This article considers whether after-sales visits by German manufacturers to Iraq, typically to honour equipment warranties, can create Iraqi tax and related compliance exposure. Manufacturers often treat these visits as a cost of an overseas sale. The Iraqi analysis can be broader, because it looks at where the work is done, how often, and how the contract prices and pays for it.
The key statute is the Income Tax Law No. 113 of 1982, together with the instructions issued by the General Commission for Taxes on contracts and on foreign companies working in Iraq. Related questions arise under the Companies Law No. 21 of 1997 and the regulation governing branches and offices of foreign companies, the Residency Law No. 76 of 2017 for visiting personnel, the Labour Law No. 37 of 2015, and the Retirement and Social Security for Workers Law No. 18 of 2023.
Looking past the warranty label
Iraqi tax practice focuses on income connected with activities carried out in Iraq and on the substance of the contractual arrangements. The equipment sale, installation obligations and after-sales services should be reviewed together. Separate invoices, or payment into a foreign account, do not necessarily change the treatment if they describe parts of a single commercial undertaking performed partly on Iraqi soil.
The relevant facts include who performs the work, how often personnel attend, whether they use a local office or workshop, and whether the manufacturer simply remedies occasional defects or runs a sustained service operation. Treaty-based exemptions and fixed day-count thresholds familiar from other jurisdictions should not be assumed; any relief must have a verified legal basis that applies to Iraq and to the particular arrangement.
Contract tax, retentions and clearance
In Iraq, the tax position of a foreign supplier frequently surfaces at the point of payment. Government and many private customers deduct or retain a portion of contract payments, and final balances, retentions or guarantees may only be released against a tax clearance from the General Commission for Taxes. A manufacturer that has not registered or filed may therefore find warranty retentions blocked long after the equipment is running.
The contract should identify who handles registrations, submissions and supporting documents, and what evidence is needed to release retained sums. A promise that the customer will take care of taxes needs more detail than a general cost allocation. The agreement should also distinguish a tax ultimately borne by the supplier from an amount temporarily withheld, require evidence that withheld sums were paid to the authority, and define the scope of any gross-up. A private agreement cannot bind the tax authority or override its assessment.
Registration and immigration are separate questions
Corporate registration, tax treatment and permission for personnel to work are linked but distinct. A tax filing does not authorise unregistered business activity, and a visa does not decide whether income is taxable. A manufacturer whose support grows into a continuing presence may need a registered branch or local entity, while its visiting engineers need the correct residence and work status under the Residency Law.
A factual review should record warranty visits, commissioning, paid maintenance and supervision days; local premises, stock and staff available to the manufacturer; who negotiates or approves chargeable work; and whether work takes place in federal Iraq or the Kurdistan Region, which has its own tax and registration authorities and procedures. A position prepared for one location should not be relied on everywhere.
Payroll and social security for visiting staff
Even where the sale itself is treated as made outside Iraq, employees working in Iraq may raise separate questions about personal income tax on salaries earned locally and social security contributions under the 2023 Social Security Law, which extended coverage to a broader range of workers. Payment of salaries from Germany does not by itself remove those questions. Short, occasional visits will usually be assessed differently from long rotations, but the analysis should be documented rather than assumed.
Records that explain the commercial substance
Each warranty visit should be supported by a service report identifying the equipment, the original sale, the reported defect and the work done. Time records and travel histories help distinguish an isolated repair from ongoing operational support. When a technician performs additional paid work during a warranty visit, that change should be documented rather than describing the entire visit as free warranty service.
Revenue and costs should be allocated consistently across contracts, invoices and accounts. Any allocation between goods and services should be commercially supportable; disguising services as goods to obtain a more favourable outcome creates risk in an audit and can undermine the credibility of the whole file.
Reassessing as support expands
A structure that suits occasional warranty attendance may no longer fit once the customer asks for permanent supervision, a resident engineer or a local spare parts store. These changes should prompt a fresh review of tax, registration and employment obligations before they occur, rather than after an audit or a blocked payment raises the question.
Planning the contract from the outset
The most effective tax planning happens before the equipment contract is signed. The agreement should state which services are performed in Iraq, how they are priced, how withholding or retentions will be handled, and what documents the supplier must provide to obtain clearance. Where support is expected to be significant, the parties can decide early whether it should be performed by a local service partner, by a registered Iraqi branch, or by visiting staff, each with different tax and compliance consequences. Leaving these choices until the first retention is withheld usually limits the options and increases cost.
Conclusion & how Etihad Law Firm can help
Warranty support is legitimate and commercially necessary, but its Iraqi tax consequences depend on facts that are easy to overlook. Providing Iraq tax advisory for German companies, Etihad Law Firm reviews contract tax exposure, retention and clearance mechanics, registration needs and payroll questions, and helps manufacturers document their actual activities so that after-sales support does not quietly become an unplanned Iraqi taxable operation.