TURKISH INVESTMENT SUPPORT MECHANISM

As a developing country, Turkey provides opportunities for foreign investors to utilize their capital budgets in a much more economically effective and also financially shortened ROI periods. In response to this situation, Turkey has rebuilt its investment incentive system to encourage investments and provides favourable mechanisms to lower the investment as well as operational expenses after the investment has been completed.

By obtaining an incentive certificate which is just a registration process government provides various benefits for investors such as VAT exemptions, Corporate Tax Reductions, lowered employer & employee’s social security contributions, also exemption of withholded income taxes on wages & salaries and cover up to 70% of interest expense on loans received from banks. Besides all these investments government is also grants free land allocation and exempts investors due stamp duty charges. Additionally Turkey is part of bilateral tax agreements with most of westerns countries which enable companies to expetriate their profits at the tax base of their original base without having any additional charges.

Investment system stipulates 6 regional divisions with the proportion of cities’ industrial and social development scale throughout Turkey. Region 1 includes most developed cities like Istanbul, Ankara and Izmir whereas Region 6 includes less developed cities in the country… Regardless of the regional division of the investment, projects meeting a specific financial amount are supported within the framework of the General Investment Incentives. For example minimum fixed capital budget of investments in Region 1 and 2 is TL 1.000.000, whereas 500.000 TRY for Region 3,4,5 and 6. Tax Reductions for projects in Region 1 is %50; %55 for Region 2, %60 for Region 3, %70 for Region 4, %80 for Region 5 and %90 for Region 6. And reduced yearly tax rates are %10 for Region 1, %9 for Region 2, %8 for Region 3, %6 for Region 4, %4 for Region 5 and %2 for Region 6. Investor should keep in mind that the rates are changing according to Organised Industrial Zones.

There are some specific investment fields taking benefit from incentives system regardless the region of the projects or some regional support exists according to the territory of the investments. Most favoured investment fields are: investments in production of high-tech goods, carbon-fiber and composite materials of carbon production, electricity generation through waste heat and renewable resources, efficient energy investment projects, international trade fair organization investments, building of kinder-gardens and child and elder day-care centers, aerospeace or defense investments, railroad installation investments, mine extraction and exploration, tourism accommodation investments.

Production of refined petroleum products, chemical products, harbor and harbor service investments, constructions of airports, production of medical, high precision and optical equipment and pharmaceuticals are considered as strategic investments and receives additional benefits from the incentive scheme of government.

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