Do I Need a Local Entity to Hire in Iraq?

In Iraq, a "local entity" typically refers to a recognized business presence, such as a subsidiary or branch office, that can legally employ individuals. This setup allows your company to comply with local labor laws, manage payroll, and fulfill tax obligations. Without a local entity, you can't effectively register as an employer, handle mandatory social security contributions, or issue compliant employment contracts.

For companies looking to hire in Iraq without the complexities of establishing a local entity, an Employer of Record (EOR) can be a practical solution. An EOR acts as the legal employer, allowing you to hire employees while ensuring compliance with local regulations.

What is Required to Employ Someone in Iraq?

• Local employing entity required to directly employ? Yes (you must register with the Iraqi Companies Registry)
• Payroll registration required? Yes (mandatory registration with the General Commission for Taxes)
• Withholding/tax remittance required? Yes (employers must withhold income tax from salaries)
• Social contributions required? Yes (employers are responsible for social security contributions)
• Local employment agreement required? Yes (written contracts are mandatory under Iraqi labor law)
• Mandatory benefits to budget? Yes (includes annual leave, sick leave, and social security)
• Works council/collective agreements considerations? Usually (certain sectors may have collective agreements)

Best Options If You're Hiring in Iraq

Can I Hire Contractors Instead of Setting Up an Entity?

Yes, but you should proceed with caution. Hiring contractors in Iraq can be a flexible option, but it comes with risks of misclassification.

While you don't need a local entity to hire contractors, Iraqi labor laws are protective of workers. If a contractor is deemed to be functioning as an employee, you could face legal challenges. Here are some points to consider:

• Ensure the contractor has independence in their work.
• Avoid controlling their hours or methods of work.
• Be cautious if the contractor's role is central to your operations.

How Long Does Entity Setup Take And What Does It Cost?

Typical entity setup timeline: It often takes 4–8 weeks to set up an entity in Iraq, depending on the type of business and required registrations.

Ongoing cost categories (entity route):

• Accounting, bookkeeping, and statutory filings: Estimated 1,000,000–2,500,000 IQD per month ($680–$1,700)
• Payroll provider: Estimated 300,000–600,000 IQD per employee per month ($200–$400)
• Employer registrations and recurring compliance: Estimated 500,000–1,000,000 IQD per year ($340–$680)
• Corporate tax filings and annual reporting: Estimated 1,000,000–2,000,000 IQD per year ($680–$1,360)

EOR cost components (no-entity route):

• A per-employee EOR service fee (from $399 p/month with Playroll)
• Pass-through statutory costs (e.g., employer social security contributions)
• Any optional benefits you choose to provide beyond statutory minimums

How an Employer of Record Can Help You Hire in Iraq

Hiring in Iraq can be complex, but it doesn’t have to require setting up a local entity or taking on long-term overhead. With an Employer of Record like Playroll, you get a simple, predictable way to hire compliantly while keeping costs transparent and under control. We help you:

• Hire employees in Iraq quickly without establishing a local entity, eliminating incorporation costs, ongoing administration, and exit complexity.
• Stay fully compliant with local payroll, tax, and employment regulations with Playroll’s managed payroll services.
• Control your total employment costs, with a clear monthly EOR service fee (from $399 per employee).
• Focus on growing your business, while we manage contracts, payroll, compliance, and labor law obligations end to end.
• Scale up or exit the market easily, without the financial or legal burden of closing a local entity.