company’s accounts and the records of its Iraqi branch. These documents serve different legal purposes. The foreign accounts may establish the financial position of the company applying for or maintaining an Iraqi presence, while the branch must separately account for its activities in Iraq. Treating one set of accounts as a substitute for the other can leave both reporting and tax questions unresolved.
In Federal Iraq, the Foreign Company Branches Regulation No. 2 of 2017, as amended, provides the main branch-registration and reporting framework. The Income Tax Law No. 113 of 1982, as amended, is relevant to the Iraqi tax position. The reporting analysis should also distinguish a branch from an Iraqi subsidiary governed by the Companies Law No. 21 of 1997, as amended.
Identifying the foreign company behind the branch
The first task is to confirm which foreign legal entity is registered through the Iraqi branch. A multinational group may have several holding and operating companies with similar names. Accounts for the ultimate holding company should not automatically be assumed to satisfy a requirement concerning the particular foreign company registered in Iraq.
The foreign company’s registration documents, name changes and authorised signatories should be consistent with the branch file. If a restructuring has changed the foreign company’s identity or legal existence, the consequences for the branch require separate assessment. Continuation of the same commercial brand does not necessarily establish continuation of the same legal person.
The branch regulation addresses circumstances such as the foreign company’s loss of legal personality through merger. Such events should not be dealt with merely by substituting a new name on the next annual report.
Accounts required for registration and continuing reporting
The branch regulation requires financial accounts of the foreign company as part of the registration documentation. That requirement should be distinguished from the branch’s continuing obligation to maintain regular accounting records in Arabic for its Iraqi activities.
The regulation also requires the branch’s accounts and activities to be audited by an auditor licensed in Iraq. The branch must submit its audited final accounts and a report on its Iraqi activities within eight months following the end of the relevant year. A group consolidation timetable does not, by itself, alter that local requirement.
Etihad’s corporate services can support the distinction between foreign-company documents, branch annual disclosures and changes requiring separate notification to the Registrar.
Reconciling the two reporting systems
The foreign company’s accounts may use a different currency, reporting format or consolidation approach. The Iraqi branch records should nevertheless provide a traceable account of local revenue, expenditure, assets and liabilities. Differences should be explained through reconciliations rather than concealed by copying group totals into the local accounts.
Head-office funding and expenses paid abroad on behalf of the branch require particular attention. The records should identify the underlying transaction, the entity making the payment and the basis on which the amount is attributed to Iraqi operations. An accounting description should not be used to create a legal obligation unsupported by the actual arrangement.
Intercompany and head-office balances should also be distinguished. A balance with the same foreign legal person may raise different questions from a transaction with another group entity. The documentation should reflect that distinction.
Contracts and the scope of Iraqi activity
The activity report should correspond to the branch’s actual work and the legal basis on which it operates in Iraq. The regulation distinguishes registration from permission to conduct the relevant activity and requires attention to sector licences where applicable.
Where contracts are signed abroad, the branch should still identify work performed in Iraq and the associated financial records. Conversely, it should not attribute every contract of the wider group to the Iraqi branch merely because the group has a local presence. The contracting entity, performance, invoicing and payment arrangements need to be analysed together.
An internal description of the branch as support only should be consistent with what its staff actually do. If its role expands, the company should reassess the registration, licensing, accounting and tax consequences of that change.
Tax reporting and corporate accounts
Under the Income Tax Law, the tax analysis depends on the relevant income, activities and applicable rules. The location of an invoice or bank receipt should not be treated as the sole answer to whether Iraqi tax obligations arise.
The company should reconcile branch accounts with tax submissions, contract records and any retentions or assessments. Acceptance of a corporate report by the Registrar does not necessarily establish the tax authority’s acceptance of the income or expense treatment.
Etihad’s tax advisory services can assist with that reconciliation, particularly where overseas payments or allocations are material to the local accounts.
Missing reports and registration exposure
The branch regulation provides for consequences where required accounts and documents are not submitted for consecutive years without a legitimate excuse, as well as other specified grounds affecting registration. The company should establish whether any formal notice or decision has been issued before assuming that filing the latest year alone resolves the position.
Historic gaps may require reconstruction of records, audit work and a sequence of submissions. The company should preserve the distinction between actual historic activity and current corrective action. Inactivity should be assessed under the regulation rather than treated as automatically eliminating reporting duties.
A coordinated annual package
A reliable reporting package links the foreign company’s current identity, the branch’s audited accounts, its Iraqi activity report and the supporting tax and corporate records. Translations and authentication should be addressed for the documents that require them. Etihad Law Firm can coordinate the corporate and tax elements with the company’s finance team and auditor. The objective is a consistent explanation of the foreign company’s Iraqi operations that satisfies local reporting duties without confusing them with consolidated group reporting