Incentives

Incentives

Investment Incentives

The new investment incentives scheme is specifically designed to encourage investments with the potential to reduce dependency on the importation of intermediate goods vital to the country’s strategic sectors.

Amongst the primary objectives of the new investment incentives scheme are: reduce the current account deficit; boost investment support for lesser developed regions; increase the level of support instruments; promote clustering activities; and to support investments that will create the transfer of technology.

Effective as of January 1, 2012, the new investment incentives system has been comprised of four different schemes. Local and foreign investors have equal access to:

  1. General Investment Incentives Scheme

  2. Regional Investment Incentives Scheme

  3. Large-Scale Investment Incentives Scheme

  4. Strategic Investment Incentives Scheme

The support instruments to be provided within the framework of the various investment incentives schemes are shown in the following table:

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Support Instruments

General Investment

Incentives Scheme

Regional Investment

Incentives Scheme

Large-Scale Investment

Incentives Scheme

Strategic Investment

Incentives Scheme

VAT Exemption

+

+

+

+

Customs Duty Exemption

+

+

+

+

Tax Reduction

+

+

+

Social Security Premium Support

(Employer’s Share)

+

+

+

Income Tax Withholding Allowance *

+

+

+

Social Security Premium Support

(Employee’s Share)*

+

+

+

Interest Rate Support **

+

+

Land Allocation

+

+

+

VAT Refund***

+

*Provided that the investment is made in Region 6.
**Provided that the investment is made in Regions 3, 4, 5 or 6 within the framework of the Regional Investment Incentives Scheme.
***For construction expenditures of strategic investments with a minimum fixed investment amount of TRY 500 million.

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Region 1 Region 2 Region 3 Region 4 Region 5 Region 6
Ankara Adana Balıkesir Afyonkarahisar Adıyaman Ağrı
Antalya Aydın Bilecik Amasya Aksaray Ardahan
Bursa Bolu Burdur Artvin Bayburt Batman
Eskişehir Çanakkale
(Bozcaada &
Gökçeada excluded)
Gaziantep Bartın Çankırı Bingöl
Istanbul Denizli Karabük Çorum Erzurum Bitlis
Izmir Edirne Karaman Düzce Giresun Diyarbakır
Kocaeli Isparta Manisa Elazığ Gümüşhane Hakkari
Muğla Kayseri Mersin Erzincan Kahramanmaraş Iğdır
Kırklareli Samsun Hatay Kilis Kars
Konya Trabzon Kastamonu Niğde Mardin
Sakarya Uşak Kırıkkale Ordu Muş
Tekirdağ Zonguldak Kırşehir Osmaniye Siirt
Yalova Kütahya Sinop Şanlıurfa
Malatya Tokat Şırnak
Nevşehir Tunceli Van
Rize Yozgat Bozcaada & Gökçeada
Sivas

Investment Incentives Scheme Types:

Regardless of the region where investment takes place, all projects meeting both the specific capacity conditions and the minimum fixed investment amount are supported within the framework of the General Investment Incentives Scheme. Some types of investments are excluded from the investment incentives system and would not benefit from this scheme.

The minimum fixed investment amount is TRY 1 million in Region 1 and 2, and TRY 500,000 in Region 3, 4, 5 and 6.

Major investment incentive instruments are:

1. Exemption from customs duties:

Customs tax exemption for imported machinery and equipment for projects with an investment incentive certificate.

2. VAT exemption:

VAT exemption for imported or domestically purchased machinery and equipment for projects with an investment incentive certificate.

Support Instruments

VAT Exemption:

VAT is exempt for imported and/or domestically delivered machinery and equipment within the scope of the investment incentive certificate.

Customs Duty Exemption:

Customs duty is exempt for imported machinery and equipment within the scope of the investment incentive certificate.

Tax Reduction:

The income or corporate tax is calculated on basis of reduced rates until the total amount of reduced tax reaches the amount of contribution to the investment. The rate of contribution to investment refers to the rate of the total fixed investment amount that is subject to tax reduction.

Social Security Premium Support (Employee’s Share):

For additional employment created by the investment, the employee’s share of the social security premium calculated on basis of the legal minimum wage will be covered by the government. The instrument is applicable only to investments made in Region 6 within the scope of the investment incentive certificate. There is no upper limit for Social Security Premium Support and it is applicable for 10 years.

Social Security Premium Support (Employer’s Share):

For additional employment created by the investment, the employer’s share of the social security premium calculated on basis of the legal minimum wage will be covered by the government.

Income Tax Withholding Allowance:

The income tax with regard to additional employment created by the investment, within the scope of the investment incentive certificate, will not be liable to withholding taxes. The instrument is applicable only to investments made in Region 6 within the scope of the investment incentive certificate. There is no upper limit for income tax withholding allowance and it is applicable for 10 years.

Interest Rate Support:

Interest rate support is a financial support instrument provided for investment loans with a term of at least one year obtained within the scope of an investment incentive certificate. A portion of the interest/profit share regarding the loan equivalent, at most 70 percent of the fixed investment amount registered in the investment incentive certificate, will be covered by the government.

Land Allocation:

Land may be allocated for investments, with an investment incentive certificate, in accordance with the rules and principles set by the Ministry of Finance, depending on the availability of such land.

VAT Refund:

VAT collected on construction expenses, made within the scope of strategic investments with a minimum fixed investment amount of TRY 500 million, will be rebated.

R&D Incentives

The R&D Law provides special incentives for R&D and design investment projects in Turkey provided that a minimum of 30 personnel are employed in an R&D center. This personnel requirement may be reduced to 15 employees in sectors determined by the Council of Ministers to be a priority, such as software, medicine and medical devices, agriculture, food, biotechnology, ICT, and other high-tech sectors. The incentives within the new law will remain in effect until 2024 and include:

  • 100 percent deduction of R&D expenditure from the tax base
  • Half of the R&D and design expenditure increase incurred in the operational year compared to the previous year will be deductible (criteria will be determined by Council of Ministers)
  • Income withholding tax exemption for employees (until December 31, 2023.)
  • 50 percent social security premium exemption for employers (until December 31, 2023)
  • Stamp duty exemption for applicable documents
  • Customs duty exemption for imported products within the scope of R&D projects
  • Techno-initiative capital for new scientists up to TRY 500,000
  • Deduction from the tax base of certain funds granted by public bodies and international organizations

Export Support

Inward Processing Regime

The aim of the Inward Processing Regime is to enable exporters to procure inputs at world market prices for the production of their exports without being subject to customs duties, including VAT, as well as trade policy measures.

The Inward Processing Regime includes two types of processing measures: Conditional Exemption System and Reimbursement System.

  1. The Conditional Exemption System waives commercial policy measures and taxes that arise during the importation of non-freely circulating raw materials, auxiliary materials, packages, and operating equipment used in production of the export product subject to Inward Processing Regime. It is called conditional as the exporter has to guarantee through collateralization of the imported materials and equipment that they will only be used for the production and exportation of the product subject to Inward Processing Regime. The guarantee given for the collateralized materials and equipment will be released upon exporting of the final product.
  2. The Reimbursement System is the reimbursement of taxes that were paid during the importation of freely circulating raw materials, auxiliary materials, packages, and operating equipment used for the production of the exported product subject to Inward Processing Regime. These taxes are reimbursed upon the exporting of the final product subject to Inward Processing Regime. Commercial policy measures are applied to the imported materials and equipment and all the import procedures such as technical regulations in foreign trade and standardization legislation must have been completed.

Evaluation of Applications

  • It should be possible to determine whether the imported raw materials are used to produce exported products.
  • The activity should not have a negative impact on the economic interests of the producers in the customs territory.
  • Activities should create added-value and the final product should not have a negative impact of the competitiveness in the sector.
  • The company should be built in the customs territory in Turkey.

Benefits of Inward Processing Regime

  • 100 percent Customs Duty Refund
  • 100 percent  VAT Refund
  • 100 percent Special Consumption Tax Refund
  • 100 percent Resource Utilization Support Fund Refund
  • 100 percent Stamp Tax Refund
  • Exemption from quotas and surveillance measures:There are import quotas determined by the government for a number of goods, and Inward Processing Regime certificate holders will not be affected by these quotas. The government also determines market prices for some products and imposes excise taxes to these products based on the determined market price, irrespective of the price paid by the importer. Participants in the Inward Processing Regime would also be exempt from such surveillance measures.
  • It is permitted for domestic sales and delivery

Sectoral Incentives

Incentives for Renewable Energy

In addition to the General, Regional, Priority, and Strategic Investment Incentive schemes that apply to investments in the energy sector, the government provides specific incentives for electricity production investments that are based on renewable energy sources.

  • 100 percent exemption from Customs Duty and VAT

  • Feed-in-Tariff (FiT) scheme for 10 years

    • Differentiated FiT scheme based on resource type

    • Extra premiums for domestic components

  • Grid connection priorities

  • Lower license fees

    • Only 1 percent of licensing fee

    • Exemption from the annual license fee for the first eight years of operation

  • License exemptions in exceptional circumstances

  • Various practical conveniences in project preparation and land acquisition

2019-01-11T18:21:35+03:00