INVESTMENT INCENTIVES IN TURKEYaz545403.vo.msecnd.net/uploads/2014/12/apresentacao... · 2014. 12. 9. · incentive certificate will be VAT exempt. (~18%) Customs Duty Exemption:

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



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

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Regional Scheme

Priority Investments

Strategic Scheme

Large Scale Scheme

General Scheme

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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.



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


(Employee’s Share)

5



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 %)

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Support Measures



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)

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Support Measures



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



Support MeasuresGeneral

Investment

Regional & Priority

Investment

Large ScaleInvestment

StrategicInvestment

VAT 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)

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Support Measures



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Regional Investment Incentive Scheme

Large Scale Investment Incentive Scheme

Strategic Investment Incentive Scheme

General Investment Incentive Scheme

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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



REGIONAL INVESTMENT INCENTIVE SCHEME

Summary Table

Incentives Region 1 Region 2 Region 3 Region 4 Region 5 Region 6

VAT 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

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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

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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

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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.

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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

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Incentives Terms and Rates

VAT 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

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# 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

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Incentives Region 1 Region 2 Region 3 Region 4 Region 5 Region 6

VAT 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


(Employee’s Share) (Year)N/A N/A N/A N/A N/A 10


Summary Table

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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.




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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)




Incentives All Regions

VAT Exemption


Tax ReductionRate of Contribution to

Investment (%)50% ( and ½ of Tax Deduction can be used before the

investment is completed)


(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


(Employee’s Share)10 years only for Region 6


Summary Table

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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.




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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


after Jan. 1st 2015

For investment


till Dec. 31th 2014

For investment


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



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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 6* 10 years 7 years Limitless

SOCIAL SECURITY PREMIUM SUPPORT

(Employer’s Share)



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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 5 5 Points 2 Points 700 / ~ 313


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]



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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



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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

Documents

INVESTMENT INCENTIVES IN TURKEYaz545403.vo.msecnd.net/uploads/2014/12/apresentacao... · 2014. 12. 9. · incentive certificate will be VAT exempt. (~18%) Customs Duty Exemption: