Wage Withholding Tax Re-introduction May 2004 Speaker : Mr Ihsan Shamran Dir. of Corporations Dept

Wage Withholding TaxWage Withholding Tax

Re-introductionRe-introduction

May 2004May 2004

Speaker : Mr Ihsan Shamran Speaker : Mr Ihsan Shamran

Dir. of Corporations Dept.Dir. of Corporations Dept.

• All income taxes (personal and corporate) were suspended from January 1st of year 2003 to April 30th of year 2004.

• (Reference : Policy Orders issued by the CPA #37, #45 and #84)

EmployersEmployers

• Private sector

• Mixed sector

• State-owned enterprises

Employee definitionEmployee definition

• Any person who has performed or is performing work for a wage and works under the administration and direction of the party employing him.

• Reference : Instructions No. 3 of 1983

Income subject to Income subject to withholding taxwithholding tax

• Salaries, wages

• Allowances (subject to 30% rule for specific allowances)

• Bonuses

Principal exemptionsPrincipal exemptions

• Allowances for– Clothing– food– lodging– transportation

Not taxable if < 30% of the total wage of the employee

• Other Allowances fully taxable

Principal Exemptions (con’t)Principal Exemptions (con’t)

• Are exempted from tax :

All income earned by foreign employees of foreign contractors and subcontractors of the CPA, Coalition Forces, forces of countries acting in coordination with the Coalition Forces’ governments that are providing assistance to Iraq.


• Are exempted from tax :

All income earned by foreign employees of foreign contractors and subcontractors of foreign governments, international organizations and non governmental organizations registered pursuant to CPA Order #45, that are providing assistance to Iraq.


Are exempted from tax :

• Salaries and allowances paid by United Nations from its own budget to its officials and employees.

Preparation of Reports, Forms Preparation of Reports, Forms and Schedulesand Schedules

• A: Employees Report• B: Forms Dhad.D\4A• C: Income Tax Deductions Schedule

Must be filed and submitted to the Direct Deduction Section in the main office of the General Commission for Taxes (Baghdad) or to the branches of the General Commission for Taxes (hereinafter “GTC”).

All forms, reports, schedules and correspondence sent to the GTC should be in the Arabic Language.

Preparation of Reports, Forms and Preparation of Reports, Forms and Schedules (con’t)Schedules (con’t)

A: Employees Report

• List of name and job title of all employees• Salary or monthly wage for each of the

employees• Hiring date• Serially numbered starting with #1Limit date for submission : July 1, 2004

Report should be prepared for new hires, every three months.


• A: Employees Report (con’t)

For confidentiality and security reasons :

Foreign companies may remit the employees report at the same time than Forms Dhad.D/4A (no later than March 31st 2005) to the head officer of Direct Deduction Section in Baghdad.


B: Form Dhad.D\4APage 1 :• 1) To be distributed among the employees.• 2) Employees complete page 1 and sign.• 3) Remit quickly to the employer• 4) Employer verify employees’ information

If employer does not receive completed Form Dhad.D\4A from the employee, employee shall be entitled to only bachelor’s allowance for the year.

: رقم االستمارة وزارة المالية 200 : السنة المالية الهيئة العامة للضرائب

قسم االستقطاع المباشر

( الصفحةاألولى)*الخاضعين لإلستقطاع المباشر المختصة بالمكلفين ( أ 4 / د . ض) استمارة الكامل . 1 :الجنسية / / :تأريخالوالدة : للمستخدم األسم

االحوالالمدنية هوية رقم : :محلالسكنى

الزوجية (أ) . 2 الزواج (ب) : الحالة :تأريخ الوظيفة (أ) . 3 :عنوان

العمل (ب) رب :أسممحلالسكني (ج) :

التجاري (د) التسجيل :رقم التالية . 4 المعلومات الجدولادناه بين بشأنأوالدك في العمروالذين (واالناث الذكور) من عشرة الثامنة دون هم الذين

الع أو الثانوية الدراسة في يزالون وال عشرة الثامنة فيهاومقدار لياتجاوزوا هم التي الكلية أو المدرسة أسم ذكر معالمدنية مد األحوال بطاقة حسب أعمارهم كذلك مبينا : ** خوالتهم

مقدار دخل األوالد المالحظات بالدنانير / السنوي

تأريخ الوالدة اليوم الشهر السنة

االسم الكامل لألوالد ( الذكور واإلناث )

1 . 2 . 3 . 4 . 5 . 6 .

:االتوقيع

الكا المكلف :مل ااسم :االتاريخ

الدائرة :المحاسب :رئيس

ـــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــــ

ت يجبأ * اإلستمارة مالء ن بداية هذه المالية في .السنة

لديك بنت مكلف بإعالتها دون أن يكون لها زوج وليس لها دخل مستقل يزيد اذا كانت **

.ذلك في حقل األوالد دينار ، دوbن ( 200000 ) على

: مالحظاتا . -أ األشهر خالل المباشر األستقطاع قسم إلى اإلستمارة هذه تصل أن المالية يجب للسنة التالية السنة من األولى .لثالثةالمواد .ب أحكام إلى أنظاركم الدخلرقم 59، 58، 57، 56نلفت ضريبة قانون من .المعدل 1982لسنة 113

بالفقرات .جـ كاملة المعلومات تدوين عدم حالة فقرة ( 4 , 2 )في كل من السماح يحجبنيسان في 2004 /أعدت


B: Form Dhad.D\4A

Page 2

• To be completed by employer and submitted to the GTC before March 31st of the following year. (Foreign companies may submit to the head officer of Direct Deduction Section in Baghdad)

الضريبة احتساب صفحةقبلالمحاسب من تملئ

الثانية ) (الصفحة

دينار

(دينار)المدخوالت .أ من للمدة الشهرية األجور أو االسمية 200 / / لغاية 200 / / الرواتب

المجاني مخص السكن بدل أو السكن صات

المجانية الطعام وجبات بدل أو الطعام مخصصات

أخرى نوعها )مخصصات بيان (مع

المدخوالت مجموع

(دينار)التنزيالت .ب

لمدة القانوني k ( )السماح شهرا

التقاعد إستقطاعات

الحياة على التأمين أقساط

األخرى أقس التأمين اط

أخرى نوعها )سماحات بيان . (مع

التنزيالت مجموع

الخاضع ب )للضريبة الدخل ناقص أ الفقرة (مجموع

رئيسالدائرة المحاسب توقيع توقيع


C: Income Tax Deductions Schedule

• To be completed by the employer at the end of every year in duplicate showing all the income, allowances and deductions, which are brought from page #2 of Form Dhad.D\4A

• To be completed by employer and submitted to the GTC before March 31st of the following year.

وزارة المالية المستخدم الهيئة العامة للضرائب الدال )أسم _______________: (بكسر

التسجيلالتجاري قسم االستقطاع المباشر رقم :___________________

المالية للسنة الدخل ضريبة استقطاعات 200جدول

12 11 10 9 8 7 6 5 4 3 2 1 فترةالعمل

الى من

الضريبة الزائدة

الضريبة المتبقية

الضريبة المستوفاة

الضريبة المتحققة

المدخوالت الخاضعة لضريبة

الدخل(5- 6)

و السماح التنزيالت

مجموع ينالحقل

(4و3 )

مخصصات السكن

الطعام و

رقم المدخوالت و المستخدم أسمالمدنية االحوال هوية

رقم االستمارة

المجموع

وزارة المالية الهيئة العامة للضرائب

قسم االستقطاع المباشر

200 / / (بكسر الدال ) االستقطاعات الضريبية من قبل المستخدم ________________________:الوزارة

__________________:المديرية العامة _________________________:إذا كان قطاع خاص (بكسر الدال)أسم المستخدم

________________________: رقم التسجيل التجاري

أقساط الضريبة

دينار رقم القسط رقم الوصل تأريخه

المجموع

: نؤيد صحة المعلومات المدونة في الجدول

..………………… توقيع رئيس الدائرة ………………….……… توقيع المحاسب

.…………………………… أسمه .………………………………… أسمه / / التأريخ / / التأريخ

: مالحظة هامةالعامةللضرائب الهيئة عن الصادرة التعليمات وفق وإرساله الجدول هذا تنظيم يجب

Method of deducting income tax Method of deducting income tax and its payment datesand its payment dates

• A special register should be kept wherein shall be entered salaries, allowances and wages of their employees who are subject to income tax.

• Tax withheld shall be remitted to either the Direct Deduction Section at the GTC or the unit of Wage Withholding Assessment at the branches of the GTC.

Method of deducting income tax Method of deducting income tax and its payment dates (con’t)and its payment dates (con’t)

• Tax withheld may be paid in either cash or by certified checks, together with a list showing the names of the employees from whose income the tax was deducted, and the amount deducted from each of them, and the related period of the year.

• Address in Baghdad: Jamal Abdlnasar Street, second building after Iraqi Museum.

وزارةالمالية للضرائب العامة الدال )أسمالمستخدم الهيئة (بكسر

:_____________ المباشر االستقطاع التسجيلالتجاري قسم رقم :___________________

الدخل ضريبة الثالثاشهر استقطاعات لفترة الرواتب من بالدينار المبالغ

مجموع استقطاع

أشهر3

الشهرية الشهري االستقطاعات هوية الراتب رقم االحوال

المستخدم ت اسم

االستقطاعات مجموع

المحاسب :توقيع

المحاسب :أسمالى منه :نسخة

المديرية ) اسم القسمالمالي \ (يذكر العامة – الهيئة قي المباشر االستقطاع قسم مع السنة نهاية المطابقة و التدقيق لغرض .للضرائب

Method of deducting income tax Method of deducting income tax and its payment dates (con’t)and its payment dates (con’t)

• About the form shown on the previous slide, for confidentiality and security reasons, foreign companies may do the following:

Keep the names of employees secret and use only the ID nationality number or the employee ID number.

The withheld tax is to be paid in The withheld tax is to be paid in 4 installments as follows :4 installments as follows :

• The amounts due for January, February and March = 1st day of April

• The amounts due for April, May and June = 1st day of July

• The amounts due for July, August and September = 1st day of October

• The amounts due for October, November and December = 2nd day of January.

Penalties and InterestsPenalties and Interests

• If the tax is not settled as indicated before on the fixed dates, an additional percentage of 5% shall be imposed after the lapse of 21 days from the fixed date.

• An additional percentage of 10% shall be imposed if the amount is not paid within 21 days after the expiration of the first period.

• Interest to be charged according to Resolution #307 of 1984.

Penalties (con’t)Penalties (con’t)

• Other penalties may apply when the employer fails to carry out the duties imposed on him under the Income Tax Law #113 or the regulations issued there under, or refusing or delaying to submit to the Financial Authority any statement or information he was obliged or called upon to submit under the provisions of the Income Tax Law.

Legal allowancesLegal allowances

• The income subject to income tax by direct deduction is reduced by the legal allowances granted to the resident individuals

• Bachelor person ID 208,333 / month• Married employee ID 375,000 / month• Widow or divorcee ID 266,667 / month• State-Owned Enterprise

employee (for 2004 only) ID 441,667 / month

Legal allowances (con’t)Legal allowances (con’t)

• Additional allowances :For every child ID 16,667 / month

If > 63 years old ID 25,000 / month No additional allowances for State-Owned

Enterprises employees (ID 441,667 / month even if they have more than 4 children)

So, no tax to withhold on income of a single employee working in the private sector if he earns less than ID 208,333 for a particular month.

Tax RatesTax Rates

Rate Annual income(after allowances)

3% Up to ID 250,000 5% Over ID 250,000 and up

to ID 500,00010% Over ID 500,000 and up

to 1,000,00015% Over ID 1,000,000

Tax rates (con’t)Tax rates (con’t)

• The amount delineating the tax-bracket amounts above are divided by 12 months in order to determine the amount of tax to withhold for every month.

Tax rates (con’t)Tax rates (con’t)

Rate Monthly income

(after montly allowances)

3% Up to ID 20,833

5% Over ID 20,833 and up

to ID 41,667

10% Over ID 41,667 and up

to ID 83,333

15% Over ID 83,333

How to calculate the monthly How to calculate the monthly tax amount to withhold :tax amount to withhold :

• Use of a work chart provided in the brochure

• Use of withholding tables available at the office of the GTC

Use of the work chart (brochure)Use of the work chart (brochure)

• First step :– Calculate the monthly salary, monthly wages

and monthly taxable allowances– Minus monthly deductions provided in Article

8 of the Income Tax Law #113 paid by the employee such as :

Pension and contributions as determined by Pension and

Social Security Laws (Private sector : 5% on gross wage)


• Second step: • Subtract from the amount of the last slide the

monthly legal allowance to which the employee is entitled:

Bachelor person ID 208,333 / month

Married employee ID 375,000 / month

Widow or divorcee ID 266,667 / month

State-Owned Enterprise

employee (for 2004 only) ID 441,667 / month


Second step (con’t)

Additional monthly legal allowances :

For every child ID 16,667 / month

If > 63 years old ID 25,000 / month


• If after the deduction of the monthly legal allowance which the employee is entitled, there is still a positive amount, that means there is income tax to withhold.

• This monthly income tax to withhold can be determined by using the workchart provided in the last page of the brochure.

(المبالغ بالدنانير ) (1) جدول رقم

(A)

أ(B) ب (c) ج ( (D د

(1) 2 3 0 20833 41667 83333

(2) 4 5 3% 5% 10% 15%

(3) 6 7 625 1666 5833

(4) 8 التعليمات :الدخل (1) الحظ

الجزء (2) منالجزء 3اطرح 2= الجزء (3) فيالجزء 4ضرب 5=

الجزء (4) معالجزء 6اجمع 7

Use of Withholding tablesUse of Withholding tables

• A second method is provided for the employers in order to determine the monthly income tax to withhold for each of their employees:

• The employer can use Tax Tables called:– Tax Withholding Table – Single and Married– Tax Withholding Table – Widow or Divorcee

Use of Withholding tables (con’t)Use of Withholding tables (con’t)

• First step– Calculate the monthly salary, monthly wages

and monthly taxable allowances– Minus monthly deductions provided in Article

8 of the Income Tax Law #113 paid by the employee such as :

Pension and contributions as determined by Pension and

Social Security Laws

• Example = monthly salary of ID 703,000


• First step (con’t)Example : Single employee

Monthly salary = ID 703,000– Social security and

pension contributions

(private sector : 5%) = ID 35,150

Taxable income before

Legal Allowance = ID 667,850


• Second step:

Depending on the particular status of the employee, select one of the two tax tables which is applicable to the employee.

Determine the code allowance which the employee is entitled for the month

• For example, single employee = O


• Third step:

Under the column “Taxable income per month (before any applicable legal allowance)” of the selected Tax Table, you determine the taxable income per month bracket attributable to the employee.

For this example ID 660,000 to ID 669,999


• Fourth step:

The number in ID that corresponds in the applicable code allowance column is the amount of monthly income tax to withhold.

For this example : ID 61,833

For More InformationFor More Information

• See the “User’s guide for the wage withholding tax” and all other related documents at :

• http://www.iraqcoalition.org/arabic/taxes/

• http://www.iraqcoalition.org/taxes/

Documents

Wage Withholding Tax Re-introduction May 2004 Speaker : Mr Ihsan Shamran Dir. of Corporations Dept