The legal framework for setting up a factory or industrial project in Iraq
Anyone planning a bottling plant, a building-materials factory or a production line for any product finds two statutes in front of them, each with its own authority, conditions and benefits. This page sketches the overall framework, helps with choosing the route, and points to the more detailed pages. The Law Office of Ali Barakat, in Baghdad, al-Yarmouk, works on industrial project files.
What counts as an industrial project?
Article 5 of the Industrial Investment Law for the Private and Mixed Sectors No. 20 of 1998 describes it as a project whose main aim is to make a product, whether a final consumer good, a capital good or an intermediate good, software included, by changing form or composition, with the work driven by mechanical power. A hand workshop falls outside; a software house falls inside. The law applies to industrial projects in the private and mixed sectors (article 1).
Route one: a formation licence from the General Directorate of Industrial Development
The General Directorate of Industrial Development has legal personality and financial and administrative independence (article 3). It grants a formation licence when the project meets the published criteria, and has at most fifteen days from the application to decide. A refused applicant may object to the appeals body within thirty days of notification (article 6). That body is chaired by the Deputy Minister of Industry and Minerals and includes representatives of the ministries of justice, finance and trade and the head of the Iraqi Federation of Industries (article 14). It also hears objections to any other decision taken under the law, within thirty days from the day after notification (article 15).
Who may apply? Article 7 requires a natural person to be an Iraqi aged eighteen or over, unless the project was inherited, and requires a legal person to be Iraqi too. A foreign company cannot obtain this licence.
What does it bring?
- Exemptions. Article 8, as amended, exempts a licensed project from all taxes and charges for a fixed period, except income tax and production charges on cigarettes, beer and spirits. It adds a partial income-tax exemption on profits at levels that vary with the owner's legal form and the project's location, higher in less developed towns and rural areas. Article 11 extends the benefits to expansion and upgrade machinery and its land and buildings for five years from the start of actual production.
- Land. Article 9 requires State bodies to allocate the State land the project calls for within city master plans, connect services, and lease it to the owner at the going rental value for as long as the licence lasts. An outright owner of agricultural land, or the holder of a right of disposal over it, may build an industrial project there if environmental conditions are met. Subletting allocated land or using it for another purpose leads to its recovery and to a charge of double the going rent for that period.
- Imports. Article 17 frees the project's machinery, equipment, raw materials and operating supplies from the import-licence requirement.
What must the owner do? Article 12 requires orderly records of output, capacity, machinery, materials and staff, submitted to the Directorate in the first quarter of each year. Article 16 requires the Directorate to be told of any major change in the project's nature or capacity, of splitting or merging it, of moving it to another governorate, of a halt in production for more than three months, or of selling it in whole or part.
Route two: an investment licence
Investment Law No. 13 of 2006, as amended, is open to Iraqi and foreign investors alike. Its article 10 allows an Iraqi investor to be given ownership of State and public-sector land allocated to industrial projects, and allows an Iraqi or foreign investor to lease land or take it under musataha for up to fifty years, renewable, and to build industrial projects on agricultural land inside or outside the master plan. The same article preserves the plot allocated to an investor under the 1998 law.
How an investment licence is applied for and who grants it is covered in obtaining an investment licence; choosing the right commission in which investment commission to approach; and industrial land in Basrah on its own page.
Choosing between them
- A foreign investor, or a partnership with a foreign party: the Investment Law, since the 1998 law is reserved to Iraqis.
- An Iraqi manufacturer with a mid-sized project on land it owns or rents: the industrial development licence fits, with a fifteen-day decision deadline.
- A project built around owning State land: the Investment Law is the one that allows ownership for an Iraqi investor.
Either way, the factory is usually owned by a company registered under the Companies Law; see Law No. 17 of 2019 and company formation.
Legal basis and sources
- Industrial Investment Law for the Private and Mixed Sectors No. 20 of 1998, as amended, articles 1, 3, 5 to 9, 11, 12 and 14 to 17 (Official Gazette No. 3733 of 3/8/1998)
- Investment Law No. 13 of 2006, as amended, article 10 (Official Gazette No. 4031 of 17/1/2007)
Frequently asked questions
Can a foreigner get a formation licence from the General Directorate of Industrial Development?
No. Article 7 requires Iraqi nationality for both natural and legal persons.
How long does the Directorate have to decide?
Fifteen days at most from the application, under article 6.
Production stopped for four months because of power cuts. Do I have to do anything?
Yes. Article 16 requires you to inform the Directorate when the project stops for more than three months.
Related topics and articles
- 01How is an investment licence applied for, and who grants it?Applying for an investment licence under Law 13/2006 as amended: application, one-stop window, 45-day decision, sectoral reply in 15 days, grievance.
- 02Industrial investment land in Basrah under the Investment LawHow Law 13/2006 as amended treats title or musataha of industrial land for a project in Basrah, without listing unconfirmed plots.
- 03When to approach the Baghdad Investment Commission, and when the National Investment Commission?When to apply to the Baghdad or National Investment Commission under Law 13/2006 as amended: strategic and federal projects, and Cabinet approval.
- 04What did Law No. 17 of 2019 change in forming an Iraqi company?The first amendment to Companies Law No. 21 of 1997, Law No. 17 of 2019: incorporation documents, minimum capital, the Iraqi share in a company with a foreign partner, holding companies, liquidation by the registrar, and electronic dealings.
- 05Free Zones Authority Law No. 3 of 1998What Free Zones Authority Law No. 3 of 1998 provides: link to the Minister of Finance, the board, and deciding investment applications inside a free zone.