How to calculate taxes on online store sales in Iraq

The e-commerce market in Iraq is expanding, and entrepreneurs and company owners are racing to launch their commercial activities in the field of digital marketing. If you are planning to launch your e-store, it is important for you to be aware of all the laws and regulations.Tax legislation Applied to sales Iraqi electronic stores 

The topic of our article today, which sheds light on the tax system to which electronic stores are subject in Iraq, and the importance of these procedures for store owners, and addresses two important points related to how these taxes are calculated, and the possibility of reducing them by legitimate, legal means.

Are your online store sales subject to the tax system in Iraq?

To answer this question, it is enough to know that all joint-stock or limited companies were established under Iraqi laws ¹ Its main headquarters is located within Iraqi territory and is automatically subject to income tax. The same applies to Iraqi electronic stores.

Online stores are classified under these two types of companies, and given that you are the owner of an online store in Iraq, and residing within Iraqi territory, your store is subject to taxes in the following manner:

• A tax on an Iraqi person residing inside or outside Iraq, regardless of the location of receipt.
• A tax on foreign companies registered in Iraq that is only on their income within Iraqi territory. 
• So yes, online stores are subject to taxes

See also the steps to create a free online store in Iraq

How to calculate taxes on sales of a free Iraqi online store

• Since 2008 until now, the Iraqi General Tax Authority has been applying A tax on profits Various companies and electronic stores inside Iraq, with a ratio ranging between 10-14%, depending on the type of activity of these companies, distributed as follows:

• 15% Profit tax 
• 10% Sales tax 

And it counts Annual income tax³ For any Iraqi online store according to the following divisions:

• 3% for works valued at 250,000 dinars.
• 5% for works valued between 250,000 - 500,000 dinars.
• 10% for works with a value between 500,000 - 1,000,000 dinars.
• 15% for businesses exceeding one million dinars.

See also Trinavo, the best free online store design company in Iraq

Legal ways to reduce your online store taxes in Iraq

You can take advantage of some laws issued by the Iraqi Tax Authority to reduce Tax costs imposed on Your online store Which are as follows:

• Exemption² Many goods and commercial activities are subject to annual income tax and sales tax, such as agricultural products and industrial products.
• Grants to local and foreign companies registered in Iraq Tax exceptions Such as deducting the costs payable and depreciation, and liquidating the losses that can be carried for the subsequent five years.

Read also sales taxes on online store products in Iraq

The importance of calculating taxes on your online store sales

Having your store subject to the tax system does not only mean that it has the status of legitimacy, but it also entails a number of advantages, the most important of which are:

• Transparency and credibility: Calculating taxes on online store owners helps enhance the transparency of financial transactions and credibility of the business.
• Taxes also benefit you as they are spent on improving public services provided to citizens, such as improving infrastructure and services, which positively affects the performance of your online store in Iraq.
• Taxes also directly affect your store in terms of purchasing power, so it is important to look for ways to reduce taxes on the products provided to your customers, which will have a positive effect on raising the percentage of purchasing power of your store.
• Taking into account that the value of taxes must be calculated within the general costs of the store.

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• Manage your business plan, implementation and performance monitoring.
• Inventory management and order tracking. 
• Create reports and study consumer behavior.
• Integration with social media.
• Get detailed reports to measure your store's performance. 

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Article sources:

1Income tax guide

2Income tax exemptions for companies and institutions

3Mechanism for calculating income tax