Investment Encouragement Program

“The Investment Encouragement Program (IEP)” targeting to support investments in Turkey and during the restructuring of the new cabinet, Ministry of Economy was entitled as the implementing institution for IEP in July 2011.

According to the regional demarcation, Turkey is classified into four regions and encouragement measures to be provided are differentiated with respect to the development status of the region where the investment is located. With regard to encouragement of investments concerning the production of goods and services, the Program is based on three pillars which differs in terms of encouragement measures:

Additionally, if needed, additional information concerning the investment encouragement system, please contact the Ministry of Economy.

Legal Basis

Investment encouragements which are designed and implemented by the Ministry of Economy are based on the provisions of Board of Ministers decrees and implementing communiqués.

The purpose of the Decree is, in line with the projected targets in Development Plans and Annual Programs as well as international agreements, to orient savings to investments with higher value added investments, increase production and employment, ensure continuity of investment propensity and the sustainable development, encourage large investments contributing to international competitiveness and employing high technologies, stimulate direct foreign investments, reduce regional development disparities, support investments for environmental protection and R&D activities.

Scope

By taking into consideration the international commitments and regional and sectoral restrictions determined in the Decree, investment activities related to the production of goods and services, research and development (R&D) and environmental protection can benefit from the encouragement measures provided by the Decree.

The core objective of the system is to eliminate inter-regional imbalances. In the Decree with regard to the implementation of encouragement measures provinces have been classified into four regions as Region I, Region II, Region III and Region IV on the basis of NUTS 2 classification as determined in the Board of Ministers Decree No.2002/4720.

According to regional classifications and other classifications investments can benefit from the following investment encouragement measures;

1. Investments which are subject to regional support;
   • In the Regions I and II;
     • Customs duty exemption
     • VAT exemption
     • Tax reduction
     • Social security premium support
     • Land allocation
   • In the Regions III and IV;
     • Customs duty exemption
     • VAT exemption
     • Tax reduction
     • Social security premium support
     • Interest support
     • Land allocation
2. Large investments;
   • • Customs duty exemption
     • VAT exemption
     • Tax reduction
     • Social security premium support
     • Land allocation
3. General investment encouragement mechanism; investments which do not fall into the scope of regional support or large investments and; with a fixed investment cost above the specified minimum amounts and excluded from the list of sectors not to be supported determined by the Annex IV of Decree No: 2009/15199,
   • • Customs duty exemption
     • VAT exemption

Minimum Fixed Investment Cost

In order to issue an investment encouragement certificate for an investment project, minimum amounts of fixed investment costs are identified in the Decree as follows:

• within the scope of regional and sectoral implementation minimum amounts are determined in the Annex II for certain investment subjects and for other subjects of  investments for which no amount has been specified in Annex II, the amounts are;
  • 1 million TL. in the provinces within the coverage of Region I and Region II,
  • 500 thousand TL. in the provinces within the coverage of Region III and Region IV.
• within the scope of large investments minimum amounts are established in Annex III.

Application Procedure

The period of compensation covers the first 5 years at maximum. Interest support under the same conditions can also be provided to investments financed through financial leasing, only if a repayment plan is prepared including the interest payments.

Total interest support for investment credits per project shall in no case exceed;

• • 300 thousand TL for R&D and environmental protection investments,
  • 500 thousand TL for investments made in region III and region IV.

• Social Security Premium Support

Large investments and regional investments issued an investment encouragement certificate are eligible to benefit from the measure. The social security premium to be paid by the employer, corresponding to the amount to be paid on minimum wage cost, is funded from the budget for the specified periods given in the table below.

The support is provided after becoming operational in completely new investments. For all other types of investments, each additional employee recruited after the notification of the average number of employees to the related Provincial Directorate of Social Security with the SSK Monthly Premium and Service Document in the last six months before the starting of investment is subject to the support following the completion of the investment.

In Regional and Sectoral Implementation,  Social Security Premium Support  should not exceed 6% of total investment amount in Region I, 8% in Region II, 10% in Region III and 14% in Region IV. For SMEs, 5% premium should be added to these percentages in each regions.

In Implementation for Large Investments, Social Security Premium Support should not exceed 2% of total investment amount in Region I, 3% in Region II, 5% in Region III and 7% in Region IV.