Supporters of Iraqi Shiite cleric Moqtada Al Sadr celebrate in Baghdad after Parliament passed the law. Reuters
Supporters of Iraqi Shiite cleric Moqtada Al Sadr celebrate in Baghdad after Parliament passed the law. Reuters
Supporters of Iraqi Shiite cleric Moqtada Al Sadr celebrate in Baghdad after Parliament passed the law. Reuters
Supporters of Iraqi Shiite cleric Moqtada Al Sadr celebrate in Baghdad after Parliament passed the law. Reuters

US condemns Iraq over law that makes normalising ties with Israel a crime


Amr Mostafa
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The US has said it is “deeply disturbed” by the Iraqi Parliament’s ratification of a law that forbids the normalisation of relations with Israel.

The State Department said the law, passed unanimously by Iraqi MPs on Thursday, jeopardised freedom of expression and promoted “an environment of anti-Semitism”.

“This legislation stands in stark contrast to progress Iraq’s neighbours have made by building bridges and normalising relations with Israel,” said spokesman Ned Price.

“The US will continue to be a strong and unwavering partner in supporting Israel, including as it expands ties with its neighbours in the pursuit of greater peace and prosperity for all.”

The new legislation expands on Iraq’s 1969 penal code, which stipulates that citizens who communicate with Israel will face prosecution and possibly the death penalty.

It goes into more detail, requiring all government institutions, officials, media outlets, companies and individuals to refrain from establishing relations with Israel.

The law will apply not only to Iraqi citizens but also to foreigners in Iraq, and includes contacts with any Israel-linked organisations and companies.

It forbids “contact and communication of any kind and means with the occupying Zionist entity, its nationals and representatives, whether individuals or institutions or organisations, for any reason”.

The law also prohibits the “promotion of any ideas, ideologies, principles or Israeli or Zionist conduct in any form” as well as “financial or moral assistance” to Israel or any institution linked to it.

Those who violate the law could face “execution or lifelong imprisonment”.

The law was submitted by the influential Shiite cleric Moqtada Al Sadr, whose political movement won the most seats in October's national elections.

The move is aimed at boosting his profile as an anti-Israel politician and to alleviate concerns that his allies from Sunni and Kurdish parties will push for normalisation.

Iran-backed parties have frequently spoken of the possibility that Israel could establish covert alliances within Iraq, in several cases singling out Mr Al Sadr's allies the Kurdistan Democratic Party, which they have accused of building bridges with the Israeli government.

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1. Domestic VAT refund amendments: request your refund within five years

If a business does not apply for the refund on time, they lose their credit.

2. E-invoicing in the UAE

Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption. 

3. More tax audits

Tax authorities are increasingly using data already available across multiple filings to identify audit risks. 

4. More beneficial VAT and excise tax penalty regime

Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.

5. Greater emphasis on statutory audit

There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.

6. Further transfer pricing enforcement

Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes. 

7. Limited time periods for audits

Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion. 

8. Pillar 2 implementation 

Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.

9. Reduced compliance obligations for imported goods and services

Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations. 

10. Substance and CbC reporting focus

Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity. 

Contributed by Thomas Vanhee and Hend Rashwan, Aurifer

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Updated: May 27, 2022, 12:26 PM