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Strategic Investment Incentives Scheme

Investments meeting the criteria below are supported within the framework of the Strategic Investment Incentives Scheme:

 

  • The domestic production capacity for the product to be manufactured with the investment should be less dependent on imports
  • to have a minimum investment amount of TRY 50 million

  • to create a minimum added-value of 40% (this condition is not applicable to refinery and petrochemicals investments)

  • The total import value of the product to be manufactured with investment should be minimum USD 50 million as of the past one year (excluding the products that are not locally produced)

 

The terms and rates of supports provided within the Strategic Investment Incentives Scheme are shown in the following table.

 

Strategic Investment Incentives Scheme Instruments

Incentive Instruments

Region

I

II

III

IV

V

VI

VAT Exemption

YES

Customs Duty Exemption

YES

Tax Reduction

Tax Reduction Rate (%)

90

Reduced Tax Rate (%)

2

Rate of Contribution to Investment (%)

50

Social Security

Premium Support (Employer’s Share)

Support Period

7 years

(10 years for Region 6)

Upper Limit for Support (%)

15 (No limit for Region 6)

Land Allocation

YES

Interest Rate Support

TRY Denominated Loans (points)

5

5

FX Loans (points)

2

2

Minimum Support Amount (*)

50,000

50,000

Social Security

Premium Support (Employee’s Share)

10 years (for investments in Region 6)

Income Tax Withholding Allowance

10 years (for investments in Region 6)

VAT Refund

YES (for construction expenditures of the strategic investments over TRY 500 million)

 

*5% of the investment amount and maximum TRY 50 million. 

 

Contribution Rate to Investment Applicable During Investment / Operating Periods Under Strategic Investment Incentives Scheme

Regions

Investment Period

Operating Period

I, II, III, IV, V

50 %

50 %

VI

80 %

20 %

 

Support Instruments

 

VAT Exemption:

VAT is exempt for imported and/or domestically delivered machinery and equipment within the scope of the investment incentive certificate.

 

Customs Duty Exemption:

Customs duty is exempt for imported machinery and equipment within the scope of the investment incentive certificate.

 

Tax Reduction:

The income or corporate tax is calculated on basis of reduced rates until the total amount of reduced tax reaches the amount of contribution to the investment.

The contribution rate to investment refers to the rate of the fixed investment subject to tax reduction.

 

Social Security Premium Support (Employee’s Share):

For additional employment created by the investment, the employee’s share of the social security premium calculated on basis of the legal minimum wage will be covered by the government. The instrument is applicable only to investments made in Region 6 within the scope of the investment incentive certificate. There is no upper limit for Social Security Premium Support and it is applicable for 10 years.

 

Social Security Premium Support (Employer’s Share):

For additional employment created by the investment, the employer’s share of the social security premium calculated on basis of the legal minimum wage will be covered by the government. A certain portion of total investment amounts are set as upper limits for this support. For Regional Investment Incentives Scheme, ceilings are 10 % for Region 1; 15 % for Region 2; 20 % for Region 3; 25 % for Region 4 and 35 % for Region 5. For Large-Scale Investment Incentives Scheme, ceilings are 3 % for Region 1; 5 % for Region 2; 8 % for Region 3; 10 % for Region 4 and 11 % for Region 5. For Strategic Investment Incentives Scheme, ceilings are 15 % for all regions. There is no upper limit for Region 6.

 

Income Tax Withholding Allowance:

The income tax in regards to additional employment created by the investment, within the scope of the investmentincentive certificate, will not be liable to withholding taxes. The instrument is applicable only to investments made in Region 6 within the scope of the investment incentive certificate. There is no upper limit for income tax withholding allowance and it is applicable for 10 years.

 

Interest Rate Support:

Interest rate support is a financial support instrument provided for investment loans with a term of at least one year obtained within the scope of an investment incentive certificate. A portion of the interest/profit share regarding the loan equivalent, at most 70 percent of the fixed investment amount registered in the investment incentive certificate, will be covered by the government.

 

Land Allocation:

Land may be allocated for investments, with an investment incentive certificate, in accordance with the rules and principles determined by the Ministry of Finance, depending on the availability of such land.

 

VAT Refund:

VAT collected on construction expenses, made within the scope of strategic investments with a minimum fixed investment amount of TRY 500 million, will be rebated.

 

R&D support

 

1)      R&D Law

 

The R&D Law provides special incentives for R&D investment projects in Turkey if a minimum of 50 personnel are employed in an R&D center. The incentives within the new law will remain in effect until 2024 and include:

 

  • 100 percent deduction of R&D expenditure from the tax base if the number of researchers exceeds 500, then in addition to the 100 percent deduction, half of the R&D expenditure increase incurred in the operational year compared to the previous year will also be deducted.

  • Income withholding tax exemption for employees (this item will be effective until December 31, 2023.)

  • 50% of social security premium exemption for employers for a period of 5 years

  • Stamp duty exemption for applicable documents

  • Techno-initiative capital for new scientists up to TRY 100,000

  • Deduction from the tax based on certain funds granted by public bodies and international organizations

 

2)      Support for Technology Development Zones

 

The advantages in Technology Development Zones are:

 

  • Offices ready to rent, and infrastructure facilities provided.

  • Profits derived from software development and R&D activities are exempt from income and corporate taxes until 31.12.2023.

  • Deliveries of application software produced exclusively in TDZs are exempt from VAT until 31.12.2023.

  • Wages of researchers along with software and R&D personnel employed in the zone are exempt from personal income tax until 31.12.2023.

  • 50% of the employer’s share of the social security premium will be paid by the government for 5 years until 31.12.2024.

 

3)      TUBITAK (Scientific and Technological Research Council of Turkey) and TTGV (Turkish Technology Development Foundation) both compensate or grant R&D related expenses and capital loans for R&D projects.

 

Projects eligible for TUBITAK incentives:

 

  • Concept development

  • Technological research & technical feasibility research

  • Laboratory studies in the translation of a concept into a design

  • Design and sketching studies

  • Prototype production

  • Construction of pilot facilities

  • Test production

  • Patent and license studies

  • Activities concerning the removal of post-sale problems arising from product design

 

Support for SMEs

 

SMEs are defined as companies employing less than 250 employees and earning less than TRY 25 million in revenue or turnover per year.

 

Incentives granted to SMEs include:

 

1.       Exemption from customs duties

2.       VAT exemption for imported and domestically purchased machinery and equipment

3.       Credit allocation from the budget

4.       Credit guarantee support

 

In order to meet financial needs of SMEs, a TRY 1 billion fund was transferred to the Credit Guarantee Fund (KGF) by the Treasury to create credit capacity worth TRY 10 billion. The guarantee limit is TRY 1,000,000 per SME and TRY 1,500,000 for the risk group that the SME related to. KGF covers up to 80 percent of the loan.

 

5.       KOSGEB support to SMEs (www.kosgeb.gov.tr)

 

The Small and Medium Sized Industry Development Organization (KOSGEB) makes significant contributions to strengthening SMEs by various support instruments in financing, R&D, common facilities, market research, investment site, marketing, export and training.

 

Industrial Thesis (SANTEZ) program

 

Direct financial support for new technology adaptation, process development, quality improvement and environmental modification projects to be achieved via university partnerships:

 

  • Up to 75% of the project budget could be supported by direct grants

  • Project term is 3 years, with a possible extension of 6 months

  • Laboratory analysis and test materials and equipment are supported

  • The application file could be approved within 4 months, and the project supervision committee is independent

 

Loans for technology development projects

 

The Technology Development Foundation of Turkey (TTGV) offers long term interest-free loans for technology development, renewable energy production, energy efficiency improvement and environmental impact-reduction projects.

 

Exemplary support for environmental projects:

 

  • The maximum contribution rate is 50% per project

  • Maximum budget of USD 1 million per project

  • The pay-back term is 4 years in total after project execution, including a one-year grace period

 

Training support

 

ISKUR, the National Recruitment Agency, may support vocational training projects for a maximum period of 6 months.

 

  • Direct salary support for interns, and unemployed candidates that are registered at ISKUR, (partial wage=TRY 20/day) during the pre-employment training session

  • Social security premium expenses (Occupational accidents and occupational diseases) are covered by ISKUR.

  • Program expenses such as the trainer's fee, energy and water bills are partially paid to the employer by ISKUR. The total amount is calculated by the cost per trainee and the employer must bill ISKUR for the services given.

  • ISKUR considers the employer (company) the legal party in this training program.

  • A certain number (percentage) of trainees must be employed after the program.

 

The Ministry of National Education cooperates for:

 

  • Vocational schools with the desired programs could be opened according to the decision of the Ministry.

  • The general cost of a trainee team for the adaptation of every requested program on a present vocational high school could be supported by the Ministry.

 

State aid for exports

 

The main aims of this scheme are to encourage exports and to increase the competitiveness of companies in international markets. This specific package mainly covers R&D activities, market research, participation in exhibitions and international fairs, and expenditure for patents, trademarks and industrial design.



 



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