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اقرأ بالعربية

Setting Up in Iraq: Branch, Subsidiary or Representative Office, and How the Kurdistan Region Differs

Foreign companies entering Iraq usually choose between registering a branch of the parent company and incorporating an Iraqi company. Representative offices in the old sense no longer exist in federal Iraq. This article sets out the current rules under Companies Law No. 21 of 1997 (as amended, including by Law No. 17 of 2019), Regulation No. 2 of 2017 on foreign company branches (as amended in 2023 and 2025), and the main differences in the Kurdistan Region.

Othman Al-JubooriOthman Al-Juboori, Iraqi lawyer, expert in Iraqi labour lawIraqi lawyer, expert in Iraqi labour law

Start with the activity, not the vehicle

The right structure depends on what the company will actually do in Iraq: perform a contract with a ministry or state company, sell to private customers, hold an investment licence, or simply explore the market. Each of these has different registration triggers, tax consequences and staffing needs. A structure chosen only for speed can create problems later with tax clearance, visa sponsorship or contract payments.

The end of the representative office

Until 2017, foreign companies could register representative offices under Regulation No. 5 of 1989. Regulation No. 2 of 2017 on Foreign Company Branches, issued by the Council of Ministers, repealed that regulation (Article 16) and required existing branches and offices, registered or not, to bring their status into line within one year (Article 14/Second). The Companies Registration Department has since called on remaining representative offices to convert to branches or deregister. In federal Iraq, a foreign company that wants a physical presence therefore needs a registered branch or an Iraqi company.

Option 1: the branch of a foreign company

Who can register

Under Article 2 of Regulation No. 2 of 2017, as amended by Regulation No. 4 of 2023, a foreign company, establishment or entity registered abroad may open a branch once one year has passed since its incorporation (the original text required two years). The application to the Registrar of Companies at the Ministry of Trade includes, legalised in the country of incorporation and translated into Arabic:

  • the constitutional documents and a valid certificate of registration;
  • a list of directors or the authorised manager, their nationalities and authorised signatories;
  • an authorisation for the branch manager, who must actually reside in Iraq;
  • an authorisation for the person filing the application;
  • the last year's (or preceding year's) final accounts; and
  • the Registrar's standard undertaking.

The Registrar must decide within 15 working days of a complete application, otherwise the application is deemed accepted, and a refusal must state reasons (Article 3, as amended).

Registration is not a licence to operate

Article 4 states expressly that the registration licence is not a permit to carry on activity. Before trading, the branch must file proof of its address in Iraq, confirmation of a current account with a licensed Iraqi bank, any sector licence required for its activity, and a letter appointing a legal adviser for the branch (Article 5). It must use its registered name in Arabic on its documents and keep accounting records in Arabic.

Under Article 6, a branch carries on commercial activity in one of these cases: starting performance of a contract with an Iraqi government body or public or mixed-sector company; signing an investment contract under the investment laws; obtaining a business licence from a competent Iraqi authority; or working with the private sector where the contract or project value is at least USD 1,000,000.

Ongoing obligations

Branch accounts must be audited by a licensed Iraqi auditor, and audited accounts and an activity report must be filed within eight months after year-end (Article 8). The Registrar may cancel the registration if the branch has no activity for four years after its last activity, fails to file for two consecutive years, or provides false information (Article 11). Changes of branch manager must be notified.

A later amendment by Regulation No. 1 of 2025 concerns Article 14; the consolidated text published by the Ministry of Trade indicates that a foreign company contracted only to supply goods or services is not required to register unless the contract involves services inside Iraq for at least one year. Companies should confirm the current wording before relying on this exception.

Pros and cons

A branch allows 100% foreign control and is commonly used for government contracts. However, it is not a separate legal person from the parent; liabilities of the branch are the parent's liabilities (Article 12 confirms that the foreign company bears the branch's legal and financial obligations after cancellation).

Option 2: an Iraqi company (subsidiary)

Companies Law No. 21 of 1997 recognises several forms, of which the limited liability company (LLC) is the most common for foreign investors, with between one and 25 shareholders. Following amendments by Law No. 17 of 2019, practitioner sources report a minimum LLC capital of IQD 1,000,000, although the Registrar or sector authorities may require more for certain activities.

The most significant change is foreign ownership. Article 12/Second, as amended in 2019, permits foreign natural or legal persons to be founders or shareholders of joint-stock companies and LLCs provided Iraqi shareholding is not less than 51%. In practice, this limits a foreign shareholder to 49% of a newly incorporated federal Iraqi company. Foreign shareholders are also generally subject to security clearance.

Practitioners differ on whether an investment licence under Investment Law No. 13 of 2006 allows full foreign ownership despite the cap; the point is not fully settled. Nominee arrangements to get around the cap carry legal and practical risk and should be approached with caution.

A subsidiary is a separate legal person with its own tax registration. It may be the required vehicle for some licensed activities, including some contractor classifications with the Ministry of Planning.

The Kurdistan Region

The Kurdistan Region has its own investment legislation and registration practice:

  • Kurdistan Region Investment Law No. 4 of 2006 treats foreign investors and capital the same as national investors and allows a foreign investor to own the entire capital of a project established under that law (Article 3).
  • Licensed projects receive a 10-year exemption from all non-customs taxes and duties from the start of services or actual production (Article 5/First), with customs exemptions for project imports entering through the Region's border crossings (Article 5).
  • The Board of Investment allocates land by lease or long-term lease at promotional prices, and may transfer ownership of land for strategic projects (Article 4). Investors may not own land containing oil, gas or precious minerals (Article 19).
  • Foreign investors may transfer profits and capital abroad (Article 7), and disputes are resolved under the contract, amicably, or by arbitration (Article 17).
  • Practitioner commentary indicates that the 2019 federal amendment imposing the 51% Iraqi-shareholding rule has not been adopted by the Kurdistan Parliament, and that companies are registered with the Region's own Ministry of Trade and Industry.

A presence in Erbil does not by itself authorise activity in Baghdad or Basra, and vice versa. Companies working across the country often need parallel registrations and should coordinate tax and residency compliance in both systems.

Workforce and labour law

Whichever vehicle is chosen, it will be the employer and visa sponsor; the branch manager must reside in Iraq, and Iraqi hiring priorities apply under the Investment Law and sector decisions. Foreign staff need residency and, in federal Iraq, a work permit under Instructions No. 1 of 2026 (Official Gazette No. 4863), which apply a 15-day labour-market test and one-year renewable permits, while in the Kurdistan Region Council of Ministers Decree No. 172 of 2022 requires at least 75% local staff. In 2024 the Council of Ministers decided that private-sector companies and companies contracted with the Ministry of Oil must employ at least 80% Iraqi staff, and the Ministry of Labour has stated that it applies this 80/20 ratio (INA, 3 December 2025; 964media, 28 September 2026); we have not seen the published text of the Cabinet decision, which practitioners cite as Decision No. 24832 of 2024. The ratio to plan on is no more than one foreign worker for every four Iraqi workers. Branches and Iraqi companies alike must register their workers under Social Security Law No. 18 of 2023 (5% employee and 12% employer contributions, with the employer also bearing the State's 8% share for foreign workers), pay a work fee of IQD 2,000,000 for each foreign worker entering Iraq (Article 106), and hold a social security clearance certificate for registrations, renewals, licences and other legal actions, with prior notice required before liquidation (Article 20). Our separate labour-law series covers employment contracts, work permits and social security in detail: see our articles on work permits for foreign workers and social security for employers, and our labour law page.

Frequently Asked Questions

Can a foreign company sign a government contract before registering a branch?

Award may precede registration, but performing the contract triggers branch activity under Article 6. Registration should be planned in parallel with bidding so that payments and visas are not delayed.

Can a foreign company own 100% of an Iraqi LLC in federal Iraq?

Under the 2019 amendment to Article 12, Iraqi shareholding must be at least 51%. A branch remains fully foreign-owned. In the Kurdistan Region, full foreign ownership of licensed projects is permitted under Law No. 4 of 2006.

Is a branch registration valid in the Kurdistan Region?

Regulation No. 2 of 2017 is a federal regulation; commentary at the time of issue noted that it does not apply to branches registered in the Kurdistan Region, which follows its own procedures.

Sources

This article is general information, not legal advice.