Iraq's Investment Law allows foreign investors to apply for investment licenses. Investment licences may only be awarded to “projects” which is widely defined in the Investment Law as an “economic activity”. Consequently, applications for a licence will only be granted to a particular commercial undertaking (such as a construction project), rather than to the corporate entities which are operating the project. The current minimum capital investment for a project to be granted a foreign investment licence is US$250,000. An investment licence will not be granted to projects in the oil and gas extraction and production sector, nor in the banking and insurance sectors.

Benefits for the investor

The legal benefits and privileges conferred by the grant of an investment licence are available to both Iraqi and foreign investors. The benefits are as follows:

  • repatriation of the investment capital and profits in an exchangeable currency, after deduction of Iraqi taxes and other dues;
  • the right to acquire and dispose of shares and debt securities listed on the Baghdad Stock Exchange;
  • an entitlement to lease land required for the relevant project (irrespective of its type) for a maximum period of 50 years;
  • the right to insure the project with any foreign or domestic insurance company;
  • the ability to open bank accounts in local and foreign currency, both in Iraq and overseas, in connection with the project;
  • certain protections against seizure and nationalisation of all or part of the relevant project;
  • the right to employ non-Iraqi workers in the project, where Iraqis with the requisite skills and qualifications are not available; and
  • the grant of residency visas and entry/exit visas for non-Iraqi workers engaged in the project and the right for such workers to transfer their remuneration to overseas bank accounts after deduction of Iraqi taxes and other dues.

Chapter 5 of the Investment Law states that projects which are granted an investment licence enjoy certain exemptions from taxes and fees for a 10 year period from the date on which commercial operations commence.

Imported assets used in the project are exempt from duties (including customs duties) for the first three years of the project, and imported spare parts are also exempt for an unlimited period if the value of those parts does not exceed 20% of the fixed asset value. Certain projects have additional exemptions for imports related to refurbishments made at least once every four years, including hotels, hospitals and education centres, provided the imports are used within three years of NIC approval of the imports.

Obligations on the investor

The investor in the project must make certain legal commitments to be granted an investment licence. The most commercially important of these obligations are as follows:

  • to meet the timeframes specified in the schedule of work submitted to the NIC;
  • to protect the environment and adhere to Iraqi and international quality standards, together with Iraqi laws related to security, health, public order and values of Iraqi society; and
  • to train the Iraqi workforce and to improve their efficiency, skills and capabilities.

In addition, the investor must give employment to Iraqi nationals as a priority over non- Iraqis, save where the skills or qualifications are not available in the local market. The Investment Regulations No. 2 of 2009 (which are implementing regulations of the Investment Law, issued by the Council of Ministers) also state that the NIC must apply a condition that at least 50% of the workforce involved in the project are Iraqi nationals. There is no further guidance on whether this is a strict condition, without which it will not be possible to be granted an investment licence, nor whether the condition operates across the workforce generally or at each level of employment grade.

There are also notification and reporting requirements contained in the Investment Law, including providing:

  • any information required by the NIC on the project’s budget and progress; and
  • records of the project’s duty-free imported materials and depreciation periods of those materials.

Application process

The NIC is the State authority which grants investment licences. It is also responsible for drawing up national policies for investment and monitoring implementation of its regulations and guidelines. The NIC is headquartered in Baghdad, but with various regional and provincial investment councils across Iraq. The 2009 Investment Regulations set out the NIC’s strategic objectives and details on its administrative functions. In particular, the Regulations state that “strategic projects of a federal nature” in any region of Iraq are within the remit of the NIC head office in Baghdad.

The NIC has the discretion as to whether a project is granted an investment licence under the Investment Law. To apply for an investment licence, the investor must submit various documents including:

  • an application to the NIC, including a report on financial competency from an accredited bank;
  • details of the projects already operated by the investor (inside or outside Iraq);
  • details of the proposed project and its economic feasibility; and
  • a timetable of works to complete the project.

It should be noted that other licences may be required for the investor and/or the project, depending on the sector and geographical location of the project. The NIC has a role in assisting investors to obtain these licences.