Despite being legally exempt from taxes, most non-governmental organizations (NGOs) in the Kurdistan Region are facing millions in financial penalties for failing to submit a quarterly compliance form. Civil society leaders report that the Tax Directorate is overlooking a government decree, penalizing non-profit, often revenue-free organizations for omitting paperwork intended to verify employee status.

According to the applicable laws of the Kurdistan Region, NGOs are exempt from taxation. However, the General Directorate of Taxation & State Real Estate of the Ministry of Finance and Economy requires them to submit a declaration form every three months. 

Any organization failing to submit this form on time is fined 75,000 IQD per quarter, causing total cumulative penalties for several organizations to exceed 1,000,000 IQD.

Non-Profits Decry Financial Burden 

Kwestan Abdulrahman, head of the Azmoon Organization for Human Development, stated that although the Council of Ministers issued an official directive confirming that NGOs are not subject to taxes, their active tax files remain open. 

She noted that her organization has received a fine of 1,000,000 IQD. Meanwhile, Jotiar Qader, deputy head of the Media Organization, revealed that they were fined 1,600,000 IQD, emphasizing that these entities operate on a non-profit basis and generally lack regular income.

Tax Authority Targets Employee Income 

An official from the Tax Directorate, speaking on the condition of anonymity, clarified that the tax is not levied on the organizations themselves. 

Instead, it applies exclusively to employees earning monthly salaries exceeding 1,000,000 IQD, who are subject to a 5% income tax. The official explained that the quarterly form is required simply to verify staffing levels. 

He added that the directorate legally cannot waive the accrued penalties but can offer installment payment plans.

Current Practices Contradict 2022 Decree 

This contradicts a Kurdistan Regional Government (KRG) directive issued on March 28, 2022, which explicitly states that NGOs do not need to open or maintain dedicated corporate tax files. 

Under that decree, only individual employees exceeding the salary threshold are required to pay income tax. Representatives from the sector argue that by maintaining these active files and demanding quarterly submissions, the tax authority is failing to implement the government's own directives.

High-Level Talks Convene for Resolution 

To resolve the impasse, Falah Hassan, Head of the KRG’s Department of Non-Governmental Organizations, recently met with Kamal Warty, Director General of Taxation & State Real Estate. 

Both parties agreed to streamline administrative processes and safeguard NGO legal protections. A final administrative decision is expected shortly regarding the penalties levied over the delayed quarterly salary forms.