Tag Archive | "taxation"

Capital Gain Tax on IOCs in Iraq


By Ahmed Mousa Jiyad.

Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Many countries impose capital gain tax on individuals, companies and corporations when a profit realized from the sale of assets. National and state legislation often has a large array of fiscal obligations and regulations regarding capital gains, however, these fiscal obligations may vary from jurisdiction to jurisdiction.

In other words capital gain tax is a normal component of taxation systems on both national and international levels, and thus has a significant contribution to the state revenues and fiscal policies. Iraq is no different and should consider doing the same.

In Iraq the signed service contracts provide the IOCs with a possibility to assign (sell) wholly or partly their participating interests as specified by a common clause in the signed contract, “any Company shall have the right to assign any of its Participating Interest, shares, rights, privileges, duties or obligations under this Contract to an Affiliate.” Such right for assignment is subject to and governed by a set of provisions outlined in the signed contract.

Due to the long duration of the contracts (the Term) that extend beyond 20 years, and due to the usual practice of Merger and Acquisition (M&A) in the international petroleum business it is highly probable that IOCs might “farm in” and “farm out” by acquiring, selling or exchange participation interests in the related petroleum field.

The transfer of participation interests between IOCs involves financial transactions or transfer of “asset” ownership between the concerned parties: the buyer and the seller.  This assignment deal may (though highly likely) results in significant realized gain (profit) for the selling party compared to the actual cost (investment) it made as a consequence to its participation in the related upstream petroleum development project.

 This realized gain is known to be “capital gain” and in most countries it is taxable. The “Capital Gain Tax” is imposed on individuals, companies and corporations and in many countries it is imposed in addition to other direct taxes such as “Property/Wealth Tax” and “Income Tax” among others. The percentage of Capital Gain Tax differs according to the taxation systems and fiscal policies across the world. 

Posted in Ahmed Mousa JiyadComments (3)

Faw Port Companies Exempted from Taxes


By Omar al-Shaher for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Iraq has decided to exempt foreign companies involved in the Faw Port project from customs duties and taxes. This decision was an attempt to accelerate the completion of the stalled project, through which Iraq has sought to confront Kuwait’s maritime expansion by building a similar port nearby.

A government statement issued on Aug. 27 said, “In accordance with the laws in force, foreign companies shall be exempt from taxes and duties for the purpose of executing the Faw Port project, given that it is a developmental project.”

In April 2012, Iraq laid the foundation stone for the Faw Port project in the al-Faw peninsula in southern Basra. The project has an estimated cost of 4.6 billion euros ($6.1 billion), and the port’s annual handling capacity is predicted to be around 99 million tons. This would make it one of the largest ports in the Arabian Gulf region. Yet construction on the project has stalled and little progress has been made.

The Greek construction company Archirodon was awarded the contract to build the port’s eastern breakwater. Yet the companies that will win contracts to construct the port’s main structure and western breakwater have yet to be revealed. There have been reports that four companies submitted distinguished proposals last month, and one of them will be selected within days.

Speaking to Al-Monitor, Ihsan al-Awadi, a member of the parliamentary Service Committee, said, “The completion of the Faw Port has been stalled due to political conflicts and security conditions.” He explained, “Lately, work on the project has changed.”

Awadi said, “The required designs were completed by companies contracted by Iraq in 2009 to build the port, and they were handed over to the Iraqi administration. Construction on the initial parts of the project, which consist of the eastern breakwater, has started.” He added, “A canal must be built in the sea with a width of 12-13 meters and a depth of 200 meters,” noting that “As soon as the drilling rigs … arrive, work will immediately start in order to build the canal.”

Posted in Construction & Engineering, TransportationComments (5)

Stock Exchange Boss Calls for Tax Breaks


By John Lee.

The Chairman of the Board of Governors of the Iraqi Stock Exchange has reportedly called for a five-year tax holiday for companies listing on the Iraqi bourse, to encourage companies to float their shares.

Laith al-Tamimi also called for the Registrar of Companies at the Ministry of Trade to expedite the incorporation by companies wishing to list on the stock market.

Regarding the requirement for mobile phone operators to be listed on the exchange, he said that Asiacell’s application had “reached an advanced stage”.

(Source: Al Sabaah)

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Customs Duty Remains at 5%


Customs duty increases have been postponed by the Iraqi Finance Ministry due to the high cost of goods, according to Aknews.

Duty was due to go up from 5% on all goods – a rate said to have been set low to encourage trade with Iraq – to as much as 30%. To put that into context, the US, which has one of the lowest rates in the world, has an average customs duty of 3%.

A parliamentary committee on economy and investment has criticised the decision, saying this will have a negative effect on the Iraqi economy.

The Investment Committee’s Nahida al-Daini told AKnews that the announcement was a surprise and would have undesirable consequences.

“Not applying the customs law means allowing poor quality goods enter the Iraqi market without any controls, as well as damaging the businesses of local producers due to competition from the imported goods,” said Daini.

 

 

(Source: Aknews)

Posted in Industry & TradeComments (1)

Central Bank: Educate Public on Paying Taxes


The Central Bank of Iraq (CBI) stated on Thursday that the assumed value of taxs in the 2011 budget is amounted to 2.7 trillion Iraqi dinars, that is 3% of the state budget.

Muzher Mouhammed Saleh, the adviser of the ICB, told AKnews that the tax file is semi-disabled in Iraq due to the poor performance of tax planning services, and because of citizens avoiding paying tax.

He said that if the Iraqi Finance Ministry wanted to activate the tax for the Iraqi people, then it should carry out educational and awareness operations about the importance of taxes in the re-construction of the country as an important financial resource for the government to finance its economic needs.

The tax sector in Iraq was semi-disabled in recent years because of the economic and security situations in the country that led to limiting the tax system to the sector of employees and traders only.

(Source: AKnews)

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