotas apply, for example 50% Iraqi workforce on investment-licensed projects.
The 8% contribution for expatriates is applied inconsistently. Budget for it until you have a written ruling.
USD cash rules complicate USD-denominated payrolls. Many employers use an Employer of Record.

Frequently asked questions

Do expatriates pay social security in Iraq?

Expatriates working in Iraq are covered unless home-country coverage is recognised. Advisers disagree on whether the extra 8% contribution under Law 18/2023 is charged to employers of expatriates, so get a written position from the local social security office.

Is there an end-of-service gratuity in Iraq?

Sources indicate there is no statutory employer-paid gratuity for workers enrolled in social security. Their retirement or end-of-service benefit comes from the social security fund. Contractual gratuities are common for expatriates. Confirm the position for your contracts with local counsel.