A Comprehensive Guide to State Investment Incentives in Türkiye
This comprehensive overview covers the main aspects of state incentives in Turkiye while providing specific details and examples.
Investment incentives play a crucial role in attracting both domestic and foreign capital to Türkiye. The country offers a wide array of support mechanisms designed to boost economic growth, increase employment, and enhance the competitiveness of Turkish industries on the global stage. In this comprehensive guide, we’ll explore the various incentive schemes available to investors in Türkiye as of June 2024.
1. Investment Incentive Schemes
Inestment incentives in Turkiye is multi-faceted, catering to different types of investments and regional development needs. The country is divided into six regions based on their level of development, with Region 1 being the most developed and Region 6 the least. This regional approach aims to promote balanced growth across the country.
1.1 General Investment Incentives
These are the most basic incentives available to all investors who meet the minimum fixed investment amount criteria:
Incentives
- VAT Exemption for Machinery
- Customs Duty Exemption
Eligibility
Minimum fixed investment amount between TRY 1,500,000 and TRY 3,000,000, depending on the investment location.
1.2 Regional Investment Incentives
These incentives are designed to encourage investments in specific regions, with more generous support provided in less developed areas:
Incentives
- VAT Exemption for Machinery and Construction
- Customs Duty Exemption
- Corporate Tax Reduction (15-55% of investment expenditures)
- Social Security Premium Support (Employer’s Share) for 2-12 years
- Land Allocation
- Interest Rate Support (in Regions 3-6)
Eligibility
Minimum fixed investment amount between TRY 1,500,000 and TRY 4,000,000, depending on the location and industry.
1.3 Strategic Investment Incentives
Strategic Investment Incentives are designed to encourage large-scale, high-value investments in Turkey. These incentives focus on sectors with high export potential and technological advancement.
Key Incentives:
- Corporate Tax Reduction: Significant reduction in corporate tax for qualifying investments.
- VAT Exemption: Exemption from Value Added Tax (VAT) for machinery, equipment, and construction costs.
- Customs Duty Exemption: Exemption from customs duties on imported machinery and equipment.
- Social Security Premium Support: Support for a portion of employer’s social security contributions.
- Interest Rate Support: Reduced interest rates on loans for investment projects.
- Land Allocation: Potential allocation of land for investment projects.
Eligibility:
To qualify for Strategic Investment Incentives, projects must meet the following criteria:
- Minimum Investment Amount: A substantial minimum investment is required.
- Domestic Value Added: A significant portion of the product’s value must be added domestically.
- Export Performance: The product must have a substantial export volume.
1.4 Project-Based Investment Incentives
This is a tailor-made incentive scheme for large-scale, strategic investments:
– All benefits of Strategic Investment Incentives
– Additional supports such as energy subsidies, capital contributions, and purchasing guarantees
Eligibility:
Minimum fixed investment of TRY 1 billion (~31 million USD), focus on high-tech and strategic products.
1.5 Medium-High Tech Investment Incentives in Turkey
The Turkish government offers a variety of incentives to encourage investments in medium-high technology sectors.These incentives are designed to stimulate economic growth, create jobs, and foster technological advancement.
Key Incentives:
- Corporate Tax Reduction: Businesses can benefit from a significant reduction in corporate taxes, with the exact percentage depending on the investment location and industry.
- VAT Exemptions: Value Added Tax (VAT) exemptions are provided for machinery, equipment, and construction costs, reducing overall investment costs.
- Customs Duty Exemptions: Imported machinery and equipment used in the investment project are exempt from customs duties.
- Social Security Premium Support: The government provides support for a portion of the employer’s social security contributions for a specific period.
- Interest Rate Support: The government offers interest rate support for loans taken out to finance the investment.
- Land Allocation: In some cases, the government may provide land for investment projects.
Eligibility :
1.6 Priority Investment Incentives
The Turkish government offers a range of incentives to encourage priority investments in specific sectors and regions.These incentives aim to boost economic growth and create employment opportunities.
Key Incentives:
- Customs Duty Exemption: Exemption from customs duties for imported machinery and equipment.
- VAT Exemption: Exemption from Value Added Tax (VAT) for machinery and construction costs.
- Corporate Tax Reduction: Significant reduction in corporate tax rates.
- Social Security Premium Support: Support for a portion of employer’s social security contributions.
- Interest Rate Support: Reduced interest rates on loans for investment projects.
- Land Allocation: In certain cases, the government may provide land for investment projects.
Eligibility:
To qualify for priority investment incentives, projects must meet the following criteria:
- Minimum Investment Amount: A minimum fixed investment amount is required, varying based on the investment location and industry.
- Investment Location: Investments must be located in designated priority regions.
- Industry: The investment project must align with the government’s priority sectors.
2. Employment Incentives
İŞKUR Incentives
The Turkish Employment Agency (İŞKUR) is an institution established to help protect, develop and expand employment in Türkiye and to prevent unemployment, and to carry out unemployment insurance services.
Technical and Vocational Training Program
Incentive:
Financial support for companies providing vocational training.
Support:
- Coverage of trainer expenses (salary, social security premiums, income tax withholding)
- Daily stipend of up to TRY 425 for trainees
- Health insurance coverage for trainees
Eligibility:
- Company supplies training venue and materials
- At least 50% of trainees must be employed at the end of the program
- Trainees must be unemployed and registered with the Turkish Employment Agency
Incentives for the Employment of Women, Youths, and Individuals with Professional Competence Certificates
Incentive:
Social security premium support for employers.
Support:
Coverage of up to 50% of the employer’s social security premium costs for up to 54 months, depending on the employee’s gender and age.
Eligibility:
- Employees must have been unemployed for at least 6 months
On-the-Job Training Program
Incentive:
Financial support for companies providing on-the-job training.
Support:
- Daily stipend of up to TRY 720 for trainees for up to 6 months
- Health insurance coverage for trainees
Eligibility:
- Number of trainees cannot exceed 30% of the total workforce
- Trainees must be unemployed and registered with the Turkish Employment Agency
- No cost to the company for training
3. R&D and Design Incentives
Türkiye places a strong emphasis on fostering innovation through R&D and design activities:
3.1 R&D and Design Center Incentives in Türkiye
The Turkish government offers a range of incentives to encourage investment in research and development (R&D) and design centers. These incentives aim to boost innovation and technological advancement in the country.
Key Incentives:
- R&D and Design Discount: 100% reduction of R&D expenditures from the corporate tax base.
- Income Tax Withholding Support: 80% (BSc), 90% (MSc), 95% (PhD) discount on income tax withholding for employees working in R&D and design centers.
- Social Security Premium Support: 50% exemption of employer’s share of social security premiums for R&D and design center employees.
- Stamp Duty and Customs Duty Exemptions: 100% exemption on stamp duty for relevant documents and customs duties for imported products used in R&D and design activities.
- Fundamental Sciences Employment Support: Wage support for R&D personnel with BSc degrees in specific fundamental sciences.
Eligibility:
At least 15 R&D personnel must be employed in order to be eligible for R&D center incentives. At least 10 design personnel must be employed in design centers.
3.2 Technology Development Zone (Technopark) Incentives
Türkiye offers a range of incentives to encourage investment and innovation in Technology Development Zones (TDZs).These incentives are designed to promote R&D, software development, and high-tech industries.
Key Incentives:
- Corporate Tax Exemption: Profits from software development, R&D, and design activities within TDZs are exempt from both income and corporate taxes.
- VAT Exemption: Sales of application software produced exclusively in TDZs are exempt from VAT. This includes software for system management, data management, business applications, and various other domains.
- Income Tax Withholding Support: Remuneration for R&D, design, and support personnel employed in the zone is exempt from all taxes. However, the number of support personnel covered by this exemption cannot exceed 10% of the total R&D personnel.
- Social Security Premium Support: 50% exemption of employer’s share of social security premiums for employees in TDZs.
- Stamp Duty and Customs Duty Exemptions: 100% exemption on stamp duty for relevant documents and customs duties for imported products used in TDZ activities.
- Fundamental Sciences Employment Support: Up to the gross minimum wage per month support for R&D personnel with BSc degrees in specific fundamental sciences.
3.3 TÜBİTAK R&D and Innovation Incentives
The Scientific and Technological Research Council of Türkiye (TÜBİTAK) offers a range of R&D and innovation programs aimed at boosting the private sector’s research capabilities and fostering entrepreneurship.
Key Program Categories:
- Private Sector R&D and Innovation Projects:
- Supports collaborative R&D projects between universities and industry.
- Provides funding for SME research and development initiatives.
- Facilitates international R&D collaborations.
- Developing Entrepreneurship and Innovative Capacity:
- Offers support for technology transfer offices.
- Provides funding for venture capital initiatives.
- Supports patent licensing and capacity-building programs.
TÜBİTAK 1515 Frontier R&D Laboratory Support Program:
Key Incentives:
- Up to 75% of the R&D budget, with a maximum of TRY 10 million.
Eligibility:
Companies with at least TRY 15 million in R&D expenditures within the past three years.
4. Other Incentives and Support Mechanisms
4.1 Advance Loans Against Investment Commitment (ALAIC)
Türkiye offers the Advance Loans Against Investment Commitment (ALAIC) program to support large-scale investments in the country. This program provides companies with access to financing for their investment projects.
Key Incentives:
- Loan Amount: Companies can receive loans of up to 70% of their total investment, with a maximum of TRY 5 billion per company.
- Interest Rate: The interest rate for these loans ranges from 30% to 15% and has a maximum maturity of 10 years.
Eligibility:
To be eligible, companies must have a total investment of at least TRY 1 billion, possess an Investment Incentive Certificate and Technology/Strategy Score, and contribute at least 20% equity to the project. Additionally,excluding the manufacturing industry, at least 50% of the domestic input amount is required.
Program Limits: The ALAIC program has an annual allocation of TRY 100 billion, with a total limit of TRY 300 billion over three years.
4.2 Agricultural and Rural Development Supports
The Agricultural and Rural Development Support Institution (IPARD / TKDK) offers a range of grants to support agricultural investments and rural development projects in 42 provinces of Türkiye.
Key Incentives:
- The cash support covers up to 75% of the investment budget, with a limit of 5,000-3,000,000 EUR.
- Eligible Sectors: Grants are available for various sectors, including meat products, milk and dairy products, plant production diversification, aquaculture production, rural development projects, machinery parks, and renewable energy investments.
Eligibility:
Specific eligibility criteria apply to each sector.
4.3 Export Incentives
he Turkish government offers a range of incentives to support exporters and promote international competitiveness. These incentives cover various aspects of export activities, from production to market entry.
Key Incentive Categories:
Support for Production Inputs:
- Customs Duty Exemption
- VAT Refund
- Special Consumption Tax Refund
- Resource Utilization Support Fund Refund
- Stamp Duty Refund
- Exemption from quotas and surveillance measures
Support for Market Entry and Promotion:
- Market Research and Market Entry Support:
- Support for health tourism, informatics, education, film/series, management consultancy, logistics,publishing, and real estate sectors: 50% support for promotion, advertisement, marketing, employment,advisory consultancy, logistics, publishing, and real estate sector expenses, as well as design company and cooperation institution expenditures, department setup abroad expenses, and high added-value product development costs.
- Design Supports: 50% for brand registration expenditures, 60% for report and foreign company acquisition expenditures, 50% for document/certification expenditures, and 50% for consultancy expenses.
- Support of Market Entry Certificates: 50% for country-specific or sector-specific market entry certificates such as ISO, CE, and GOST-R.
- Incentives for Service Exports: 50% for commission payments made to agencies, 50% for fair participation expenditures, up to 80% for advertisement, promotion, and marketing expenditures, up to 80% for foreign department rents, and up to 50% for translation expenditures.
- Global Supply Chain Support: Up to 50% for machinery/equipment purchases, foreign office expenditures,software purchases, training and advisory costs, certification and test expenditures incurred by companies aiming to become suppliers for global companies, for up to 2 years and up to USD 1 million.
Additional Information:
- Supports may vary depending on the sector, with additional incentives offered for certain industries.
4.4 Free Trade Zone Incentives
Basic Objectives of Free Trade Zones:
- Promoting export-oriented investment and production
- Accelerating Foreign Direct Investment (FDI) and technology access
- Directing enterprises towards export
- Developing international trade
Activities Permitted in Free Trade Zones:
- Manufacturing
- Research and development (R&D)
- Software
- General trading
- Storing
- Packing
- Banking and insurance
- Assembly and disassembly
- Maintenance services
Key Incentives:
- Income Tax Exemption: For companies exporting at least 85% of the FOB value of products produced in the free zone.
- VAT Exemption
- Customs Duty Exemption
- Special Consumption Tax Exemption
- Corporate Tax Exemption: For manufacturing industry
- Income Tax Exemption on Employees’ Salaries
- Stamp Duty Exemption
- Property Tax Exemption
- Permission to Bring Second Hand/Used Machinery
This comprehensive incentive system demonstrates Türkiye’s commitment to attracting investments across various sectors and regions. By offering tailored support mechanisms, the country aims to boost its economic development while addressing regional disparities and promoting innovation.
Investors are encouraged to thoroughly review the eligibility criteria and application procedures for each incentive scheme to maximize the benefits for their specific projects. As the incentive landscape may evolve, it’s advisable to consult with relevant government agencies or investment promotion offices for the most up-to-date information and guidance.
5. Regional Incentive Breakdown
To better understand how incentives vary across regions, let’s break down the support measures for each:
| منطقه | VAT Exemption | Customs Duty Exemption | Corporate Tax Reduction Rate | Social Security Premium Support (Years) | Land Allocation | Interest Rate Support | Income Tax Withholding Support |
|---|---|---|---|---|---|---|---|
| Region 1 | Yes | Yes | 50% | 2-3 | Yes | خیر | خیر |
| Region 2 | Yes | Yes | 55% | 3-5 | Yes | خیر | خیر |
| Region 3 | Yes | Yes | 60% | 5-6 | Yes | Yes | خیر |
| Region 4 | Yes | Yes | 70% | 6-7 | Yes | Yes | خیر |
| Region 5 | Yes | Yes | 80% | 7-10 | Yes | Yes | خیر |
| Region 6 | Yes | Yes | 90% | 10-12 | Yes | Yes | Yes |
As we can see, the level of support increases as we move from Region 1 to Region 6, reflecting the government’s aim to boost development in less industrialized areas.
6. Strategic Sectors and Priority Investments
Türkiye has identified several strategic sectors and priority investment areas that receive enhanced incentives:
6.1 Medium-High Tech Investments
Investments in medium-high technology sectors can benefit from Region 4 incentives regardless of their actual location (except in Region 6, where Region 6 incentives apply). These sectors include
- Chemical materials and products
- Machinery and equipment manufacturing
- Electrical machinery and equipment
- Motor land vehicles
- Railway and tramway locomotives and wagons
6.2 High-Tech Investments
Similarly, high-tech investments can benefit from Region 5 incentives regardless of location. These include:
- Pharmaceuticals
- Computer, electronic and optical products
- Aircraft and spacecraft
6.3 Priority Investments
Certain types of investments are deemed priority areas and can benefit from enhanced incentives. Some examples include:
- LNG storage facilities
- Nuclear power plants
- Defense industry investments
- Mine extraction and processing
- Railroad and maritime transportation
- Tourism investments in protected areas
7. Technology Focused Industrial Movement Program (HAMLE)
This program deserves special attention as it targets high value-added production in strategic sectors:
Sectors: Machinery, electrical equipment, computer science, pharmaceuticals, electronics, chemicals, optics, transportation vehicles
Support: Combines strategic incentives with additional benefits like qualified employee support, capital contribution, and energy support
Eligibility:
Minimum TRY 10 million investment (may vary by call)
8. Project-Based Investment Incentives: Case Studies
To illustrate the potential of project-based incentives, let’s look at some real-world examples:
Ford’s Commercial Vehicle and Battery Production Investment
– Investment Amount: TRY 20.5 Billion
– Key Supports: 100% corporate tax reduction, 10-year social security premium support, TRY 250 million qualified personnel support, TRY 200 million energy support
Kalyon’s Photovoltaic Solar Panel Production Investment
Investment Amount: TRY 3.7 Billion
Key Supports: 70% corporate tax reduction, 10-year social security premium support, TRY 100 million qualified personnel support, TRY 240 million energy support
These examples demonstrate the tailored nature of project-based incentives and their potential to support large-scale, strategic investments.
9. R&D and Innovation Ecosystem
Türkiye’s commitment to fostering innovation is evident in its comprehensive R&D support system:
9.1 Technology Development Zones (TDZs)
As of 2024, there are 92 technoparks across Türkiye, offering a conducive environment for R&D activities:
- 100% corporate tax exemption on R&D profits
- 100% income tax exemption for R&D personnel
- 50% employer social security premium support
- VAT exemption for software developed in TDZs
9.2 TÜBİTAK Programs
The Scientific and Technological Research Council of Türkiye (TÜBİTAK) offers various support programs:
- Industrial R&D Funding Program
- SME R&D Start-up Support Program
- International Industrial R&D Projects Support Program
- Frontier R&D Laboratory Support Program
Spotlight on TÜBİTAK 1515 Frontier R&D Laboratory Support Program:
Support: Up to 75% of the R&D budget, maximum TRY 10 million
Eligibility:
At least TRY 15 million R&D expenditure in any of the last three years
10. Export-Oriented Incentives
Türkiye’s export promotion strategy includes several targeted support mechanisms:
10.1 TURQUALITY® Program
This world-renowned program aims to create global Turkish brands:
- 50% support for branding activities abroad (advertising, store rents, consultancy, etc.)
- Executive development programs
- Vision seminars for global competitiveness
10.2 Market Entry Support
- 70% support for international market research trips
- 60-75% support for report purchases and foreign company acquisitions
- 80% support for e-commerce site subscriptions
10.3 Service Export Incentives
Targeted support for sectors like health tourism, IT, education, and logistics:
- Up to 80% support for advertising and marketing expenses
- 50-60% support for certification, consultancy, and agency commissions
11. Free Trade Zones: Gateways to Global Markets
Türkiye’s 18 Free Trade Zones offer unique advantages for export-oriented businesses:
- VAT Exemption
- Customs Duty Exemption
- Special Consumption Tax Exemption
- Corporate Tax Exemption (For Manufacturing Industry)
- Income Tax Exemption on Employees’ Salaries
- Stamp Duty Exemption
- Property Tax Exemption
- Permission to Bring Second Hand/Used Machinery
Free trade zones in Turkiye
12. How to Apply for Incentives
To benefit from these incentive schemes, investors typically need to follow these steps:
- Determine eligibility based on investment type, amount, and location
- Prepare a feasibility report and gather necessary documents
- Apply for an Investment Incentive Certificate through the Ministry of Industry and Technology’s e-TUYS system
- Obtain the certificate and start implementation
- Submit regular progress reports to relevant authorities
13. Future Outlook
As Türkiye continues to position itself as a strategic investment destination, we can expect the incentive system to evolve. Key trends to watch include:
– Increased focus on green investments and sustainability
– Enhanced support for digital transformation and Industry 4.0 technologies
– Continued emphasis on reducing import dependency in critical sectors
– Potential new incentives targeting emerging technologies like AI, quantum computing, and biotechnology
نتیجه
Türkiye’s comprehensive investment incentive system offers a wide array of opportunities for both domestic and foreign investors. By strategically leveraging these supports, companies can significantly enhance their competitiveness while contributing to Türkiye’s economic development.
As the global economic landscape continues to shift, Türkiye’s adaptable and targeted approach to investment promotion positions it as an attractive destination for businesses looking to expand or establish new operations.
Investors are encouraged to engage with relevant government agencies, such as the Investment Office of the Presidency of Türkiye, to explore how these incentives can be tailored to their specific projects and objectives.
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