Social Security & Payroll Compliance in Iraq for Foreign Companies

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Operating in Iraq requires a clear understanding of local labor and social security obligations. In recent years, Iraqi authorities have significantly strengthened enforcement of Social Security Law No. 18 of 2023, placing increased responsibility on foreign companies, contractors, and service providers operating in the country.

This article outlines the key compliance requirements, common risks, and practical considerations for foreign companies managing payroll and social security in Iraq.

 All companies operating in Iraq and employing local Iraqi staff are required to register with the Iraqi Social Security Authority and comply with monthly contribution and reporting obligations. Social security compliance is closely monitored and is often linked to other government processes, including tax assessments, license renewals, and contract approvals.

Under the current legal framework, social security obligations apply regardless of whether a company operates through a branch, subcontract, or project-based presence.

 Social security contributions are calculated as a percentage of the employee’s gross salary and are split between employer and employee contributions. In regulated sectors such as oil & gas, construction, and EPC projects, contribution rates are typically higher and subject to strict scrutiny.

Employers are responsible for:

• Registering employees correctly 
• Calculating contributions accurately
• Submitting monthly declarations 
• Paying contributions on time
   

Failure to comply may result in penalties, back payments, and operational restrictions.

 Social security obligations primarily apply to Iraqi national employees. However, the classification of employees as local or expatriate must be accurate and defensible.

Authorities increasingly review:

• Employment contracts 
• Payroll structures 
• Residency and work permit status 
• Duration of presence in Iraq
   

Misclassification or inconsistent documentation may expose companies to reassessment risks.

 One of the most important developments under the current law is the expanded enforcement scope set out in Article 14 (B) and (C). These provisions allow authorities to:

• Extend social security obligations beyond direct employment relationships 
• Review subcontractors, related entities, and project arrangements 
• Assess compliance based on actual economic activity rather than contractual form
   

This has increased exposure for foreign companies operating through subcontracting or project-based models.

 Foreign companies frequently face issues due to:

• Late or incomplete registration with Social Security 
• Incorrect salary bases used for contribution calculations 
• Inconsistent payroll records and employee documentation 
• Lack of alignment between payroll, tax filings, and labor contracts 
• Assumptions that enforcement will not be applied retroactively
   

Recent enforcement trends show that authorities are increasingly willing to review historical periods.

 To manage social security risk effectively, companies should:

• Establish proper payroll and social security registration from day one 
• Maintain accurate and consistent employee documentation 
• Align payroll records with tax filings and labor contracts 
• Conduct periodic compliance reviews 
• Address issues proactively before inspections or audits
   

A structured, compliance-driven approach significantly reduces operational and financial exposure.

 ASHUR International Consultants supports foreign companies operating in Iraq with:

• Social security registration and compliance management 
• Payroll structuring and monthly processing 
• Regulatory advisory under Iraqi labor and social security law 
• Audit support and authority engagement 
• Risk assessments and corrective action planning
   

Our approach is practical, compliant, and aligned with current enforcement practices.

 Social security compliance in Iraq is no longer a secondary administrative matter. For foreign companies, it is a critical regulatory obligation that directly affects operational continuity and financial exposure.

Understanding the law, staying compliant, and addressing issues early are essential to operating successfully in Iraq.