turkey new inv_incentives_18072012

For further inquiries: [email protected]

FOREIGN DIRECT INVESTMENT AND

INVESTMENT INCENTIVES IN TURKEY

July, 2012 TOKYO

MURAT ALICI

DEPUTY DIRECTOR GENERAL,

GENERAL DIRECTORATE OF INCENTIVES AND FOREIGN INVESTMENT

INVESTMENT CLIMATE AND THE NEW

INCENTIVE SYSTEM IN TURKEY

REPUBLIC OF TURKEYMINISTRY OF ECONOMY

GENERAL DIRECTORATE FOR

INCENTIVES & FOREIGN INVESTMENT


Turkey: One of the Eight Growth Markets of Future

Source: Goldman Sachs Asset Management, 2011

Growth

Markets

Brazil

Russia

India

China

Mexico

Korea

Turkey

Indonesia

For further inquiries: [email protected] 33

Investing in Turkey = Doing Business in the Region

4 -Hour


Policies to bring together international capital with Turkey’s assets

FDI Regime

• National treatment

• No pre-entry screening /minimum capital requirements

• Right to acquire real estate

• Guarantee to transfer proceeds

• Right to employ key expatriate staff

• Right to access international dispute settlement

• Bilateral Investment Treaties with 84 countries

• Double Taxation Agreements with 76 countries

• Customs Union with the EU

• Free Trade Agreements with 19 countries

Improving investment climate : Moving target for the government since 2002

• Streamlining procedures for investments and eliminating administrative and

bureaucratic hurdles in line with changing priorities and needs of business

• Political ownership

• Making full use of public-private dialogue through permanent platforms (Coordination Council for Improvement of Investment Climate, Investment Advisory Council)


COUNCIL OF MINISTERS

Coordination Council for the Improvement of Investment

Environment (YOIKK) Investment Advisory Council (IAC)

Investment Advisory Council (IAC)

Steering Committee

Working Groups for Assesment and

Evaluation

Monitoring

Company registration and corporate governance

EmploymentInput Supply Strategy (GITES)

and Sectoral Licensing

Land for investment, environmental and zoning permits

Taxes and Incentives

Foreign Trade and Customs

Intellectual Property Rights and R&D

Legislation of Investment Climate

Access to Finance Infrastructure

TECHNICAL COMMITTEES

For more information http://www.yoikk.gov.tr/eng

Improvement of the Investment Environment in Turkey

For further inquiries: [email protected] Directorate for Incentives & Foreign InvestmentGeneral Directorate for Incentives & Foreign Investment

� Executives of leading multinational

firms,

� Heads of international institutions

(IMF, World Bank, European Investment

Bank) and

� Heads of TOBB, TUSIAD, YASED, TIM.

Investment Advisory Council of Turkey had 7 meetings since 2004.

Investment Advisory Council

Improvement of the Investment Environment in Turkey


New trend : Turkey as a regional headquaters for multinationals


1,1 1,72,8

10,0

22,0

19,5

8,4 9,0

15,9

6,5

20,2

3,4

0

5

10

15

20

25

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

FDI inflows (cumulative) Companies with Intr.Capital (cumulative)

• 1923-2002 : 15 billion USD 6.000

• 2003-2011 : 110 billion USD 30.000

A.T. Kearney FDI Confidence Index Rankings

• 2010 � 23

• 2012 � 13

USD Billion

Source: Ministry of Economy, 2012 JuneJan-May

FDI Figures


The New Investment Incentives ProgramThe New Investment Incentives Program

Large Scale

Investment

Incentive Scheme

Large Scale

Investment

Incentive Scheme

Regional

Investment

Incentive Scheme

Regional

Investment

Incentive Scheme

� Customs Duty Exemption

� VAT Exemption � Tax Reduction� Social Security Premium Support(Employer’s Share)

� Land Allocation



� Land Allocation



� Land Allocation� Interest Support



� Land Allocation� Interest Support


� VAT Exemption


� VAT Exemption

Strategic

Investment

Incentive Scheme

Strategic

Investment

Incentive Scheme

General

Investment

Incentive Scheme

General

Investment

Incentive Scheme



� Land Allocation� Interest Support� VAT Refund



� Land Allocation� Interest Support� VAT Refund

Moreover, investments in Region 6 are eligible for income tax withholding allowance and social security premium support (Employee’s share).

New investment incentive system


STRATEGIC

INVESTMENT

INCENTIVE SCHEME

GENERAL

INVESTMENT

INCENTIVE SCHEME


REGIONAL

INVESTMENT

INCENTIVE SCHEME

LARGE SCALE

INVESTMENT

INCENTIVE SCHEME


New investment incentives : Diversified regional opportunities


Support MeasuresSupport Measures

VAT Exemption for the machinery and equipment within the scope of the investment. (around 18%)

Customs Duty Exemption: Customs duty is not paid for the imported machinery and equipment within the scope of the investment. (around 2%)

Tax Reduction: Reduced income/ corporate tax rate (50-90 %) until the total deduction reaches to the rate of contribution. (15-60 %)

Loan Interest Support: For the credits used by the company, a certain portion of the interest share will be covered by the Ministry. (3-5% for TL credits, 1-2% for foreign currency credits) (500K-900K TL limits)

Land Allocation: Limited amount of lands are allocated to the investments taking account of the importance of investments.

VAT Refund: VAT payments for the building & construction expenses will be rebated . (only for strategic investments which costs at least 500 Million TL)


Support MeasuresSupport Measures

for the additional employment generated by the investment

Social Security Premium Employer’s Share, on portions of labor wages corresponding to amount of legal minimum wage, will be covered by the Ministry.

Social Security Premium Employee’s Share, on portions of labor wages corresponding to amount of legal minimum wage, will be covered by the Ministry. (only for Region 6)

Income Tax Withholding will provide exemption from income tax withholding. (only for Region 6)


Incentives Region 1 Region 2 Region 3 Region 4 Region 5 Region 6

VAT Exemption ��

Customs Duty Exemption ��

Tax Reduction out of OIZ

“Rate of Contribution

to Investment” (%) in OIZ

15 20 25 30 40 50

20 25 30 40 50 55

Social Security out of OIZ

Premium Support

(Employer’s Share) in OIZ

2 years 3 years 5 years 6 years 7 years10

years

3 years 5 years 6 years 7 years 10years12

years

Land Allocation ��

Interest Support N/A N/A ��

Income Tax Withholding N/A N/A N/A N/A N/A10

years

Social Security Premium

Support (Employee’s Share)N/A N/A N/A N/A N/A

10

years

REGIONAL INVESTMENT INCENTIVE SCHEME

SUMMARY TABLESUMMARY TABLE


PRIORITY INVESTMENTS

Following priority investments will benefit from terms and rates of the

support measures of Region 5 even they take place in Regions 1 to 4.

� Tourism investments in Cultural and Touristic Preservation and Development Regions

determined by the Council of Ministers Decree.

� Mining investments

� Railroad and maritime transportation investments

� Specific pharmaceutical investments and Defense Industry investments with minimum

investment amount of 20 Million TL

� Test facilities, wind tunnel and similar investments made for automotive, space or defense

industries

� International fairground investments with a minimum covered area of 50.000 m2

� Primary, Middle and High School investments by private sector

� Investments made to produce products developed by an R&D Project which is supported by

Ministry of Science, Industry and Technology

Priority Investments


LARGE SCALE

INVESTMENT

INCENTIVE SCHEME

STRATEGIC

INVESTMENT

INCENTIVE SCHEME

GENERAL

INVESTMENT

INCENTIVE SCHEME


REGIONAL

INVESTMENT

INCENTIVE SCHEME


Goals of the Scheme:

� To improve technology and R&D capacity

� To provide a global competitive advantage

Incentive measures available for Large Scale Investments:

� VAT Exemption,

� Customs Duty Exemption,

� Tax Reduction,

� Social Security Premium Support

� Land Allocation

Large Scale Investments



Investment SubjectsMinimum Investment Minimum Investment Minimum Investment Minimum Investment AmountAmountAmountAmount (Mil(Mil(Mil(Millionlionlionlion ¨̈))))

1 Refined Petroleum Products 1000

2 Chemical Products 200

3 Harbours and Harbour Services 200

4 Automotive OEM and Autoparts

4-a Automotive OEM Investments 200

4-b Autoparts 50

5 Railway and Tram Locomotives and/or Railway Cars 50

6 Transit Pipe Line Transportation Services 50

7 Electronics 50

8 Medical, High Precision and Optical Equipment 50

9 Pharmaceuticals 50

10 Aircraft and Space Vehicles and/or Parts 50

11Machinery (including Electrical Machines And

Equipments) 50

12 Integrated Metal Production 50


Support Measures I II III IV V VI

VAT Exemption ��

Customs Duty Exemption ��

Tax Reduction out of OIZ

Investment Contribution

Rate (%) within OIZ

25 30 35 40 50 60

30 35 40 50 60 65

Social Security out of OIZ

Premium Support

(Duration years) within OIZ

2 3 5 6 7 10

3 5 6 7 10 12

Land Allocation ��

Interest Support N/A N/A N/A N/A N/A N/A

Income Tax Withholding (Years) N/A N/A N/A N/A N/A 10

Social Security Employee Share Support (Years)

N/A N/A N/A N/A N/A 10

Large Scale Investment Incentives



LARGE SCALE

INVESTMENT

INCENTIVE SCHEME

STRATEGIC

INVESTMENT

INCENTIVE SCHEME

GENERAL

INVESTMENT

INCENTIVE SCHEME


REGIONAL

INVESTMENT

INCENTIVE SCHEME


Strategic Investments

– An investment for the production of intermediate or final products of which more

than 50% of the country demand is supplied by imports.

– Energy investments for exclusive use of such strategic investments

Goals of the scheme

– On the basis of the “Input Supply Strategy”, this scheme aims at supporting

production of intermediate and final products with high import dependence with a

view to reduce current account deficit.

– It also targets encouraging high-tech and high value added investments with a

potential of strengthening Turkey’s international competitiveness



EEEEligibilityligibilityligibilityligibility Criteriariteriariteriariteria

� For the production of intermediate and final products

• with high import depedence

• of which more than 50% are supplied by imports

� With a minimum investment amount of 50 Million TL and a minimum 40%

local value added

� With an import figure of at least 50 Million $ in the previous year (This

condition will not be applied for goods with no domestic production)



Incentives All Regions

VAT Exemption �

Customs Duty Exemption �

Tax ReductionRate of Contribution

to Investment (%)

50% (50% of the contribution can be benefited

before the investment is completed)

Social Security Premium Support

(Employer’s Share)

(Term of Support)

7 Years (10 years for Region 6 )

Land Allocation �

VAT Refund The building and construction costs of investments

of more than 500 Million TL

Interest Payment SupportLimited to 5% of total investment amount and

with a cap of 50 Million TL

Income Tax Deduction Support 10 years only for Region 6

Social Security Premium Support -

Employee’s Share (Term Of Support)10 years only for Region 6

Strategic Investment Incentive Scheme
