In an effort to reach Turkey's long-term macroeconomic targets of increasing Turkey's world trade share, ensuring the security of supply, improving Turkey's rank in production of information, technology and innovation, and facilitating the transition to a production structure based on design and marks with high added value, the Turkish Parliament adopted a new comprehensive package law, the "Law on Supporting Investments on Project Basis and Amending Certain Laws and Decree Laws" No. 6745 ("Law") which was published in the Official Gazette on September 7, 2016.
What the Law Says
Within the scope of the Law, the Council of Ministers will be entitled to grant tax incentives, supports or donations for the projects that are to be financed by the Ministry of Economy and meet the qualifications set out below, separately or collectively:
- address Turkey's current and prospective needs in line with its targets set forth in national development plans and annual programs;
- ensure the security of supply;
- reduce foreign dependency;
- provide technological change; and
- be innovative, R&D intensive and with high added value.
The Council of Ministers may decide that one or more of the following benefits may be granted to eligible investment projects:
- For investments within the scope of the investment incentive certificate, a corporate income tax rate reduction of up to 100% and an investment contribution rate of 200% maximum. The Council of Ministers may also grant corporate income tax exemption exclusively for the profits derived from an investment up to 10 years as of the date when the investment commences to operate.
- If the investment is built upon a public immovable property, a right of easement or use on that immovable property can be granted in favor of the investor without consideration for 49 years. On condition that the investment is completed and the envisaged employment is provided for 5 years, ownership of the immovable property can be transferred to the investor without consideration upon request.
- Customs tax exemption.
- Income tax withholding support.
- Social security premium support for employer's share support for 10 years.
- Supply of energy consumption expenditures of up to 50% for a maximum of 10 years.
- Donation, interest or dividend support for the loans extended in order to finance the fixed investment amount for up to 10 years.
- Salary support of up to 20 times the gross monthly minimum wage for qualified employees who are significantly important for the investment for a maximum of 5 years.
- Guarantee of purchase for the project-based investment product can be granted, the duration and amount of which will be determined by the Council of Ministers.
- The Council of Ministers may grant exemption for permission, assignment, license, registrations and other restrictive provisions imposed by other laws for project-based investments.
- The Council of Ministers may decide that all kinds of infrastructure investment can be carried out if the project requires this.
- The Council of Ministers may allow the State to become a shareholder owning up to 49% of the investment amount provided that the acquired shares will be sold back to the investors or be sold via public offer within 10 years.
If the investment is not duly completed, all taxes that cannot be collected in time due to reduced corporate income tax application, tax exemption and income tax withholding support will be collected with delay interest without being subject to any tax loss penalty. Other incentives granted will be taken back within the scope of the Law on Collection Procedure of Public Assets.
In cases where the investment is transferred, the transferee company may benefit from the same benefits and exemptions, provided that the conditions set forth in the Law are fulfilled.
These incentives are among the precautions taken after the coup attempt to vitalize the Turkish economy; to mitigate the attempted coup's adverse effects; and to make investment in Turkey more attractive.
Affected taxpayers who wish to carry out new investment projects should be aware of the new tax reliefs and support provided in the Law.