US Company Formation from Iraq (2026): US LLC or C-Corp for Iraqi and Kurdistan Businesses, Dollar Access, Banking Scrutiny and Iraqi Tax

For Iraqi businesses, the US dollar is the working currency. Imports are priced in dollars, many contracts are paid in dollars, and the dinar's value depends on access to dollars. In the last few years that access has become harder. The US Treasury and the Federal Reserve Bank of New York have cut dozens of Iraqi banks off from dollar transactions over concerns about money laundering and sanctions evasion. The Central Bank of Iraq has been working to bring compliant banks back.

For an Iraqi trader, IT company or consultant with foreign customers or suppliers, this is a reason to look at a US company. A US LLC or corporation with its own US business account can receive payments from clients, pay US suppliers and logistics companies, and hold dollars in the US banking system. It can be formed from Baghdad, Basra or Erbil without travelling. This guide explains what to expect, especially from US banks, and how US LLC formation and US C-Corp formation compare for Iraqi owners.

In short: an Iraqi citizen or Iraqi company can own 100% of a US LLC or C-Corporation, formed remotely. Iraq is not under comprehensive US sanctions, but US banks treat Iraqi owners as higher risk, so applications need full documentation of the business and the source of funds. Expect fewer options than for residents of the Gulf. There is no US–Iraq tax treaty, so US corporate dividends to Iraq are withheld at 30%. Iraqi tax law taxes resident Iraqis on income earned inside and outside Iraq, at progressive rates up to 15%, and the Kurdistan Region has its own rules. With UCB, a Wyoming LLC with EIN is $249 and the formation, EIN and bank application package is $348.

Who can form a US company from Iraq

US states set no nationality or residence requirement for owners, managers or directors. An Iraqi citizen living in Iraq or abroad, a resident of the Kurdistan Region, or an Iraqi company can own a US company outright. An individual owner can be the sole manager or director. You need no US visa, SSN or US address, and no trip. The company needs a registered agent in its state, which is included for the first year in every UCB formation (see registered agent explained), and an EIN, which the IRS issues without an SSN or ITIN (see EIN for non-residents).

US sanctions target specific people, companies and militias, not Iraq as a whole. Every formation provider and bank screens owners, and anyone with ties to listed persons will be refused. Ordinary businesses go through closer review rather than a ban.

For identity, use a valid Iraqi passport, or another nationality's passport if you hold one. The national card (البطاقة الوطنية) alone is not accepted. For proof of address, a recent utility bill or bank statement with an English translation. Because Iraqi addresses are often written by district and landmark (mahalla, zuqaq, house number), spell yours identically on every form.

The banking question: be ready for enhanced due diligence

US banks and fintechs decide country risk for themselves, and most put Iraq in a high-risk category. Recent years of dollar-access restrictions on Iraqi banks have reinforced that. Some providers do not onboard companies whose owners live in Iraq. Others will, after enhanced due diligence. Very few will accept a thin application.

What a successful Iraqi application usually includes:

• A specific description of the business: "IT support and network installation for hotels and hospitals in Erbil and Dubai", not "general trading".
• Evidence the business is real: an English website, a trade licence or company registration in Iraq, client contracts or purchase orders, and invoices.
• A clear explanation of money flows: who pays the US company, who it pays, and how money moves to Iraq.
• Consistent details across the state filing, EIN letter and application, and a US business address with your own suite number.

Plan how money will move between the US account and Iraq before you open it. Regular, explainable transfers to an Iraqi bank that has full dollar access are much easier for a US bank to accept than irregular transfers, cash-heavy patterns, or transfers to banks under US restrictions. The Central Bank of Iraq publishes which banks are restricted from dollar transactions. Check yours is not among them.

UCB tells you at the start which banking options are realistic for your profile, before you pay for a bank application. See US business bank accounts for non-residents and why banks reject non-resident applications.

How Iraq taxes a US company and its owner

Iraq's Income Tax Law No. 113 of 1982 taxes the income of resident Iraqi individuals earned inside or outside Iraq, wherever it is paid. Non-residents are taxed on income arising in Iraq. In federal Iraq, individuals pay progressive rates of 3% up to 15% on taxable income above IQD 1 million. Companies generally pay 15%, with higher rates in the oil and gas sector.

The Kurdistan Region applies its own tax regulations and administration. Its rates and practice differ from federal Iraq, for example a flat rate on employment income.

For a resident Iraqi owner of a US company, then, Iraqi tax can reach the company's profits when you receive them, and possibly before. How Iraqi practice treats a foreign LLC, and how the law applies to income held abroad, is a question for an Iraqi accountant. Keep the US company's statements, invoices and US filings in order for them.

US LLC formation from Iraq

The US side

A single-member LLC owned by a non-resident is disregarded for US federal income tax. If it has no US office, US employees or US agents who conclude contracts, its income is generally not effectively connected with a US trade or business, so no federal income tax is due (see effectively connected income explained). There is also no 30% withholding on money it passes to you, because there is no corporate dividend. It files Form 5472 with a pro forma Form 1120 every year, and the penalty for missing it is $25,000 (see Form 5472 explained).

Buying in the USA and selling in Iraq

Iraq imports many goods from the USA, from vehicles bought at US auctions to spare parts, medical supplies and machinery. Iraqi importers often use a US company to buy and pay for goods, hold accounts with US suppliers and pay US freight forwarders.

For US tax, buying goods in the USA for export does not in itself create a US trade or business. Income from selling inventory is generally sourced where title passes to the buyer. A US LLC that buys goods in the USA and sells them to customers in Iraq, with title passing outside the USA, usually has foreign-source income and no US income tax. The contracts and shipping terms should say where title passes. A US warehouse, US staff or sales to US customers would change the analysis.

Two other things to check before you buy:

• Export controls. Most consumer goods and vehicles are freely exportable, but some machinery, electronics and dual-use items need US export licences, and every export is screened against US restricted-party lists. A licensed freight forwarder handles this.
• Licences to buy. Some US auctions and wholesale suppliers sell only to licensed dealers or through registered brokers. A US company does not by itself make you a licensed dealer.

An example from Erbil

This is an illustrative example, not a client case.

Dara runs a company in Erbil importing used vehicles and parts from the USA. He forms a Wyoming LLC that holds accounts with a US auction broker, a parts wholesaler and a freight forwarder in New Jersey. Payments to US suppliers go from the LLC's US account. His Iraqi company buys the vehicles from the LLC, with title passing in Iraq on arrival, and resells them locally.

In the USA, the LLC files Form 5472 and a pro forma 1120. It has no US income tax, because it has no US sales, no US staff and title passes abroad. In Iraq, the trading profit is earned locally and taxed under Kurdistan rules. The LLC's documents show the bank exactly where every dollar comes from and where it goes.

US C-Corp formation from Iraq

A C-Corporation pays 21% federal tax on its profits, plus state tax where it does business, and files Form 1120 and Form 5472 each year (see the 21% corporate tax explained and the C-Corp guide for non-residents). With no treaty, dividends, royalties and related-party interest paid to Iraq are withheld at 30%. Paying profit out to an Iraqi owner therefore costs about 44.7% in US federal tax alone.

A corporation makes sense in a few situations:

• A US operating business, with staff, a warehouse or a US office, that will reinvest its profits.
• A joint venture with US partners, for example on reconstruction, energy services or healthcare projects, where the partners want a Delaware corporation.
• A technology company raising investment from US or Gulf funds (see raising US investment as a foreign founder).

For an Iraqi owner who simply needs to receive and pay in dollars, the LLC is usually simpler and cheaper.

The Iraqi diaspora

Large Iraqi and Kurdish communities live in Michigan, around San Diego, in Arizona and in Texas, as well as in Europe and the Gulf. Diaspora founders often form US companies with family members or partners in Iraq. Where some owners are US citizens or green card holders, they are US persons taxed on worldwide income, and a multi-member LLC is a partnership filing Form 1065. Foreign partners' shares of any US-connected income are subject to withholding. See single-member vs multi-member LLC.

Which state

• Wyoming for most Iraqi-owned companies without US premises: low yearly costs and owners kept off the public filing.
• New Mexico, the cheapest, with no annual report.
• Delaware for a corporation with US partners or investors.
• The state where your premises are, if the business has a warehouse or office in Michigan, Texas or elsewhere.

See best state for non-residents and the state selector.

What it costs

State fees and the first-year registered agent are included. See what a US LLC costs every year.

Common mistakes

• Applying to US banks with a vague description, no website and no contracts. For an Iraqi owner, this almost always fails.
• Sending money from the US account to an Iraqi bank that is restricted from dollar transactions.
• Assuming a US company is a licensed dealer or exporter. Auctions, wholesalers and export controls have their own rules.
• Selling to US customers or holding US stock without considering US tax on that income.
• Paying dividends from a US corporation to Iraq, at 30% withholding with no treaty.
• Skipping Form 5472 because the LLC owed no US tax.

Frequently asked questions

Can an Iraqi citizen own a US company? Yes, 100%, living in Iraq or abroad, without visiting the USA.

Can I open a US bank account for the company while living in Iraq? Sometimes, but options are limited and banks apply enhanced due diligence. A fully documented application, with a real business, contracts and a clear explanation of money flows, is essential.

Is there a US–Iraq tax treaty? No. US dividends, royalties and related-party interest paid to Iraq are withheld at 30%.

Will my US LLC pay US tax? Usually not, if it has no US office, staff or agents and no US-connected sales. It files Form 5472 and a pro forma 1120 every year.

Does the Kurdistan Region follow the same tax rules? Not entirely. The Kurdistan Region has its own tax administration and rates. Ask an accountant in the Region.

Do I need an ITIN? Not to form the company or get its EIN. See what is an ITIN and who needs one.

How UCB can help

We handle US company formation for owners in Iraq and the Kurdistan Region remotely: the state filing, EIN, registered agent, US business address and a bank application prepared for enhanced due diligence. Each year we file the company's federal return through our US tax filing service. Your Iraqi accountant handles Iraqi tax, and we supply the US records they need. See our formation, EIN and bank account package.

Setting up a US company from Iraq? WhatsApp us at +1 315 961 2956 or email enquiries@ucbsolutions.com.