For further inquiries: [email protected]
Republic of TurkeyMinistry of Economy
INVESTMENT
INCENTIVES IN
TURKEYNihat ALKAS
Head of Department
General Directorate of Incentives and
Foreign Investment
MINISTRY OF ECONOMY
For further inquiries: [email protected]
Republic of TurkeyMinistry of Economy
Policy Orientation
The year 2023 would be the centenary of Turkish Republic’s establishment. Therefore we set up a challenging vision for 2023. By year 2023, we do intend;
to take place among the top 10 economies in the world,
to achieve an annual export level of 500 billion USD and
to raise per capita income to 25 thousand USD.
to reach $2 trillion GDP
to increase the share of R&D expenditures to %3 of GDP
to host 50 million tourists annually with $50 billion revenue
to have 125.000 MW installed power (up from 55.000 MW)
to built 10.000 km high-speed railway, 4.000 km new railway
2
For further inquiries: [email protected]
Republic of TurkeyMinistry of Economy
Regional Scheme
Priority Investments
Strategic Scheme
Large Scale Scheme
General Scheme
3
For further inquiries: [email protected]
Republic of TurkeyMinistry of Economy
4
Additionally, all investment projects in Region 6 will be eligible for Income Tax Withholding Allowance and investments
within the frame of regional, large scale and strategic schemes in Region 6 are also eligible for Social Security Premium
support of Employee’s Share.
For further inquiries: [email protected]
Republic of TurkeyMinistry of Economy
SUPPORT MEASURES
VAT Exemption
Customs Duty Exemption
Tax Deduction
Social Security Premium Support
(Employer’s Share)
Interest Support
Land Allocation
VAT Refund
Income Tax Withholding
Support
Social Security Premium Support
(Employee’s Share)
5
For further inquiries: [email protected]
Republic of TurkeyMinistry of Economy
VAT Exemption: Investment machinery and equipment
imported and/or locally provided within the scope of the
incentive certificate will be VAT exempt. (~18%)
Customs Duty Exemption: Investment machinery and
equipment imported within the scope of the incentive
certificate will be customs duty exempt. (~2%)
Tax Deduction: Reduced tax rates for investor’s income
(50-90 %) until the total deduction reaches to the rate of
contribution. (15-65 %)
6
Support Measures
For further inquiries: [email protected]
Republic of TurkeyMinistry of Economy
Interest Rate Support: For investment loans, a certain
portion of the interest share will be covered by the Ministry.
(3-7 percentage points for TL credits, 1-2 percentage points
for foreign currency credits) (TL 500K-900K ~ $ 225K-403K)
Land Allocation: Government land will be allocated for the
investments
VAT Refund: VAT collected on the building & construction
expenses will be rebated. (only for strategic investment projects
with a fixed investment cost of least TL 500M ~ $ 230M)
7
Support Measures
For further inquiries: [email protected]
Republic of TurkeyMinistry of Economy
For the additional employment created by the investment
Social Security Premium Employer’s Share, on portions of labor wages
corresponding to amount of legal minimum wage, will be covered by the Ministry.
(~ $79 per employee per month)
Social Security Premium Employee’s Share, on portions of labor wages
corresponding to amount of legal minimum wage, will be covered by the Ministry.
(only for Region 6) (~ $71 per employee per month)
Income Tax Withholding exemption will provide exemption from income tax
withholding. (only for Region 6) (~ $29 per employee per month)
* A special note for Region VI: The minimum wage will be ~30% less by
decreasing from ~$597 to ~$418 with the effect of this new investment incentive
program.
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Support Measures
For further inquiries: [email protected]
Republic of TurkeyMinistry of Economy
Support MeasuresGeneral
Investment
Regional & Priority
Investment
Large ScaleInvestment
StrategicInvestment
VAT Exemption
Customs Duty Exemption
Tax Deduction
Social Security Premium Support (Employer’s Share)
Interest Support
Land Allocation
VAT Refund
Only For Region 6 (The Least Developed Region)
Income Tax Withholding Support
Social Security Premium Support (Employee’s Share)
9
Support Measures
For further inquiries: [email protected]
Republic of TurkeyMinistry of Economy
Regional Investment Incentive Scheme
Large Scale Investment Incentive Scheme
Strategic Investment Incentive Scheme
General Investment Incentive Scheme
11
For further inquiries: [email protected]
Republic of TurkeyMinistry of Economy
12
The aim of the Scheme:
Regional system aims to eliminate inter-regional imbalances.
The supported sectors:
Supported sectors are determined according to the economic potentials of provinces and scales of economies.
For each provinces, there is a supported sectors list with a different minimum investment amount or capacity requirement.
The support rates and terms:
Rates and terms of support measures are differentiated according to development level of the regions.
REGIONAL INVESTMENT INCENTIVE SCHEME
For further inquiries: [email protected]
Republic of TurkeyMinistry of Economy
REGIONAL INVESTMENT INCENTIVE SCHEME
Summary Table
Incentives Region 1 Region 2 Region 3 Region 4 Region 5 Region 6
VAT Exemption
Customs Duty Exemption
Tax Deduction out of OIZRate of Contribution to Investment (%) in OIZ
15 20 25 30 40 50
20 25 30 40 50 55
Social Security out of OIZ Premium Support(Employer’s Share) in OIZ
2 years 3 years 5 years 6 years 7 years 10 years
3 years 5 years 6 years 7 years 10 years 12 years
Land Allocation
Interest Support N/A N/A
Income Tax Withholding N/A N/A N/A N/A N/A 10 years
Social Security Premium Support (Employee’s Share)
N/A N/A N/A N/A N/A 10 years
13
For further inquiries: [email protected]
Republic of TurkeyMinistry of Economy
PRIORITY INVESTMENTS
Following priority investments will benefit from terms and rates of the support measures of Region 5 even they are made in Regions 1, 2, 3, 4.
Specific pharmaceutical (bio-technologic and oncology pharma, blood products) investments and Defense Industry investments with a minimum investment amount of TL 20 Million (~ $ 9.3 Million)
Tourism investments in Cultural and Touristic Preservation and Development Regions determined by the Council of Ministers Decree and thermal tourism investments.
Mining Investments
Railroad and maritime transportation investments
14
For further inquiries: [email protected]
Republic of TurkeyMinistry of Economy
PRIORITY INVESTMENTS
Nursery, Pre-school, Primary, Middle and High School investments by private sector
Test facilities, wind tunnel and similar investments made for automotive,
space or defense industries
International fairground investments with a minimum covered area of 50.000 m2
Investments made to produce products developed by an R&D Project which is supported by Ministry of Science, Industry and Technology, TUBITAK and KOSGEB
15
For further inquiries: [email protected]
Republic of TurkeyMinistry of Economy
PRIORITY INVESTMENTS
Engine parts, transmission and parts and/or automotive electronics production with a minimum investment amount of TL 20 Million (~ $9.3 Million)
Automotive OEM investments with a with a minimum
investment amount of TL 300 Million (~ $140 Million)
Engine production investments with a with a minimum investment amount of TL 75 Million (~ $35 Million)
Electric energy production which uses specific mines (i.e. lignite, hard coal, anthracite) as inputs.
16
For further inquiries: [email protected]
Republic of TurkeyMinistry of Economy
PRIORITY INVESTMENTS
Investments on production of electricity through waste heat recovery in a facility (excluding natural gas-based electricity generation plants)
Energy efficiency investments of existing manufacturing
facilities.
Liquefied natural gas (LNG) investments and underground gas storage investments with a minimum amount of TL 50 M (~ $23 M)
Investments of carbon fiber or the composite materialsmade from carbon fiber provided that along with carbon fiber production
Priority Investments
17
For further inquiries: [email protected]
Republic of TurkeyMinistry of Economy
Incentives Terms and Rates
VAT Exemption
Customs Duty Exemption
Tax ReductionRate of Contribution to Investment (%)
40
Social Security Premium Support(Employer’s Share)
7 years
Land Allocation
Interest Support
SUPPORT MEASURES FOR PRIORITY INVESTMENTS
Summary Table
18
For further inquiries: [email protected]
Republic of TurkeyMinistry of Economy
Regional Investment Incentive Scheme
Large Scale Investment Incentive Scheme
Strategic Investment Incentive Scheme
General Investment Incentive Scheme
19
For further inquiries: [email protected]
Republic of TurkeyMinistry of Economy
# Investment SubjectsMin. Inv. Amount
Million TL Million USD
1 Refined Petroleum Products 1.000 448
2 Chemical Products 200 90
3 Harbours and Harbour Services 200 90
4 Automotive OEM and Side Suppliers 200-50 90-22.5
5 Railway and Tram Locomotives and/or Railway Cars 50 22.5
6 Transit Pipe Line Transportation Services 50 22.5
7 Electronics 50 22.5
8 Medical, High Precision and Optical Equipment 50 22.5
9 Pharmaceuticals 50 22.5
10 Aircraft and Space Vehicles and/or Parts 50 22.5
11 Machinery (including Electrical Machines And Equipments) 50 22.5
12 Integrated Metal Production 50 22.5
Goals of the Scheme: - Improvement of Technology and R&D Capacity- Provide a competitive advantage in the international arena
20
Large Scale Investment Incentive Scheme
For further inquiries: [email protected]
Republic of TurkeyMinistry of Economy
Incentives Region 1 Region 2 Region 3 Region 4 Region 5 Region 6
VAT Exemption
Customs Duty Exemption
Tax Reduction out of OIZRate of Contribution to Investment (%) in OIZ
25 30 35 40 50 60
30 35 40 50 60 65
Social Security out of OIZ Premium Support(Employer’s Share) (Year) in OIZ
2 3 5 6 7 10
3 5 6 7 10 12
Land Allocation
Interest Support N/A N/A N/A N/A N/A N/A
Income Tax Withholding N/A N/A N/A N/A N/A 10
Social Security Premium Support
(Employee’s Share) (Year)N/A N/A N/A N/A N/A 10
Large Scale Investment Incentive Scheme
Summary Table
21
For further inquiries: [email protected]
Republic of TurkeyMinistry of Economy
Regional Investment Incentive Scheme
Large Scale Investment Incentive Scheme
Strategic Investment Incentive Scheme
General Investment Incentive Scheme
22
For further inquiries: [email protected]
Republic of TurkeyMinistry of Economy
23
Goals of the scheme:
This scheme aims at supporting production of intermediate
and final products with high import dependence with a view
to reduce current account deficit.
It also targets encouraging high-tech and high value added
investments with a potential to strengthen Turkey’s
international competitiveness.
Strategic Investment Incentive Scheme
For further inquiries: [email protected]
Republic of TurkeyMinistry of Economy
24
Eligibility Criteria for Strategic Investment:
Production of import dependent intermediate goods and
final products (more than 50% supplied by imports)
50 Million TL ($22.5 M) minimum investment amount
A minimum 40% value addition
Import in the last year should be at least $ 50M (This
condition is not necessary for goods with no domestic
production)
Strategic Investment Incentive Scheme
For further inquiries: [email protected]
Republic of TurkeyMinistry of Economy
Incentives All Regions
VAT Exemption
Customs Duty Exemption
Tax ReductionRate of Contribution to
Investment (%)50% ( and ½ of Tax Deduction can be used before the
investment is completed)
Social Security Premium Support
(Employer’s Share) 7 Years (10 years for Region 6)
Land Allocation
VAT Refund
For the building and construction expenditures of
investment projects of at least 500 Million TL
(~$233 Million)
Interest Payment SupportLimited to 5% of total investment amount and
with a cap of 50 Million TL ($22.5M)
Income Tax Withholding Exemption 10 years only for Region 6
Social Security Premium Support
(Employee’s Share)10 years only for Region 6
Strategic Investment Incentive Scheme
Summary Table
25
For further inquiries: [email protected]
Republic of TurkeyMinistry of Economy
Regional Investment Incentive Scheme
Large Scale Investment Incentive Scheme
Strategic Investment Incentive Scheme
General Investment Incentive Scheme
26
For further inquiries: [email protected]
Republic of TurkeyMinistry of Economy
27
Regardless of region where investment is made, the scheme is available for
all investment projects provided that:
Investment subject is not excluded from the investment incentives
programs.
Requirement of minimum fixed investment amount is met
• 1 Million TL. ($470K) in Regions I and II,
• 500 Thousand TL.($235K) in Regions III, IV, V and VI respectively.
The investment projects that are supported from the General Investment
Incentives Scheme will benefit only from Customs Duty and VAT
exemptions on their machinery and equipment expenditures.
General Investment Incentive Scheme
For further inquiries: [email protected]
Republic of TurkeyMinistry of Economy
29
TAX REDUCTION
Regions
Rate of Contribution to Investment (%)
Regional Scheme Large Scale Scheme
For investment
projects to be started
till Dec. 31th 2014
For investment
projects to be started
after Jan. 1st 2015
For investment
projects to be started
till Dec. 31th 2014
For investment
projects to be started
after Jan. 1st 2015
I 15 10 25 20
II 20 15 30 25
III 25 20 35 30
IV 30 25 40 35
V 40 30 50 40
VI 50 35 60 45
For further inquiries: [email protected]
Republic of TurkeyMinistry of Economy
30
Regions
For
investment
projects to be
started till
Dec. 31th
2013
For investment
projects to be
started after
Jan. 1st 2014
Support Cap
(Ratio to Fixed Investment- %)
Regional
SchemeLarge Scale Scheme Strategic Investments**
Region 1 2 years N/A 10 3 15
Region 2 3 years N/A 15 5 15
Region 3 5 years 3 years 20 8 15
Region 4 6 years 5 years 25 10 15
Region 5 7 years 6 years 35 11 15
Region 6* 10 years 7 years Limitless
SOCIAL SECURITY PREMIUM SUPPORT
(Employer’s Share)
For further inquiries: [email protected]
Republic of TurkeyMinistry of Economy
31
INTEREST SUPPORT
Schemes
Support Rate
Maximum Amount of
Support
(Thousand TL /~ $)TL LoansLoans in Foreign
Currency
R&D and Environmental Protection
Investments5 Points 2 Points 500 / ~225
Strategic Investments 5 Points 2 Points
5% of Investment
maximum 50.000
/~22.500
Regional Scheme
Region 3 3 Points 1 Points 500 / ~225
Region 4 4 Points 1 Points 600 / ~269
Region 5 5 Points 2 Points 700 / ~ 313
Region 6 7 Points 2 Points 900 / ~403
Republic of Turkey Ministry of EconomyGeneral Directorate of Incentive Implementation and Foreign Investment
Ayse Canan GURHAN- Commercial CounsellorTurkish Embassy in Sao PauloOffice of Commercial CounsellorPhone: + 00 55 11 3045 1733Fax: +00 55 11 3045 1899E-mail: [email protected]
Caner SANNAV- Representative of Ministry Of Economy in Sao PauloOffice of Commercial CounsellorPhone: + 00 55 11 3045 1733Fax: +00 55 11 3045 1899E-mail: [email protected]
Republic of Turkey Ministry of EconomyGeneral Directorate of Incentive Implementation and Foreign Investment
Phone : + 90 312 444 43 63
E-mail : [email protected]
Web : www.economy.gov.tr
www.incentives.gov.tr
Nihat ALKASHead of DepartmentE-mail: [email protected]
Ismet INCEForeign Trade ExpertE-mail: [email protected]
Alper Kursad ALKANForeign Trade ExpertE-mail: [email protected]
For further inquiries: [email protected]
Republic of TurkeyMinistry of Economy
34
TAX DEDUCTION IN REGIONAL AND LARGE SCALE
INVESTMENT INCENTIVE SCHEMES
Regions
Rate of
Contribution to
Investment (%)
Tax Deduction Rate
(%)
Applicable Rates of Tax Deduction Amount
before and after completion of investment
project
Before After
RegionalLarge
Scale 50 0 100
Region 1 15 25
Region 2 20 30 55 10 90
Region 3 25 35 60 20 80
Region 4 30 40 70 30 70
Region 5 40 50 80 50 50
Region 6 50 60 90 80 20
For further inquiries: [email protected]
Republic of TurkeyMinistry of Economy
35
REGION 2 REGION 3 REGION 4 REGION 5 REGION 6
Investment Amount
(Thousands)
TL 5.000
~ $ 2.250
TL 5.000
~ $ 2.250
TL 5.000
~ $ 2.250
TL 5.000
~ $ 2.250
TL 5.000
~ $ 2.250
Tax Deduction : 55% 60% 70% 80% 90%
Investment Contribution
Rate:20% 25% 30% 40% 50%
Tax Deductable Amount
(Thousands):
TL 1.000
~ $ 448
TL 1.250
~ $ 560
TL 1.500
~ $ 672
TL 2.000
~ $ 896
TL 2.500
~ $ 1.120
- Investment Period:
(Thousands TL)
(10%)
100
(20%)
250
(30%)
450
(50%)
1.000
(80%)
2.000
- Operation Period:
(Thousands TL)
(90%)
900
(80%)
1.000
(70%)
1.050
(50%)
1.000
(20%)
500
Corporate/income tax
rate until it reaches the
amount of contribution
to investment:
9%
(reduced tax
rate: 11%)
8%
(reduced tax
rate : 12%)
6%
(reduced tax rate : 14%)
4%
(reduced tax rate :
16%)
2%
(reduced tax
rate : 18%)
Explanatory Calculations for a Hypothetical Investment Project
Valid only with certain assumptions on project characteristics