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    Investment Incentive Regime in Turkey

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    investment incentives in Turkey

    Investment Incentive Regime in Turkey

    by Pi Legal Consultancy

    Introduction

    Overall, this article offers a comprehensive overview of the Investment Incentive Regime in Turkey.  The investment incentive regime in Turkey covers a wide range of incentives for legal and natural entities engaging in different sectors. Foreign investors can also enjoy these incentives on an equal footing. This paper particularly focuses on legal requirements of investment incentive certificates based on the type of the certificate.

    Why should you invest in Turkey?

    Undoubtedly, Turkey attracts foreign direct investments through its growing economy, a rapidly increasing young population and low production costs. Also Turkey is at the nexus of Asia and Europe.

    Regarding main benefits of investing in Turkey see our article on Is Turkey Safe for Investment?: Six Advantages to Grow Your Business in Turkey

    What does investment incentives mean?

    To some extent, it depends on the country profile. To clarify, “Investment incentive” refers to an administrative action dedicated to encouraging foreign and local investors into the domestic market or establishing an effectively functioning national economy. Investment incentive certificates play a key role in implementing “investment incentive policy” in Turkey.

    What is the Legal Basis of the Investment Incentive Regime in Turkey?

    Above all, the Decree on State Supports (Investment Subsidies) (No: 2012/3305) is central to the investment incentive regime in Turkey. Under Article 1, the objective of this Decree is to regulate the principles and procedures to orient savings to investments with high added value, to increase production and employment, to encourage strategic investments and regional and large scale investments, to attract international direct investments, to decrease regional development differences, to support investments related to environmental protection and to support research and development activities.

    The full text of the said Decree is available online here (in Turkish).

    What is the investment incentive certificate?

    In accordance with Article 1, the main target with the investment incentive certificate is to increase production and employment, as well as regional, strategic and international investments.

    New emerging working and economic conditions caused by the coronavirus epidemic all over the world has adversely affected many sectors. By all means, this situation had a detrimental effect upon a wide range of corporations. In the face of the current economic conditions after the pandemic in Turkey, it has become even more important for the domestic authorities to encourage investors from every single sector. In providing employment and foreign currency inflow from abroad, the legal or natural entities seeking investment incentives make a great contribution to the financial conditions of Turkey within the scope of the incentive application or existing certificate,

    What are examples of investment incentives in Turkey?

    In general there are 8 main areas of state support within the context of an investment incentive certificate:

    -Customs Duty Exemption

    -VAT Exemption

    -VAT Refund

    -Interest/Profit Share Support

    -Social Security Premium Support (Employer’s Share)

    -Social Security Premium Support (Employee’s Share)

    -Income Tax Withholding Support

    -Tax Deduction

    However, it is obligatory that the investments in the relevant incentive certificate are made on time. Once the investment project is not realized on time, an additional period of time may be asked and granted. Passing deadlines is subject to cancellation of the relevant certificate.

    What are the main types of investment incentive certificates?

    The scope and nature of investment incentive certificates are changeable on the grounds of type of the certificate and incentive scheme. At the present time, there are four main incentive schemes: general investment incentive scheme, regional investment incentive scheme, priority investment incentive scheme, strategic investment incentive scheme.

    Who can apply for an Investment Incentive Certificate?

    Legal and natural persons, partnerships, stock corporations, cooperatives, joint ventures, public institutions and agencies, public professional organizations, associations and foundations, Turkish branches of foreign based companies can benefit from state support granted under the Investment Incentives Program of Turkey.

    How can you apply for an investment incentive certificate?

    It is noteworthy that applications can be brought online via the electronic incentive implementation system, formally known as E-TUYS in Turkey.

    Where should you apply for an investment incentive certificate?

    The main competent national authority for investment incentive certificates is the Ministry of Industry and Technology. In other words, investors can make applications to the Ministry of Industry and Technology in order to enjoy an incentive certificate. Having said that, local governmental agencies or different Ministries may take part in preparing incentive certificates under certain circumstances. 

    Conclusion

    Consequently, the regulations as to the question of how the investment incentive regime works in Turkey are extremely complex. Particularly, very careful steps should be taken in compliance with the type of incentive certificate. Applicants have to satisfy all criteria set for each scheme. Necessary administrative procedures should be carried out step by step. Besides, effective time management is needed.  A comprehensive legal consultancy service might be very helpful in determining what needs to be done for an incentive certificate and/or how to benefit maximum from an investment incentive certificate. The absence of such legal assistance may lead to unintended administrative steps and even investment incentive lawsuits, which may be much more costly and lengthy.

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    Pi Legal Consultancy is an international law firm based in Ankara (Turkey) that offers legal consultancy and advocacy. We deliver legal services in key legal areas, among others, employment, international trade, healthcare, real estate, citizenship, corporate governance, banking and finance, energy and mining. Please visit our website for all our work and practice areas.

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