State Incentives Offered to Foreign Investors in Turkey

Turkey offers some excellent opportunities for attracting foreign investors. Turkey, offers encouragement for foreigners who wants to make investments in the Turkey. Thanks to these encouragements, investors can action more fertilized and profitable.

Now, let us look at the encouragements for foreigners can benefit from.

VAT Exemption

VAT (value added tax) is not paid for machinery and equipment to be purchased domestically and abroad within the scope of the investment incentive certificate.

Customs Duty Exemption

Customs duty is not paid for machinery and equipment to be purchased from abroad within the scope of the investment incentive certificate.

Tax Offer

Income and corporate tax is the total amount of tax offered, calculated at the proposed rates until the investment contribution rate reaches. Investment contribution rate refers to the tax deductible rate of the total fixed investment amount.

Social Insurance Premium Support (Employer Lot)

Social insurance premium employer lot is paid by government which calculated from legal minimum wage for the providing deploy by the investment. This element only valid State 6 investments within the scope of the investment incentive certificate. Social insurance premium doesn’t have maximum limit and has validity for 10 years.

Social Insurance Premium Support (Hirer Lot)

Social insurance premium hirer lot is paid by government which calculated from legal minimum wage for the providing deploy by the investment.

Income Tax Stoppage Offer

The determined income is not liable to stoppage tax for the providing extra deploy by the investment. These element only valid state 6 investments. Income Tax Stoppage Offer doesn’t have maximum limit and has validity for 10 years.

Interest Rate Support

A certain part of the interest / dividend to be paid for the loan used up to 70% of the fixed investment amount registered in the investment incentive certificate is paid by the state for the first five years at most.

Land Allocate

Investment land is allocated for the investments to be made, depending on the availability of land according to the regulations of the Ministry of Finance.

VAT Refund

Paid VAT is refund back while spending for the building-construction expenses minimum investment amount is more than (500 Million ₺) scope of the strategic investments

Ar-Ge Encouragement

Turkey, the R & D center at least 15 in at least 10 staff employed at the design center offers special incentives for R & D and design projects in Turkey.

  • 100% of R&D expenses are deducted from the tax base.
  • Stamp tax is not paid on documents to be issued.
  • Customs duty is not paid for products imported within the scope of R&D projects.

Investment Regions and Incentives to be Applied

There are four type of incentive for the new incentive system which entered into force date of 1 January 2012. These types of incentives also differ for 6 different investment regions across the country.

  1. General Investment Encouragement Practices
  2. Regional Investment Encouragement Practices
  3. Large Scale Investment Encouragement Practices
  4. Strategic Investment Encouragement Practices

There are 6 different regions in these applications of investments. The encouragements are differ according to the region to be invested.

1. General Investment Encouragement Practices

Regardless of region and nationality, Turkey offer encouragements which mentioned below for the investment 1 million₺ or 500.000₺.

Customs Duty Exemption

Regardless of nationality, they do not pay customs duty for machinery and equipment imported from abroad.

VAT Exemption

Domestic and foreign investors do not pay VAT for the equipments, machinery which bought from abroad or domestic market.

2-Regional Investment Encouragement Practices

Incentives are offered to domestic or foreign investors. The incentives are differ for their chosen regions in determined 6 areas in Turkey. Regardless of region, investors are exemption from customs duty and VAT. The government allocates land to investors to set up a production facility.

Apart from these, they provide social security premium support to employers and hirers at varying rates. Especially in the 6.Region east of the Turkey need to investments. So, there are special incentives who want to make investment in the 6.Region. For example, the investors get income stoppage tax offer for 10 years who make investment in the 6.Region. This way, the investor receives a 90% tax cut.

Also, regardless of region there are some investments areas supports with 5.region elements. The examples:

  • Mine Hoisting and/or Process Investments
  • Automotive, Test Centers for Space and Defense Industry, Wind Tunnel and Similar Investments.
  • Turbine and Generator Manufacturing for Renewable Energy Generating
  • Kindergarten, Day Care Centre, Primary School, Secondary School and High School Education Investments.

Again, regardless of region these are some of investments benefit from 4.region incentives.

  • Manufacture Farming and Wood Machines
  • Food, Beverage and Tobacco Processing Machinery Manufacturing
  • Other Organic Main Chemical Materials Manufacturing
  • Chemical Fertilizer and Nitrogen Compound Manufacturing
  • Manufacture of Synthetic Rubber and Plastic Raw Materials

3.Large Scale Investment Encouragement Practices

Turkey technology, large-scale investment stimulus plan for its competitiveness in the international market and R & D capacity will increase 12 investment areas are implemented and providing the following incentives.

4.Strategic Investment Encouragement Practices

Investments that meet the criteria below are supported within the scope of the Strategic Investment Incentives Practices.

  • The local production capacity for the product to be manufactured by investment should be less than the import of the product.
  • The investment must be worth at least 50 million TL.
  • The investment should create at least 40% added value. This requirement is not required for refinery and petrochemical investments.
  • The total import value of the product to be produced should be at least 50 million US dollars as of the last 1 year. This condition is not required in non-production goods in Turkey.
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