According to the Turkish Foreign Direct Investors Law there are many advantages of establishing a company in Turkey for foreigner investors;
- Work permit convenience is provided to the companies established by foreigners in terms of foreign personnel employment.
- Reports of international value organizations are taken as basis in determination of non- cash capital of foreign investors.
- Foreign investors can resort to national or international arbitration and other dispute resolution systems due to potential legal problems.
- Foreign investors can freely transfer abroad their profits and some income gained in Turkey.
- Expropriation or nationalization of foreign direct investments has been restricted.
- Reports of international value organizations are taken as basis in determination of non- cash capital of foreign investors.
Capital companies (Joint stock company, limited company and partnerships limited by shares are the capital companies.) are obliged to pay Corporation tax (20%) in Turkey. Private companies (limited partnerships and general partnerships are private companies) and individuals are obliged to pay income tax (progressive 15%, 20%, 27%, 35%, 40%) which the applicable percentage arises due to the amount of earnings/revenues of individuals and private companies during the year.
In addition to these, there will be a value added tax (1%, 8%, 18%) depending on the type of work, special consumption tax (45%, 50%, 80%, 130%, 150%, 220%, 277%) depending on the products (jewelry, fur, car, alcohol, cigarette, gasoline) and stamp tax applicable to rental income (10%). When the company dividends are distributed, taxes are collected from the shareholders in two stages, namely corporate tax and then income tax.
There are tax exemptions or tax incentives for companies established by foreigners. For example, Turkey has signed double taxation treaties with many countries. Turkey applies tax exemption (value added tax exemption and customs duty exemption) for procurement of machinery and equipment, regardless of the investment region determined by the state. The depth of incentive provided by the government vary based on the level of development of the regions. Developed regions are provided with fewer incentive options than lesser developed regions. Turkey offers higher incentives for investments to be made in less developed regions. These incentives are value added tax exemption, customs duty exemption, proportional corporate tax reduction in investment expenditures, social security premium support (employer’s share), land allocation, interest rate support depending on the investment location.
The state offers different incentives for Medium-High Tech investment areas, for Priority investment areas both determined by the state and for strategic investment in areas with high importation. Incentives are provided also for R&D/Design Centers. At least 15 R&D personnel must be employed in order to be eligible for R&D center incentives. At least 10 design personnel must be employed in design centers. Companies may also prefer technoparks for their R&D activities. Teknopars provide a wide range incentive opportunities. There are also TUBITAK incentives. TUBITAK supports the research, technology development, and innovation activities of companies with its grants.
There are also free zones outside of the customs border of Turkey for the activities of export- oriented companies. The incentives for companies situated on these zones are value added tax exemption, customs duty exemption, special consumption tax exemption, corporate tax exemption for companies operating in the manufacturing industry, exemption from the income tax on employees’ salaries (on the condition that 85% of the production is exported), stamp duty exemption, property tax exemption, permission to bring second hand/used machinery. Please do not hesitate to contact us for further information.