Corporate Tax Credits and Incentives in Turkey
A range of corporate tax credits and incentives in Turkey are designed to promote investment, innovation, and economic growth. These incentives include R&D tax benefits, regional development support, and sector-specific exemptions aimed at attracting foreign and domestic investors. By leveraging these opportunities, companies can significantly reduce their tax burden while contributing to Turkey’s thriving business environment. At Ozbek CPA, we specialize in helping businesses navigate the corporate tax credits and incentives in Turkey, ensuring you maximize benefits tailored to your industry and strategic goals. Let us guide you in optimizing your financial outcomes through Turkey’s robust incentive programs.
Foreign Tax Credit in Turkey
Foreign companies operating in Turkey can take advantage of a foreign tax credit for taxes paid abroad. This credit applies up to the amount of Turkish Corporate Income Tax (CIT) liability on the foreign-sourced income. Unused credits can be carried forward for three years. To claim this credit, companies must provide validated foreign tax office receipts approved by the Turkish consulate in the respective country. Special provisions apply for dividends received by Turkish resident companies from foreign subsidiaries.
Exemption for Foreign Construction and Repair Income
Turkish corporations involved in construction and repair projects abroad may benefit from a CIT exemption in Turkey. However, losses from these projects cannot be offset against domestic income, as foreign losses are not deductible from Turkish taxable income. This provision highlights the strategic importance of tax planning for international businesses in Turkey.
Investment Incentives in Turkey
Turkey offers a wide array of investment incentives through the Investment Incentive Certificate (IIC), issued by the General Directorate of Incentive Practices and Foreign Capital under the Ministry of Industry and Technology. These incentives support investors across various sectors and regions.
Key Investment Incentives:
- VAT exemption on machinery and equipment purchases.
- Customs duty exemption on imported equipment
- Reduced CIT rates
- Social security premium support (employer and employee shares)
- Interest rate support
- Land allocation
- VAT refund
Investment incentives are classified into general, regional, and strategic schemes to attract local and foreign investors.
General Investment Scheme
The general investment scheme covers projects that do not fall into specific categories but still qualify for customs duty and VAT exemptions on purchasing investment goods, including machinery and equipment.
Regional and Sector-Based Investment Scheme
Turkey is divided into six regions based on development levels, with incentives varying by region. Less developed areas receive more extensive support, including:
- Customs duty and VAT exemptions
- CIT reductions
- Social security premium support
- Land allocation
- Interest rate support
Strategic Investment Scheme
Designed to reduce foreign dependency, the strategic investment scheme encourages producing critical products. Eligible projects must meet criteria such as:
- A minimum fixed investment of TRY 50 million
- A focus on high-import dependency products
Project-Based Investment Incentive Package
The Project-Based Investment Incentive Package supports high-value, innovative, and technology-driven projects. Companies aligning with Turkey’s national development goals benefit from:
- VAT and customs duty exemptions
- CIT reductions
- Qualified personnel support
Technology Focused Industry Move Program
This program aims to enhance high-tech production in Turkey. Qualified projects receive:
- Customs duty and VAT exemptions
- CIT reductions
- Social security premium support
- Infrastructure support
The program targets products with high growth potential and strategic importance
Free Trade Zones in Turkey
Turkey’s free trade zones offer tax advantages for manufacturing, trading, and storage activities. Goods moving between Turkey and free trade zones are treated as imports or exports. Companies benefit from reduced tax obligations, customs duty exemptions, and more. An operating license from the Ministry of Economy is required.
Research, Development, and Design Incentives
Turkey provides extensive tax incentives for R&D and design activities under laws such as:
- Law No. 5746 on R&D and Design Activities
- Law No. 4691 on Technology Development Zones
Key R&D Incentives:
- R&D deduction: Deduct 100% of eligible expenses from the CIT base
- Income tax exemption: Up to 95% for R&D personnel salaries
- Social security premium support: 50% funded by the government
- VAT exemption: For machinery and equipment used in R&D
- Stamp tax exemption: For R&D-related documents
Technology Development Zones (Techno Parks)
Techno Parks in Turkey provide:
- CIT exemption on profits from software development and R&D activities
- Income tax exemptions for R&D personnel
- Social security premium support
- VAT and customs duty exemptions on machinery and imported goods
At OzbekCPA, we specialize in helping businesses navigate corporate tax credits, investment incentives, and compliance with Turkish tax laws. Whether you are an established multinational or a growing startup, we provide personalized consultancy to help you unlock the full potential of doing business in Turkey.
Contact us today to maximize your tax credits, investment incentives, and R&D benefits tailored to your business needs.