Turkey offers quite excellent opportunities to draw foreign investors to Turkey. A great deal of government promotions are presented to the foreigners who seek to make investment in country. Thanks to these promotions, they may operate more productively and profitably.
Now, let us look at government promotions from which the foreigners who want to make investment in Turkey may benefit.
No VAT (value added tax) is paid for the machinery and equipment to be purchased within the country and abroad within the scope of investment incentive certificate.
Customs Duty Exemption
No customs duty is paid for the machinery and equipment to be purchased within the country and abroad within the scope of investment incentive certificate.
Income and corporate tax is calculated over deduction rates until total deducted tax amount reaches rate of investment contribution. Rate of investment contribution express the ratio total fixed investment amount which subjects to tax deduction. Social Insurance Premium Support (Worker Contribution)
For the employment provided through investment , worker contribution of social insurance premium calculated over legal minimum wage amount is met by state. This element is valid only for the investments to be made in Region 6 within the scope of investment incentive certificate. No upper limit exists for Social Insurance Premium Support and valid for 10 years.
Social Insurance Premium Support (Employer Contribution)
Employer contribution of Social insurance Premium calculated over legal minimum wage for the employment provided through investment is met by state.
Withholding Deduction for Income Tax
Income tax which is identified for the additional employment provided via investment does not subject to withholding. This element is valid only for the investments to be made in Region 6. No upper limit exists for Withholding Deduction for Income Tax and valid for 10 years.
Interest Rate Support
Interest rate support is a financing support given for investment loans with at least 1 year maturity. Certain amount of the interest/profit share to be paid for the loan which is used up to 70% of fixed investment amount registered on investment incentive certificate.
In regard to investments to be made, investment land is allocated depending on land availability according to regulations of Ministry of Finance.
VAT which is collected for expenditures of building-construction realized under strategic investments whose minimum fixed investment amount is higher than 500 million TL is returned.
In the event that at least 15 personnel in R&D centres and 10 personnel in design centres are employed, special incentives are presented to R&D and design investment projects in Turkey, These incentives are valid till 2024. Some of these incentives are:
- 100% of R-D expenditures are deduced from tax basis.
- No stamp duty is paid to the certificates to be issued.
- No customs duty is paid for the products imported under R&D projects.
Investment Regions and Applicable Incentives
In new incentive system which came into force on January 1 2012, four different incentive types are in force. These incentive types show differences for 6 separate investment regions across the country. These incentives are:
- General Investment Incentive Applications
- Regional Investment Incentive Applications
- Large Scale Investment Incentive Applications
- Strategic Investment Incentive Applications
6 different regions are present for such incentive application. İncentive types change as per the region at which making investment is desired.
1. General Investment Incentive Applications
Without presence of any difference between the region where investment is to be made, for the local and foreign persons who make 1 million TL or 500.000 TL, the following incentives are offered.
Customs tax exemption
Domestic and foreign investors do not pay customs duty for the machinery and equipment imported abroad.
Domestic and foreign investors do not pay 18% value added tax (VAT) for the machinery and equipment supplied within the country or abroad.
2- Regional Investment Incentive Applications
To the domestic and foreign investors who want to make investment in 6 regions identified across Turkey, various incentives are presented according to the region they have chosen. The investors who seek to operate in any region are exempted from customs duty and value added tax. Land is also allocated to these investors by state for setting up production plant.
Apart from these, social insurance Premium support is given at varying rates for worker and employer. Especially for the persons who desire to make investment in 6th region, namely eastern provinces of the country which needs more development, attractive incentives are offered. For instance, the investors who want to make investment in 6th region receive withholding deduction of income tax for 10 years and gain tax deduction at 90% rate.
In addition, regardless of respective region, there exist some investment fields to be supported with 5th region elements. We can exemplify the following for that:
- Mine extraction and/or processing investments.
- Test centres, wind tunnel and similar investments for automotive, space or defence industry
- Manufacturing of turbine and generator for production of renewable energy
- Investments of kindergartens, primary school, secondary school and high school
Again, similarly without considering relevant region, some investment areas to benefit from 4th region investments are:
- Manufacturing of agriculture and forestry machines
- Manufacturing of the machines which process food, beverage and tobacco
- Manufacturing of other main organic chemical substances
- Manufacturing of chemical fertilizer and nitrogen compounds
- Manufacturing of synthetic rubber and plastic raw materials
3. Large Scale Investment Incentive Applications
Turkey applied large scale investment incentive plan for 12 investment areas to increase its R&D capacity and the competitiveness in international market, technology and the following incentives are provided.
4. Incentive Applications for Strategic Investment
The investments which comply with the following criteria are supported within the scope of Incentive Applications for Strategic Investment.
- Local production capacity for the product to be manufactured with investment should be less than import of product.
- Investment values should be at least 50 million TL.
- Investment should create minimum 40% value added. No this condition is sought for refinery and petro-chemistry investments.
- Total import value related to the product to be manufactured should be minimum 50 million USD as of last 1 year. For the goods not manufactured in Turkey, no this condition is requested.