Iraq Parliament Backs 35% Tax On Gas, Oil Firms

by Lorys Charalambous, Tax-News.com, Cyprus

17 September 2009

A bill that will impose a new 35% income tax rate on revenues deriving from the exploration, processing and production of oil and gas by foreign firms was tabled in Iraq’s parliament on September 12.

The law, which was approved by the Iraqi government in May this year, aims at tapping revenues from foreign investment in the country’s vast oil fields, which is due to further increase in December when the government plans to auction further contracts to prospective investors.

Announcing the tax in May, the Iraqi government underlined that the proposal was not drafted to deter foreign investment, nor impose a draconian burden on its most important sector, but instead to claim rightful revenues from the industry, which are currently collected in the companies’ home countries.

The government noted that the growing network of Iraqi double tax avoidance treaties will ensure that appropriately domiciled companies do not pay tax twice.

A second reading of the bill will be required before it is put to the vote; however, it is anticipated that the bill will be passed with little – if any – opposition.

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