By Deloitte Iraq —
Law No 4 of 2006, Law of Investment in the Kurdistan Region (the “Investment Law”) provides for tax incentives and exemptions for foreign investors in the Kurdistan Region who are involved in certain qualifying projects. The Investment Law sets out specific projects which are considered to qualify for an investment license. In general, projects involving vital sectors, such as electricity, agriculture, health and environment, infrastructure and education, etc. qualify as eligible projects.
1. Key provisions of the Investment Law
According to the Investment Law, projects which qualify for an investment license (and which have obtained the requisite approvals) should benefit from:
- Total ownership of project land allowed, except investors may not own land containing oil, gas or mineral resources.
- Full repartition of project investment and profits.
- A foreign investor shall be entitled to send his capital back abroad upon winding up or disposal of the Project without prejudice to applicable laws and regulations regarding taxes and customs.
- Exemption from the following taxes:
- All non-custom taxes and duties for a period of ten years from the date production commences or the date services are offered.
- Custom duties on imports of spare parts up to 15% of project cost.
- Custom duties, taxes, import licenses on imported vehicles, equipment, instruments, etc, provided they are imported within two years of approval by the Investment Commission Chairman.
- Custom duties and taxes on imports of linens, carpets, furniture and other renovation items once every three years for hotels, hospitals, universities, schools, and tourist institutions.
- Custom duties for five years on imports of raw materials for production.
- All non-custom taxes and duties for a period of ten years from the date production commences or the date services are offered.
- Custom duties on imports of spare parts up to 15% of project cost.
- Custom duties, taxes, import licenses on imported vehicles, equipment, instruments, etc, provided they are imported within two years of approval by the Investment Commission Chairman.
- Custom duties and taxes on imports of linens, carpets, furniture and other renovation items once every three years for hotels, hospitals, universities, schools, and tourist institutions.
- Custom duties for five years on imports of raw materials for production.
- Employment of foreign workers provided no capable Iraqis are available.
- Foreign workers may repatriate earnings.
- Equal treatment of foreign investor and capital as national investor and capital.
- An investor may transfer his investment totally or partially to another foreign or to a national investor, or may assign the project to his partner with the approval of the board.
- Services provided by the Kurdistan Regional Government to the boundary of the project, such as water, electricity, sewage, public roads, telecommunications, etc.
- Foreign or domestic insurance and additional incentives for projects in “less developed areas” and “joint projects” between Kurds and foreigners.
- Protection under the Supremacy of Kurdistan Law (Art. 115 of Iraq’s Constitution) whenever there is any contradiction between this law and “other relevant laws,” the provision of this law shall be applicable.
- An investor’s initiative and technical know- how are protected under this law and any person, by virtue of his post, who discloses any information, will be punished.
Law No 4 of 2006, Law of Investment in the Kurdistan Region (the “Investment Law”) provides for tax incentives and exemptions for foreign investors in the Kurdistan Region of Iraq who are involved in certain qualifying projects.
2. Eligible projects
The provisions of this Law shall apply to the projects approved by the board in one of the following sectors:
- Manufacturing industries, electric power and related services.
- Agriculture, whether crop growing farms or animal farms, forestry and related services.
- Hotels, tourist and recreational projects, fun-fairs, and amusement parks.
- Health and environment.
- Science and technology research, and information technology.
- Modern communication and transport.
- Banks, insurance companies, and other financial institutions.
- Infrastructure projects, including construction, reconstruction and housing projects, roads and bridges, railways, airports, irrigation and dams.
- Free zones, modern commercial markets, and relevant advisory services.
- Education at all levels, within the framework of the educational policy of the Region.
- Any project in any other industry which the council agrees is covered by the provisions of this law.
Full repartition of project investment and profits is allowed and upon liquidation or disposal of the project, a foreign investor shall be entitled to send his capital abroad.
3. Licensing procedures
In order to avail of the provisions of the Investment Law, the Kurdistan entity is required to obtain an investment license in respect of the specific project. The following are necessary procedures when submitting a request:
- The entity is required to submit an application to the Board of Investment accompanied with documentation that would assist in obtaining the exemption e.g. description of the project, copy of the contract (if available) and a summary of how the project would contribute to the development of the Region.
- The board will have to decide on the application within 30 days from the date of fulfillment of the technical, legal, and economic conditions and requirements.
- The board shall then consult with competent authorities on the advantages of issuing the license and such authorities will give their viewpoint for the acceptance, rejection or amendment request within 30 days from the date of the board’s referral of the application to them.
- If the application is rejected, the applicant may raise an objection to the president of the council within 15 days from the date of the rejection notice.
- The president of the council will have to respond within 30 days and his decision shall be conclusive.
