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Tax Incentives in Turkey

(You may use this link to see a brief explanation of Turkish Tax System)

  1. EXCLUSION OF INVESTMENT DEDUCTION
  2. DEDUCTION OF RESEARCH & DEVELOPMENT
  3. GAIN EXCLUSION ON EDUCATION AND INSTRUCTION BUSINESSES
  4. INCENTIVE OF VALUE ADDED TAX IN VEHICLES, OIL SEARCHING AND INCENTIVE CERTIFICATED INVESTMENTS
  5. TAX INCENTIVES IN INDUSTRIAL ZONES
  6. TAX INCENTIVES IN TECHNOLOGY DEVELOPING ZONES
  7. TAX INCENTIVE APPLIED IN FREE ZONES
  8. TAX INCENTIVE APPLIED IN EMERGENCY ZONE AND PRIORITY DEVELOPMENT AREAS
  9. TAX INCENTIVE APPLIED IN ORGANIZED INDUSTRIAL ZONES
  10. TAX AND FEES EXCLUSION IN PROVIDING CREDITS
  11. TAX INCENTIVES FOR RISING OF INVESTMENT AND EMPLOYMENT
  12. TAX INCENTIVES FOR CULTURAL INVESTMENTS AND ENTERPRISES

 

A. EXCLUSION OF INVESTMENT DEDUCTION (09:54 27.04.2006)

Being valid from 01.01.2006, with the Law numbered 5479, Article 19 of the Income Tax Law headed “Exclusion of Investment Deduction on business and agricultural earnings” has been abolished, and Temporary Article 69, attached to this Law, has arranged transition period applications. According to this;

can be deducted as exclusion of investment deduction.

(Income Tax Law a.19; Income Tax Law Temporary Article 61; Income Tax Law Temporary Article 65; Income Tax Law Temporary Article 69; Income Tax Circular/1; Income Tax Circular/22; Income Tax Circular/23; Income Tax Circular/32)

B. DEDUCTION OF RESEARCH & DEVELOPMENT (09:58 27.04.2006)

Being valid from 31.07.2004, %40 of research and development expenditures realized in the structure of enterprise and those which are oriented to new technology and searching of knowledge can be deducted from the income declared by annual tax return.

(Income Tax Law a.89/1-9; Corporate Tax Law a.14/6;Law numbered 5228 Temporary a.5, Corporate Tax General communiqué 86)

C. GAIN EXCLUSION ON EDUCATION AND INSTRUCTION BUSINESSES (10:09 27.04.2006)

Gains derived from operating private schools which began to function from 01.01.2004 is excluded from income tax for the five taxation period. The exclusion shall be applied to the gains derived from pre-school education, primary education, private education and secondary education private schools operated by the business income taxpayers within the scope of Law numbered 625.

Those who want to benefit from exclusion have to apply to our Ministry in written following beginning to function.

(Income Tax Law a.20; Corporate Tax Law a.8/8; Income Tax General communiqué 254; Law numbered 5228 Temporary a.1)

Free education and instruction services given in condition that not to pass over %10 of capacities of relevant period by the private schools subjected to the provisions of Law numbered 625, are excluded from value added tax. Value Added Tax Law a. 17/2-b)

lso, gains derived from operating rehabilitation centers which are affiliated with trusts to which The Council of Ministers gave tax exemption or associations beneficial to public interest are excluded from corporate tax for five taxation period. (Corporate Tax Law a.8/8)

D. INCENTIVE OF VALUE ADDED TAX IN VEHICLES, OIL SEARCHING AND INCENTIVE CERTIFICATED INVESTMENTS (10:11 27.04.2006)

- Delivery of sea, air and railway vehicles,

- Delivery of floating system and vehicles,

- Delivery and services done concerning the manufacture and construction of these vehicles.

- Modification, maintenance and repair services of these vehicles

done to the taxpayers whose businesses are leasing or operating sea, air and railway vehicles, floating system and vehicles in various forms are excluded from value added tax.

(Value Added Tax Law a. 13/1-a, Value Added Tax Law General communiqué 48; Value Added Tax Law Circular/31)

Exploration, operating, enrichment and refining activities concerning gold, silver and platinum and within scope of Oil Exploration Law provisions services and delivery of goods done to those who are busy with oil exploration activities are excluded from value added tax.

(Value Added Tax Law a.13/1-c, Value Added Tax Law General communiqué 16,19,93,95)

Delivery of machines and equipment to the taxpayers, owner of the investment incentive certificate, under this certificate are excluded from value added tax.

(Value Added Tax Law a.13/1-d, Value Added Tax Law General communiqué 69,72,74,87,92) (Cabinet Decision numbered 2004/8127)

Delivery of goods and rendering of services concerning businesses mentioned hereafter to the taxpayers who deal with construction, restoration and widening businesses of ports and airports by themselves or make others deal with these businesses are excluded from value added tax. (Value Added Tax Law a. 13/1-e, Value Added Tax Law General communiqué 93,96)

E. TAX INCENTIVES IN INDUSTRIAL ZONES (10:14 27.04.2006)

Incentives oriented to income and corporate taxpayers doing business in industrial zones take place in Incentive of Investments and Employment Law numbered 5084.

To those who function in these regions should be supported in income tax withholding, support in employer shares of insurance premium, free investment space and energy support.

Income Tax Withholding Incentive:
(Law numbered 5084 a.3, a.7/h and General communiqué of support for investment and employment serial number 1 and
number 2)

Employer’s Contribution Incentive:
(Law numbered 5084, a.4, a.7/h)

Free Investment Place Assignment:
(Law numbered 5084, a.5)

Energy Support:
(Law numbered 5084, a.6, a.7/h)

F. TAX INCENTIVES IN TECHNOLOGY DEVELOPING ZONES (10:15 27.04.2006)

- Gains derived from software and research& development activities in technology developing zones by the taxpayers who do business in mentioned zones are excluded from income and corporate tax till 31.12.2013.

- Wages of researcher, software programmer and research & development personnel related to these jobs in these zones are excluded from income tax till 31.12.2013.

- Gains acquired within the scope of application of Technology Developing Zones Law numbered 4691 by executive companies of technology developing zone are also excluded from income or corporate tax till 31.12.2013.

- These exclusions shall be also applied to the executive company of Scientific and Technological Research Council of Turkey (TÜBİTAK)- Technology Free Zone of Marmara Research Center, to the income and corporate taxpayers doing business in this zone and to the wages of researcher, software programmer and research & development personnel working in this zone.

(Technology Developing Zones Law Temporary Article 2, Corporate Tax Circular 6)

Within the period in which the gains of entrepreneurs doing business in technology developing zones are excluded from income or corporate tax, delivery and services which are manufactured only in these zones and in the form of system management, data management, business applications, sectoral, internet, mobile and military command control application software are also excluded from value added tax.( Value Added Tax Law Temporary Article 20)

G. TAX INCENTIVE APPLIED IN FREE ZONES (10:16 27.04.2006)

Free zones considered as out of customs areas, Taxpayers who has license to function in free zones which founded due to law numbered 3218 are excluded from:

Income and corporation tax limited to the time in their license for the income they derived in these zones.

Income tax of the personnel wages until the date of 31.12.2008

Every kind of tax and fees about the functions in these zones until 31.12.2008.

Separately incomes of the taxpayers derived in these zones are excluded from income and corporation tax until the annual taxation period of full membership date to European Union (Free Zones Law temporary article 3) (Corporate Tax circular 13) (Corporate Tax General communiqué 85)

Goods and services in free zones are excluded from VAT also. (Value Added Tax Law a.16/1-c, Value Added Tax Law 17/4-ı , Value Added Tax Law General communiqué 39,93)

H. TAX INCENTIVE APPLIED IN EMERGENCY ZONE AND PRIORITY DEVELOPMENT AREAS (10:17 27.04.2006)

By the law numbered 4325 it is aimed to increase investment and employment by applying tax incentives and providing free government lands for the investors in emergency zones and priority development areas.

Income and Corporation Tax Exclusion:

Gains of taxpayers in emergency zones who began work between 1.1.1998 – 31.12.2000 are excluded from income and corporation tax for 5 taxation years including investment period as long as they employ 10 or more workers actually and continuously. (Law numbered 4325,a.3) (4325/ General communiqué serial number 1)

Income and Corporation Tax Deduction:

Beginning from the end of exclusion time and ending at 31.12.2007 if 10 or more workers actually and continuously employed in workplaces of the province, a deduction in income and corporation tax will be made at the rate of worker count determined (Law numbered 4325,a.3) (4325/ General communiqué serial number 1)

Free Investment Place:

In the priority development areas, lands belonging to the treasury can be assigned to real or legal persons for free in case of investments consisting at least 10 persons of employment and have incentive certificate. (Law numbered 4325, a.8) (4325/ General communiqué serial number 1)

I. TAX INCENTIVE APPLIED IN ORGANIZED INDUSTRIAL ZONES (10:19 27.04.2006)

Incentives directed to the income and corporation taxpayers located in organized industrial zones are in Incentive of Investment and Employment Law numbered 5084. Taxpayers functioning in these regions covering the provinces in scope of the law numbered 5084 were given income tax withholding incentive, employer contribution incentive, free investment land allocation and energy support.

1. Income Tax Withholding Incentive:
(Law numbered 5084 a.3, a.7/h and General communiqué of support for investment and employment serial number 1 and
number 2)

2. Employer’s Contribution Incentive:
(Law numbered 5084, a.4, a.7/h)

3. Free Investment Place Assignment:
(Law numbered 5084, a.5)

4. Energy Support:
(Law numbered 5084, a.6, a.7/h)

Separately body of organized industrial zones is exempt from all types of tax and fees about the operation of Organized Industrial Zones Law.

Wastewater fee is not taken from the zones operating a water treatment plant.
(Law n.4562, a.21)

Land and work-place deliveries of economic entities formed for the foundation of organized industrial zones are exempt from Value Added Tax (Value Added Tax Law a.17/4-k)

Economic entities founded by public body or professional institution with real and legal entities, using all of its income to meet the requirements of these places, to prepare the infrastructure of organized industrial zones with small industrial sites and to ensure the common requirements such as: land, electricity, gas, steam and water are exempt from corporation tax. (Corporate Tax Law a.7/25)

Buildings in organized Industrial regions benefit from real estate tax exclusion following the 5 years of their completion. (Real Estate Tax Law a.5/f)

J. TAX AND FEES EXCLUSION IN PROVIDING CREDITS (10:28 27.04.2006)

Papers constructed for acquiring or payback of credits, which will be used by the hand of Banks, credit enterprises abroad and international associations, and the signs over these papers (Except usage of credits) are exempt from stamp duty. (Stamp Tax Law Table number / 23)

Transactions caused by establishment, merging, assignation, capital raise, splitting off and type alteration of joint stock, shared commandite and limited companies and transactions related to providing, re-payment and bonds of credits which are given by banks, overseas credit organizations and international institutions shall not be subjected to charges. (Charges Law a.123)

K. TAX INCENTIVES FOR RISING OF INVESTMENT AND EMPLOYMENT (10:30 27.04.2006)

In law numbered 5084 which directed to rise of investment and employment, Income tax withholding incentive will be applied following the completion of the investment in provinces until 31.12.2007 for beginner investors or creating employment opportunities.

When the law was put into force there was 36 provinces enclosed but as a result of the changes made in the law; tax, insurance premium incentives and energy support subjects were taken in scope of law and 13 more provinces added whose social – economical development value determined negative by State Planning Organization so the number of provinces benefiting from the incentives risen to 49.

1. Income Tax Withholding Incentive:
(Law numbered 5084 a.2, a.3, a.7/h and General communiqué of support for investment and employment serial number 1 and number 2)

2 Employer’s Contribution in . Insurance Premium Incentive:
(Law numbered 5084, a.4)

3. Free Investment Place Allocation:
(Law numbered 5084, a.5)

4. Energy Support:
Be changed as (Law numbered 5084, a.6)

L. TAX INCENTIVES FOR CULTURAL INVESTMENTS AND ENTERPRISES (10:31 27.04.2006)

The purpose of the law numbered 5225 is to provide meeting of individual and society requirements; preserving of cultural assets and abstract cultural heritage and becoming it an item of sustainable culture, activating the environment of cultural communication and interaction, producing of cultural and artistic values, creating and developing possibility of society’s attention of these values; keeping our country’s cultural assets alive and utilize and use it as contribute element to country economy, promoting cultural investment and enterprises to build and running of cultural centers.

Incentives that will be applied for cultural investments and enterprises in the scope of this law are as follows:

1. Income Tax Withholding Deduction:
Corporation Tax Payer Investor or entrepreneur who has license in scope of this law can deduct %50 of the income tax in the phase of investment not longer than 3 years and %25 of the income tax in the enterprise phase not longer than 7 years from the tax accrued in their withholding tax return based on their monthly insurance payroll given to the administration only for the worker wages that will be worked in the licensed investment or enterprise. (Law numbered 5225, a.5/b)

2. Allocation of Immovable Property:
Ministry of Culture and Tourism has the authority of making immovable property assignment for the cultural investment and entrepreneurs in scope of this law. (Law numbered 5225,a./5a)

3. Abatement in Employer Contributions:
Corporation Tax Payer Investor or entrepreneur who has license in scope of this law can deduct %50 of the employer contribution in the phase of investment not longer than 3 years and %25 of the employer contribution in the enterprise phase not longer than 7 years will be paid by treasury based on their monthly insurance payroll given to the administration only for the worker wages that will be worked in the licensed investment or enterprise. In accordance with article 72 and 73 of Social Insurance Law (Law numbered 5225, a.5/c)

4. Water Cost Discount and Energy Support:
Cultural investment and enterprises pays the water prices at the lowest tariff of the region. %20 of the electricity and natural gas costs of this investment or enterprise are paid by the treasury for 5 years. (Law numbered 5225, a.5/d)

5. Ability to Employ Foreign Personnel or Artists:
Foreign specialist personnel or artists can be employed in licensed investment or enterprises not more than %10 of the personnel by the view of the Ministry of Culture and Tourism and permission of the Ministry of Labour and Social Security. (Law numbered 5225, a.5/e)

6. Ability to Function in Weekends or Official Holidays:
Licensed enterprises and other units in scope of license can carry on their functions in weekends or official holidays in work hours identified as in license.

Assignees of a licensed investment or enterprise by the permission of the ministry are also benefit from the incentive and deduction provisions of this law (Law numbered 5225, a.5/f)


This document provides a general overview of taxation in Turkey. No rights may be derived from it.

Revenue Administration
Department of Taxpayer Services
İlk Adım Cad.
06450 Dikmen-ANKARA
TURKEY

http://www.gib.gov.tr

January 2006

(Source: Revenue Administration web Site)

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