Social Security Law no.18 of 2023

On 28 August 2023, the new Social Security Law, no. 18 of 2023 (the "Law"), was published for Federal Iraq. Some details of the proposed changes are yet to be confirmed by the Pensions and Social Security Offices (PSSO). The Law should be enforced 90 days from its issuance date in the Official Gazette, therefore the proposed changes would be effective by the end of November 2023.

In this alert, we have curated vital information on the above, not only to keep you informed but also to equip your business with the knowledge and insights needed to foster clear communication with your workforce.

Current Law vs New Law

The table below is designed to serve as a quick reference guide to help you
understand how the changes to the law may evolve and impact your financial
situation, both as an employer and as an employee. It outlines key aspects of
the current Social Security law alongside the new changes, offering a clear
comparison that can guide your decision-making process:

of the Social Security Law
legislation / practice

SSPC rates

Employer deducts 5% from an employee’s salary and contributes 12% or 25% (if in the oil and gas business).

In addition to the prevailing rates of 5%, 12% or 25% (if in oil and gas business), an additional 8% contribution is required to be made for individuals not employed by an oil and gas company. 

Responsible parties for the additional 8% contribution:

Local Iraqi employees:
The Government.

Expat employees (registered with the PSSO):

The employer.

We would not expect the introduction of the new contribution
of 8% to impact the business, as the contribution for Iraqi employees will be
made by the government, while foreign nationals are typically exempt from Iraqi
social security. Therefore, the new contribution likely would not apply to
expat employees not subject to Iraqi social security. 

Salary subject to SSPC

Basic salary and only any fixed allowances in excess of 30% of the basic salary.

salary, whether paid in cash or in kind, and all allowances
provided to an employee.

Salary base subject
to SSPC has now increased.

Fluctuation on the SSPC base

SSPC is determined based on the social security base calculated in January or the first month of employment, remaining consistent throughout the year, regardless of salary/allowance fluctuations.

The Law suggests that SSPC should be calculated based on the salary base of the first month of employment, which implies that the current approach on calculation of social security remains the same.

There are no specific instructions on the salary base that will be applied for calculation of SSPC. Discussions are ongoing with the PSSO to confirm the approach.

Minimum vs maximum salary cap

No minimum or maximum cap on salary is set, for which SSPC is remitted for.

The PSSO accepts a minimum salary equal to the Iraqi Government's annual minimum wage (currently IQD 350,000 or USD 265 for 2023) and a maximum of five times that amount (IQD 1,750,000).

the maximum amount is significantly low, discussions are ongoing with the PSSO
to understand this new maximum requirement further.

New joiners and

SSPC is not calculated for employees who leave before the month ends, but for new joiners, it applies for the entire month, regardless of their start date.

New employees – no change. 

For departing existing employees, SSPC should be calculated and remitted based on the proportion of the days worked.

are ongoing with the PSSO to confirm the approach.

Late SSPC filing
penalty – Grace Period

are incurred if SSPC is not paid within 1 month of the deadline.

A penalty is incurred on the SSPC amount due if it is not paid within 120 days (3 months) of the due date.

The grace period provided to companies to settle SSPC has increased, providing a favourable position for businesses.

Late SSPC filing penalty amount

Late payment penalty is 2%.

If companies fail to settle contributions within 120 days, a penalty of 1% per month is incurred, capped at 100% of the SSPC due.

percentage has decreased, providing a favourable position for businesses.

Treatment of expat
employees – SSPC Exemption

workers in Iraq can seek a formal exemption from social security contributions
by providing sufficient proof to the PSSO.

explicit guidance in respect of the approach to be followed for expat

the absence of specific instructions, the current practice would likely remain applicable,
until further clarity is provided by authorities. 

Deadline to remit SSPC to the PSSO

End of the month, following the month in which salaries are paid.



How can Deloitte help?

Understanding how these changes in the law impact employees and employers is crucial for maintaining compliance, optimizing ahead planning, and fostering clear communication with your workforce.

Our Iraq tax team provides support to businesses in aligning with the recently enacted Social Security Law and extends tax advisory services as needed. They are well-equipped to engage in constructive dialogues with the PSSO to facilitate greater clarity on regulatory nuances, thereby ensuring that companies remain in full compliance with the law. 

Furthermore, we handle the complete process of preparing, submitting, and processing SSPC filings on behalf of businesses in Iraq, streamlining their compliance obligations.

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