Government Incentives For Foreign Investments in Turkey
Table of Contents
Incentives Provided for Foreign Investors in Turkey
Turkey offers a lot of opportunities for foreign investments. There are numerous government incentives for these foreign investors within the country. Through these incentives, investors can operate more efficiently and profitably. Here are government incentives offered to foreign investors in Turkey.
Turkey’s cheap operational costs, local manufacturing, unexplored markets, and high consumer spending provides a wealth of prospects for international companies and foreign investors. There are also other advantages, such as;
- The right to avoid double taxation if you are a foreign investor in Turkey, you will only pay taxes in Turkey, not in your home country,
- The freedom to transfer your earnings from Turkey to other countries, and the right to obtain Turkish citizenship if you invest $500,000 in Turkey,
A new investment incentive scheme has been in operation since January 1, 2012, intending to boost Turkey’s growth. The incentive system’s major aims are to boost production and employment, direct investments to a big scale, eliminate regional development disparities, and reduce reliance on intermediate products imports. You must acquire the Investment Incentive Certificate (IIC) to take advantage of the benefits available to international investors. The Ministry of Trade has been in charge of implementing the investment incentive system since 2018.
Five distinct schemes make up the investment incentive system in Turkey:
- General Investment Incentives Scheme,
- Regional Investment Incentives Scheme,
- Priority Investment Incentive Scheme,
- Large-Scale Investment Incentives Scheme,
- Strategic Investment Incentives Scheme,
Related Article: Investment Regulations in Turkey
Offers of Turkish investment incentives system are as follows:
Investment Incentives That Foreigners Can Get in Turkey
VAT (Value Added Tax) Exemption: Within the scope of an Investment Incentive Certificate, VAT is free for imported or locally supplied machinery and equipment.
VAT Refund: VAT charged for building-construction expenses is refunded if the minimum fixed investment amount is realized within the scope of strategic investments over 500 million ₺.
Tax Breaks: Income and corporate tax are calculated at discount rates until the total reduced tax amount reaches the investment contribution rate. Investment contribution rate refers to the tax-deductible rate of the total fixed investment amount.
Customs Tax Exemption: Customs duty is not paid for machinery and equipment to be purchased from abroad within the scope of the Investment Incentive Certificate.
Social Insurance Premium Support (Employee Share): The employee’s share of the social insurance premium calculated on the legal minimum wage amount for employment provided by investment is covered by the state. This element applies only to investments to be made in Zone 6 under the investment incentive certificate. There is no upper limit for Social Insurance Premium Support and is valid for 10 years.
Social Insurance Premium Support (Employer’s Share): The employer’s share of the Social Insurance Premium calculated on the legal minimum wage amount for employment provided by investment is covered by the state.
Income Tax Withholding Deductions: Income tax determined for additional employment provided by investment is not subject to withholding. This element applies only to investments in Region 6. There is no upper limit for Income Tax Withholding Allowance and is valid for 10 years.
R&D (Research and Development) Incentives: Special incentives are offered for R&D and design investment projects in Turkey if at least 15 personnel are employed in R&D centers and at least 10 personnel are employed in design centers. Some of these incentives are:
• 100% of R&D expenses are deducted from the tax base,
• Stamp duty is not paid on the documents to be issued,
• Customs duty is not paid for imported products within the scope of R & D projects.
Interest Rate Support: Foreign investments interest rate support is financing support provided for at least one term investment loan. A certain portion of the interest/dividend payable on the loan used up to 70% of the fixed investment amount registered in the investment incentive document is covered by the state, provided that it is paid for the first five years.
Land Allocation: For investments to be made, investment land (or purchased land in Turkey) is allocated depending on the availability of land in accordance with the regulations of the Ministry of Finance.
Stamp Duty Exemption: No stamp duty is payable for documents.
Property Tax Exemption: No property tax is payable for land and buildings.
Corporate Tax Exemption: No corporate tax is payable.
Capital Contribution: The government may contribute up to 49% of the investment amount as a capital contribution.
Infrastructure Support: The investor’s infrastructure requirements, such as power and natural gas, may be addressed.
Purchasing Guarantee: The investor’s business’s goods are assured to be available for public purchase.
Cash Support: Some expenditures are partially rebated by the state.
Training Support: Daily expenses and eligible training costs are covered by ISKUR.
Depending on the magnitude of the investment, some, but not all, of the above incentives are available to particular types of enterprises. Hotels and renewable energy are two examples of industries that are eligible for investment incentives:
Examples of Turkey’s Investment Incentives:
Incentives For Hotels
Regardless of the magnitude of the investment, “regional investment incentives” are provided for the construction of 3, 4, or 5-star hotels in Antalya. Customs duty exemption, Social Security Premium Support for two years, VAT exemption, and a 50% reduction in corporation tax are all available to such investments until the total reductions exceed 15% of the investment amount. The government may, upon request, provide land in Antalya to the investor for the construction of such hotels.
The investment is given additional advantages if the hotels are developed in government-designated tourism development regions. In addition to the customs duty exemption, VAT exemption, and land allocation, investors may qualify for Social Security Premium Support for seven years, a five-point interest rate reduction for bank loans in Turkish Lira, and an 80 percent reduction in corporate tax until the total reductions equal 40 percent of the investment amount.
Incentives For Renewable Energy
Renewable energy investments, regardless of their scale, get significant government subsidies in addition to the standard advantages. These are the incentives:
- Government guarantee that the produced energy will be purchased by the government for 10 years, based on the price scale in USD,
- 100% exemption from stamp duty and Value-Added Tax,
- Reduction in licensing fees for the first 8 years,
- Procedural priority for the renewable-energy plants,
- Land allocation for renewable-energy plants,
- Assistance in project planning.
Final Thoughts and Conclusions on; “Government Incentives For Foreign Investments in Turkey”
Foreign investors have the same access to investment incentives as Turkish investors. Tax reductions, tax exemptions, staff training support, land distribution, capital contribution, and financial support are among the investment incentives that Turkey offers to foreign investors. The quantity, nature, and extent of the incentives are determined by a variety of factors, including the type of firm, industry, city, and investment amount. If you are looking to make foreign investment in Turkey, there is no doubt you’ll come out profitable.
- Yalcin, F. (2021, April 15). Incentives Provided for Foreign Investors in Turkey. Doingbusinessinturkey.Com. <https://doingbusinessinturkey.com/incentives-provided-for-foreign-investors-in-turkey/>
- Celebi, B. E. (2020, April 11). State Incentives for Foreign Investors in Turkey. Celebi Legal | Antalya Lawyer | Antalya Law Firm. <https://www.celebilegal.com/state-incentives-for-foreign-investors-in-turkey/>