INVESTMENT INCENTIVES IN TURKEY

Murat GOREN

Commercial Consul of Turkey

Los Angeles, April 2015

Responsible agencyResponsible agency

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Ministry of Economy

General Directorate of Incentive Implementation and Foreign Direct Investment

www.economy.gov.tr

http://www.ekonomi.gov.tr/portal/faces/home/yatirim

http://www.incentive.gov.tr/

GeneralGeneral

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•Turkey is investment friendly country.

•Investors in Turkey enjoy from tax credit to direct financial support for their investment.

•Almost all investment with few exceptions is encouraged but with different level.

•Each Investment is put under one program to determine eligibility of incentives.

The investment incentives-1

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Value Added Tax (VAT) Exemption and Refund

VAT is not paid for imported and/or domestically provided machinery and equipment within the scope of the investment encouragement certificate.

VAT paid is refunded for constructions of building for Strategic Investment exceeding 500 Million TL

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Customs duty is not paid for the machinery and equipment provided from abroad (imported) within the scope of the investment encouragement certificate.

Custom Duty Exemption

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Tax Reduction

Pay income or corporate tax with reduce rates until total value reaches to said amount.

Rate of Contribution to Investment shows % of total amount of investment. State considers it contribute your investment by waiving some income taxes.

State waives some parts of taxes until waived amount reaches total contribution amount.

Contribution to investment ( with 10 % rate) is 10 TL for 100 TL investment.

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%10 more contribution to investment compared to regional incentives !!!

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SOCIAL SECURITY PREMIUM SUPPORT (Employer’s Share)

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INTEREST SUPPORT

General investment incentives

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If the investment does not fit into any specific program, it still enjoys general incentives regardless of region, provided that:

•Investment subject is not excluded from the investment incentives programs •Requirement of minimum fixed investment amount is met

General Incentives provides only customs duty and VAT exemptions on machinery and equipment expenditures.

New thing in the new program, income tax exemption will be available on minimum wage portion of labor, if investment is made in Region 6.

Regional investment incentives-1

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• Regional system aims to eliminate inter-regional imbalances by means of

encouragement of sectors determined.

• Sectors and rates of support measures have been differentiated according

to the level of development of the regions.

• Within the scope of regional investment encouragement, minimum investment

amounts are determined for certain investment subjects in each region

separately. If there is no defined minimum investment amount, it is;

– 1 Million TL. in Regions I and II,

– 500 Thousand TL. in Regions III, IV, V and VI.

Clustering and R&D in Regional Incentives

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Following investments will benefit from upper level regional incentives for Tax Reduction and Social Security Premium

• Investments in Organized Industrial Zones, • Joint Investments by multiple (at least 5) companies operating in the same sector which establish integration to their activities.

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REGIONAL MAP

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Large scale investment incentives-1

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Large scale investment incentives-2

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Strategic investment incentives-1

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What are the Strategic Investments?

–Investments to be made for production of intermediate or final

products of which more than 50% are supplied by imports.

–Energy investments to be made for exclusive use of such

strategic investments.

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Eligibility criteria for Strategic Investments

to be made for production of intermediate and final products

with high import dependence

of which more than 50% are supplied by imports.

with a minimum investment amount of 50 Million ¨̈

with a minimum 40% value added

With an import of at least 50 Million $ in the last one year period

(This condition is not necessary for goods with no domestic

production)

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Incentives All Regions

VAT Exemption

Customs Duty Exemption

Tax Reduction Rate of Contribution to Investment (%)

50% (50% of the contribution can be used before the investment is completed)

Social Security Premium Support(Employer’s Share) (Term of Support)

7 Years (10 years for Region 6)

Land Allocation

VAT Refund The building and construction costs of investments The building and construction costs of investments of more than 500 Million of more than 500 Million ¨̈

Income Tax Deduction Support 10 years only for Region 610 years only for Region 6

Social Security Premium Support (Employee’s Share)(Term Of Support)

10 years only for Region 610 years only for Region 6

Priority investment-1

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Followings are considered priority investments and will be eligible to Region 5 incentives no matter which Regions they are.

Priority investment-2

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Followings are considered priority investments and will be eligible to Region 5 incentives no matter which Regions they are.

Priority investment-3

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Followings are considered priority investments and will be eligible to Region 5 incentives no matter which Regions they are.

Priority investment-4

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Followings are considered priority investments and will be eligible to Region 5 incentives no matter which Regions they are.

Incentive Analysis in Pharmaceutical

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Priority Investment : Minimum Investment – 20 Milyon TL - $ 10 Milyon Make your investment in eligable for Region 5’s incentives Tax Reduction (TR) %70, (RC) rate of contribution %30

Large Scale InvestmentMinimum Investment – 50 Milyon TL - $ 25 MilyonTR-TC 20%-50%, 25%-55%, 30%-60%, 35%-70%, 40%-80%, 45%-90%

Strategic InvestmentMinimum Investment – 50 Milyon TL - $ 25 MilyonMinimum Imports – $ 50 Milyon, More than 50% Imports share Minimum 40% value addedTR-TC 50%-50%

Thank you

www.economy.gov.trE-mail : losangeles@economy.gov.tr

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Los Angeles, CA 90048