Turkey, with its dynamic economy and strategic location, offers a range of tax benefits to promote business growth, attract investments, and support economic development. The Turkish government has implemented various tax incentives and exemptions to create an enabling environment for businesses and individuals. In this article, we will explore the key tax benefits available in Turkey, including investment incentives, research and development (R&D) incentives, regional development incentives, and special industry-specific incentives. We will also highlight the positive impact of these tax benefits on the economy and investment climate.
Investment Allowance: Turkey provides investment allowances to encourage domestic and foreign direct investment. Under this scheme, eligible investments can benefit from a deduction from taxable income. The allowance amount is determined based on the location, size, and type of investment, providing a significant incentive for businesses to expand their operations in Turkey.
Investment Support and Promotion Agency (ISPAT): The Investment Support and Promotion Agency of Turkey plays a crucial role in attracting investments to the country. ISPAT provides comprehensive assistance to investors, including information, consultancy services, and support throughout the investment process. This proactive approach helps businesses navigate the investment landscape more effectively and maximize the benefits of available tax incentives.
Research and Development (R&D) Incentives
R&D Deductions: Turkey offers tax deductions for expenses related to research and development activities. Businesses engaged in R&D can deduct a portion of their eligible expenses from taxable income, reducing their overall tax liability. This incentive encourages innovation, technological advancements, and the development of new products and services.
R&D Support Programs: In addition to tax deductions, Turkey has established various support programs to foster R&D activities. These programs provide financial grants, incentives, and collaborative partnerships between the public and private sectors. By incentivizing R&D, Turkey aims to enhance its competitiveness and position itself as a hub for innovation and knowledge-driven industries.
Regional Development Incentives
Development Agencies: Turkey has established development agencies across various regions to promote balanced regional development. These agencies offer tax incentives and support programs to attract investments and stimulate economic growth in less-developed areas. The incentives may include tax reductions, exemptions, and customs duty advantages, creating an attractive investment environment in these regions.
Free Zones: Turkey has designated several free zones strategically located throughout the country. These zones offer a range of tax benefits, including exemption from corporate income tax, value-added tax (VAT), and customs duties. Additionally, businesses operating within free zones benefit from simplified administrative procedures and access to well-developed infrastructure and logistics facilities.
Special Industry-Specific Incentives
Export Incentives: Turkey encourages exports through various tax incentives. Export-oriented businesses can benefit from reduced corporate income tax rates, VAT exemptions on export-related activities, and customs duty advantages. These incentives aim to boost Turkey’s export competitiveness, enhance foreign exchange earnings, and expand the global reach of Turkish products and services.
Technology Development Zones: Technology Development Zones (TDZs) in Turkey provide a favorable environment for technology-based companies. Businesses operating within TDZs benefit from tax exemptions on corporate income tax, VAT, and customs duties. These zones foster collaboration between academia, industry, and research institutions, promoting technology transfer, innovation, and high-value-added production.
Ease of Doing Business
Apart from specific tax incentives, Turkey has taken significant steps to improve the overall business climate and ease of doing business. Initiatives such as simplified tax procedures, digitalization of tax-related processes, and the implementation of online tax filing systems streamline administrative processes and reduce the burden on businesses.
Turkey’s tax benefits and incentives create an attractive investment climate, stimulating business growth, and supporting economic development. From investment allowances to R&D incentives, regional development incentives, and industry-specific advantages, the Turkish government has implemented a comprehensive framework to attract domestic and foreign investments. These tax benefits not only reduce the tax burden on businesses but also encourage innovation, job creation, and regional development. As Turkey continues to position itself as a global business hub, the availability of tax incentives remains a significant driver for companies seeking to establish and expand their operations in the country.