Introduction
Turkey has become an attractive hub for investors thanks to its geopolitical position, young population, large domestic market, and dynamic entrepreneurial ecosystem. Establishing an investment company in Turkey is not only advantageous for local entrepreneurs but also highly appealing to foreign investors. The most significant benefit comes from the government incentive system.
Investment incentives reduce costs through tax reductions, social security premium supports, interest subsidies, and land allocation, making Turkey a favorable destination for both local and international capital. In this article, we will explore the incentives provided to investment companies in Turkey, their scope, and the legal and financial advantages they offer to investors.
1. The General Investment Environment in Turkey
Turkey is strategically located at the crossroads of Europe, Asia, and the Middle East, making it a logistics hub for investors. This geographic advantage allows investment companies not only to access the Turkish domestic market but also to reach nearly 1.5 billion consumers across neighboring regions.
Additional factors that strengthen Turkey’s investment environment include:
- Young and qualified workforce,
- Developed infrastructure,
- Free trade agreements,
- Customs Union with the EU.
Beyond these advantages, the strongest motivation for investors is undoubtedly the state-supported incentive mechanisms.
2. What Is the Investment Incentive System?
The investment incentive system refers to the support mechanisms introduced by the Turkish government to reduce investment costs, increase competitiveness, and attract capital inflows.
Main objectives of the incentive system include:
- Supporting regional development,
- Creating employment,
- Encouraging technology transfer,
- Promoting domestic production,
- Strengthening exports.
Depending on the sector, size, and geographical location of the investment, companies may benefit from different types of incentives.
3. Types of Investment Incentives
In Turkey, incentives for investment companies are categorized as follows:
a) General Incentives
Available to all investment companies regardless of sector or region, including:
- VAT exemption,
- Customs duty exemption.
b) Regional Incentives
Turkey is divided into six regions based on economic development. Companies investing in less developed regions enjoy stronger support such as:
- Employer’s share of social security premiums,
- Income tax withholding support,
- Interest rate support.
c) Priority Investments
Strategic sectors such as defense, health, education, energy, and R&D benefit from additional incentives.
d) Strategic Investments
Designed to reduce the current account deficit, replace imports, and encourage high value-added production. These investments enjoy the most comprehensive support.
4. Key Incentives for Investment Companies
Investment companies in Turkey can benefit from the following support mechanisms:
- VAT Exemption: No VAT on machinery and equipment purchases.
- Customs Duty Exemption: No customs duty on imported investment goods.
- Tax Reduction: Corporate tax deductions.
- Social Security Premium Support: Employer’s share covered by the state for a set period.
- Interest Rate Subsidy: Part of loan interest expenses covered by the government.
- Land Allocation: Access to state-owned land for investment projects.
- VAT Refund: For construction-related expenses in large-scale or strategic projects.
5. Incentives for Foreign Investors
Turkey also provides strong incentives for foreign investors:
- International Arbitration Guarantee: Disputes can be resolved through international arbitration.
- Double Taxation Treaties: With over 80 countries, preventing double taxation on income.
- Free Zones Advantages: Full tax exemptions, customs benefits, and simplified bureaucracy.
Foreign investors in sectors such as finance, technology, energy, and manufacturing are especially targeted for additional incentives.
6. Advantages of Investment Incentives for Companies
The benefits of Turkey’s incentive system for investment companies can be summarized as follows:
- Reduced Costs: Tax exemptions and premium supports significantly lower expenses.
- Higher Profitability: Lower financing costs and state support increase profit margins.
- Risk Mitigation: State-backed guarantees minimize risks, particularly in strategic sectors.
- Faster Growth: Companies can expand with less capital.
- Global Competitiveness: Incentives strengthen companies’ positions in international markets.
7. Legal Framework and Judicial Decisions
Investment incentives in Turkey are not only economic but also have a solid legal foundation.
- Court of Cassation rulings (Yargıtay) provide precedents favoring investors in cases of disputes over incentive certificates.
- Turkish Commercial Code (TCC) and Foreign Direct Investment Law secure investor rights.
Legal guidance is highly recommended to ensure compliance and full benefit from incentive programs.
8. The Future of Investment Incentives in Turkey
The future of investment incentives in Turkey is expected to focus on technology, green energy, and digital transformation. The government is planning to expand support for environmentally friendly and sustainable investments.
Additionally, with the opening of the Istanbul Finance Center, special incentives for financial investment companies are anticipated, further boosting Turkey’s position as a global investment hub.
Conclusion
Turkey is not only attractive due to its geographical location and large domestic market but also because of its robust investment incentive programs. Investment companies benefit from tax reductions, premium support, interest subsidies, and land allocation, making Turkey a secure and profitable choice.
For both local and foreign investors, establishing a company in Turkey offers long-term profitability and sustainable growth, with strong government-backed incentives ensuring protection and support.
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