How does Iraq payroll tax work in 2026?
Iraq social security runs at 12% for employers and 5% for employees under Law No. 18 of 2023. Income tax tops out at 15% across four bands. There is no universal personal allowance. Individual deductions depend on marital status, so the effective starting point varies by employee.
· Iraq guide
Illustration · Baghdad, Iraq
Iraq employer social security is 12% of gross salary. This rate applies to all employees in the non-oil sector under the Workers Retirement and Social Security Law No. 18 of 2023.
The employee pays 5% of net salary into social security. Income tax has four bands: 3% up to IQD 250,000, then 5%, then 10%, then 15% above IQD 1,000,000.
Iraq has no universal tax-free allowance. Deductible amounts vary by marital status. Payroll is monthly. Employers must remit withheld income tax to the General Commission of Taxes within 15 days of the month end.
What does an employer pay in Iraq social security?
The employer pays 12% of each employee's gross salary into social security. This rate covers retirement and social insurance.
The rate was set by the Workers Retirement and Social Security Law No. 18 of 2023. It applies to the non-oil sector. There is no earnings ceiling on the contribution.
| Contribution type | Rate | Basis |
|---|---|---|
| Employer social security | 12% | Gross salary, no ceiling |
Oil and gas sector
A different contribution structure applies to employees in the oil and gas sector. The 12% rate shown here is for the non-oil sector, which covers the majority of private-sector employers. If you are hiring into the oil and gas sector in Iraq, speak to a local adviser about the applicable rates before running payroll.
Law No. 18 of 2023 changes
The Workers Retirement and Social Security Law No. 18 of 2023 updated the employer contribution rate. Employers must register all eligible employees with the social security authority from the start of employment. Registration is not optional. Failure to register exposes the employer to back contributions and penalties.
What does an employee pay in Iraq social security?
The employee pays 5% of net salary into social security.
The employer deducts this amount directly from the employee's pay and remits it alongside the employer contribution. There is no employee contribution ceiling.
| Contribution type | Rate | Basis |
|---|---|---|
| Employee social security | 5% | Net salary, no ceiling |
The combined employer and employee social security cost is 12% plus 5%. The employer bears the larger share. Both contributions go toward the retirement and social insurance fund established under Law No. 18 of 2023.
No separate pension scheme
Iraq does not have a separate mandatory occupational pension scheme. The social security contributions described above are the full mandatory retirement-savings obligation. There is no auto-enrolment mechanism or additional pension layer sitting above social security.
Minimum wage
The federal minimum wage is IQD 350,000/month. This is the rate applicable in most governorates. The Kurdistan Region applies a higher rate. Always confirm the applicable rate for the specific governorate before making an offer.
Iraq income tax bands for 2026
Income tax has four bands. The rates go from 3% at the lowest level up to 15% above IQD 1,000,000 per year.
Iraq does not apply a universal zero-rate personal allowance. Instead, employees can claim personal deductions that vary by marital status. The deductible amount is higher for married employees. Confirm each employee's deduction entitlement during onboarding.
| Taxable income (IQD per year) | Rate |
|---|---|
| IQD 0 to IQD 250,000 | 3% |
| IQD 250,000 to IQD 500,000 | 5% |
| IQD 500,000 to IQD 1,000,000 | 10% |
| Above IQD 1,000,000 | 15% |
Personal deductions
The Iraqi income tax system allows personal deductions before the bracket table applies. The deductible amount differs for single and married employees. A married employee's deduction is higher than a bachelor's deduction. These deductions are set by the Iraq tax authority and can reduce the effective tax liability significantly for lower and mid-income earners. Confirm the applicable deduction for each employee at onboarding, as the amount affects the withholding calculation from the first pay run.
Expatriate employees
Non-resident employees working in Iraq are taxed on Iraq-source income. Foreign nationals employed through an EOR are generally treated as residents for tax purposes from the start of employment. The employer must withhold income tax and social security on the same basis as for Iraqi nationals. Speak to a local tax adviser if an employee has dual-residence implications.
How does Iraq payroll withholding and filing work?
Payroll in Iraq runs monthly. Employers must withhold income tax from each employee's salary and remit it to the General Commission of Taxes within 15 days of the month end.
A monthly statement must be filed at the Direct Deduction Division of the tax authority alongside the remittance. Missing the deadline exposes the employer to interest and penalties.
Employers must deduct income tax from employee salaries each month and forward the amount to the General Commission of Taxes, Direct Deduction Division within the first 15 days of the following month. A monthly statement accompanies the payment.
Source: PwC Worldwide Tax Summaries: Iraq, Tax Administration
The payroll cycle and filing obligations:
- Pay frequency: monthly (12 pay runs per year)
- Income tax remittance: within 15 days of the month end to the General Commission of Taxes
- Monthly statement: filed at the Direct Deduction Division alongside the payment
- Social security remittance: employer and employee contributions are remitted to the social security authority each month
Iraq does not operate a real-time digital payroll reporting system comparable to UK PAYE RTI. The primary withholding mechanism is the monthly direct deduction procedure. Maintaining accurate monthly records is essential, as the tax authority may review payroll records during inspections.
Year-end reconciliation
At the end of each tax year, employers reconcile the total amounts withheld against the annual income tax liability for each employee. Any under-deduction must be corrected. The General Commission of Taxes oversees this process. Employers operating through Teamed have this handled end-to-end.
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Collect salary and hours data
Gather each employee's gross salary, any variable pay, and any benefits for the month before the payroll run closes.
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Calculate gross and apply deductions
Determine taxable income after each employee's personal deduction. The deductible amount varies by marital status, so confirm the correct figure for each employee.
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Withhold income tax
Apply the four-band income tax table to the taxable income and withhold the correct amount from each employee's salary.
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Deduct employee social security
Deduct the employee social security contribution from each employee's net salary and calculate the matching employer contribution.
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Remit to the tax authority
Transfer the withheld income tax to the General Commission of Taxes and file the monthly statement at the Direct Deduction Division, both within 15 days of the month end.
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Pay social security contributions
Remit both the employer and employee social security contributions to the social security authority for the month.
Social security contributions in the Iraq payroll stack
Iraq does not have a separate pension layer. The mandatory contribution is entirely within the social security system.
The employer pays 12% and the employee pays 5%. Both go to the social security fund. There is no additional occupational or auto-enrolment pension obligation.
Summary of the full mandatory payroll cost stack in Iraq:
| Contribution | Employer rate | Employee rate |
|---|---|---|
| Social security (retirement and insurance) | 12% | 5% |
| Separate pension scheme | None | None |
What social security covers
The Workers Retirement and Social Security Law No. 18 of 2023 funds retirement pensions and occupational injury insurance. Contributions accumulate toward the employee's retirement benefit. The fund is administered by the social security authority, not by private pension providers.
Voluntary supplemental savings
Employers are not required to offer any voluntary savings or supplemental pension arrangement above the mandatory social security contribution. Some multinational employers operating in Iraq offer voluntary savings plans as part of a competitive benefits package. These are contractual arrangements, not legal requirements. If you want to offer a voluntary benefit on top of the mandatory contribution, Teamed can advise on how to structure it correctly under Iraqi law.
How does Teamed handle Iraq payroll for you?
Teamed becomes your legal employer of record in Iraq for from $599 per employee per month, with zero FX mark-up in any currency.
Payroll, tax, social security, and the full Iraq employment law stack run on one platform.
Real HR and legal experts handle your Iraq hires. That means monthly payroll calculated correctly against the four income-tax bands and the social security rules, income tax remitted to the General Commission of Taxes within the 15-day window, and social security filed on time. An actual person, not a pooled queue, manages your account. There is no setup fee and no exit fee. Employer cost passes through at cost, itemised on every invoice.
EOR payroll and entity setup both live on one platform. A contractor who converts to payroll keeps their record. That same employee can graduate from EOR to your own Iraq entity when the time is right. EOR is the right model for a first Iraq hire, until it isn't. Run the Employer Cost Calculator to see the full cost picture. Start from the Iraq hiring overview.
Key source: PwC Worldwide Tax Summaries: Iraq and Deloitte: Social Security Law No. 18 of 2023.
Frequently asked questions
What is the employer social security rate in Iraq in 2026?
The employer social security contribution is 12% of each employee's gross salary. This rate applies to the non-oil sector under the Workers Retirement and Social Security Law No. 18 of 2023. There is no earnings ceiling. A separate rate structure applies in the oil and gas sector.
What social security does an Iraq employee pay?
The employee pays 5% of net salary. The employer deducts this amount directly from each payslip and remits it alongside the employer contribution. There is no employee contribution ceiling. Iraq has no separate occupational pension scheme; social security is the full mandatory retirement obligation.
What are the Iraq income tax bands in 2026?
Iraq income tax has four bands: 3% on income up to IQD 250,000 per year; 5% from IQD 250,000 to IQD 500,000; 10% from IQD 500,000 to IQD 1,000,000; and 15% above IQD 1,000,000. There is no universal tax-free allowance. Personal deductions vary by marital status.
How and when must Iraq payroll tax be remitted?
Employers must remit withheld income tax to the General Commission of Taxes, Direct Deduction Division, within 15 days of each month end. A monthly statement must be filed at the same time. Payroll runs monthly, giving 12 pay periods per year. Social security contributions are also remitted monthly to the social security authority.
Does Iraq have a pension auto-enrolment system?
No. Iraq does not operate a separate mandatory occupational pension or auto-enrolment scheme. The only mandatory retirement contribution is social security: 12% from the employer and 5% from the employee under Law No. 18 of 2023. Any voluntary supplemental savings arrangement is a contractual benefit, not a legal requirement.
The income-tax bracket figures in Iraq are denominated in Iraqi dinar and the thresholds are low relative to typical professional salaries. Most employees reach the top band quickly. The real variable in the withholding calculation is the personal deduction, which differs for single and married employees. Get that right from day one or you face a reconciliation problem at year end.
Iraq social security is 12% employer and 5% employee under Law No. 18 of 2023. That is the fixed cost before income tax.
Income tax tops at 15%, and most professional salaries hit that band fast given the low dinar thresholds.
The payroll window is tight: 15 days to remit after each month end. Get the structure right before the first hire.
