The new investment incentives scheme is specifically designed to encourage investments with the potential to reduce dependency on the importation of intermediate goods vital to the country’s strategic sectors.
Amongst the primary objectives of the new investment incentives scheme are: reduce the current account deficit; boost investment support for lesser developed regions; increase the level of support instruments; promote clustering activities; and to support investments that will create the transfer of technology.
Effective as of January 1, 2012, the new investment incentives system has been comprised of four different schemes. Local and foreign investors have equal access to:
1- General Investment Incentives Scheme
2- Regional Investment Incentives Scheme
The support instruments to be provided within the framework of the various investment incentives schemes are shown in the following table:
|Support Instruments||General Insvestments Incentives Scheme||Regional Investments Incentives Scheme|
|Customs Duty Exemption||+||+|
|Social Security Premium Support (Employer’s Share)||+|
|Income Tax Withholding Allowance *||+|
|Social Security Premium Support (Employee’s Share) *||+|
|Interest Rate Support **||+|
|VAT Refund ***|
*Provided that the investment is made in Region 6.
**Provided that the investment is made in Regions 3, 4, 5 or 6 within the framework of the Regional Investment Incentives Scheme.
***For construction expenditures of strategic investments with a minimum fixed investment amount of TRY 500 million.
|Region 1||Region 2||Region 3||Region 4||Region 5||Region 6|
|Eskişehir||Çanakkale (Bozcaada & Gökçeada excluded)||Gaziantep||Bartın||Çankırı||Bingöl|
|Rize||Yozgat||Bozcaada & Gökçeada|
1. General Investment Incentives Scheme
Regardless of the region where investment takes place, all projects meeting both the specific capacity conditions and the minimum fixed investment amount are supported within the framework of the General Investment Incentives Scheme. Some types of investments are excluded from the investment incentives system and would not benefit from this scheme.
The minimum fixed investment amount is TRY 1 million in Region 1 and 2, and TRY 500,000 in Region 3, 4, 5 and 6.
Major investment incentive instruments are:
- Exemption from customs duties
- VAT exemption:
2. Regional Investment Incentives Scheme
The sectors to be supported in each region are determined in accordance with regional potential and the scale of the local economy, while the intensity of support varies depending on the level of development in the region.
The minimum fixed investment amount is defined separately for each sector and region with the lowest amount being TRY 1 million for Region 1 and 2, and TRY 500,000 for the remaining regions.
The terms and rates of support provided within the Regional Investment Incentives Scheme are shown in the following table.
|Regional Investment Incentives Scheme Instruments|
|Customs Duty Exemption||YES|
|Tax Reduction||Tax Reduction Rate (%)||50||55||60||70||80||90|
|Rate of Contribution to Investment (%)||Out of OIZ*||10||20||25||30||40||50|
|Social Security||Support Period||Out of OIZ*||2 years||3 years||5 years||6 years||7 years||10 years|
|Within OIZ*||3 years||5 years||6 years||7 years||10 years||12 years|
|Premium Support (Employer’s Share)||Upper Limit for Support (%)||Out of OIZ*||10||15||20||25||35||No Limit|
|Within OIZ*||15||20||25||35||No Limit||No Limit|
|Interest Rate Support||TRY Denominated Loans (points)||N/A||N/A||3 points||4 points||5 points||7 points|
|FX Loans (points)||1 point||1 point||2 points||2 points|
Premium Support (Employee’s Share)
|Income Tax Withholding Allowance||N/A||N/A||N/A||N/A||N/A||10 years|
Because of high investment costs of and low energy prices in the market, the private sector investors avoid investing in energy market on the grounds that it is not profitable, thus supply problem can be overcome by means of energy cooperatives. Energy cooperatives can also be effective in solving problems through cooperation between local or other public institutions and organizations. Other benefits include accountability and rural diversity.
The new investment incentives system defines certain investment areas as “priority” and offers them the regional support extended to Region 5 by the Regional Investment Incentives Scheme, regardless of the region of the investment. If the fixed investment amount in priority investments is TRY 1 billion or more, tax reduction will be applied by adding 10 points on top of the “rate of contribution to investment” available in Region 5. If priority investments are made in Region 6, the regional incentives available for this particular region shall apply.
Fields of investment with specific priorities to be supported with Region 5 instruments regardless of the investment’s region are:
- Mine extraction and/or processing investments
- Mining exploration investments to be made in the licensed areas by investors with a valid Exploration License or Certificate issued pursuant to the Mining Law
- Investments for power generation where metals stated in the 4-b group of Article 2 of the current Mining Law No. 3213 within the scope of a valid mining license and permit issued by the Ministry of Energy and Natural Resources are used as inputs
- Investments for energy efficiency projects which are to be carried out at existing manufacturing industry facilities with minimum 500 TEP (ton equivalent petroleum) annual energy consumption, which would provide minimum 20% energy savings compared to the current situation, and with 5 years or less return on investment as a result of energy savings
- Investments for electricity generation through waste heat recovery in a facility (excluding natural gas-fired electricity generation plants)
- Liquefied natural gas (LNG) investments and underground gas storage investments with a minimum amount of TRY 50 million
- Investments for the production of turbines and generators used in renewable energy generation, as well as investments for the production of blades used in wind energy generation
- Integrated investments for the production of aluminum flat products by hot rolling and direct chill slab casting methods
- Licensed warehousing
- Nuclear power plant investments
- Investments for research and reference laboratories, consumer safety and infectious diseases reference laboratories, pharmaceutical and medical device analysis and control laboratories, as well as laboratory complexes for in vivo testing and research centers
3. Sectoral IncentivesIncentives for Renewable Energy
In addition to the General and Regional Investment Incentive schemes that apply to investments in the energy sector, the government provides specific incentives for electricity production investments that are based on renewable energy sources.
|Renewable Energy Fit Rates|
|Type of production facility based on renewable energy resources||Feed-in-tariff
(US Dollar cent/kWh)
|Hydroelectric production facility||7.3|
|Wind power-based production facility||7.3|
|Geothermal power-based production facility||10.5|
|Biomass-based production facility (including landfill gas)||13.3|
|Solar power-based production facility||13.3|
|Additional FIT rates for Local Content Support|
|Type of facility||Domestic production||Domestic Contribution
(US Dollar cent/kWh)
|Hydroelectric production facility||1. Turbine||1.3|
|2. Generator and power electronics||1.0|
|Wind power-based production facility||1. Blade||0.8|
|2. Generator and power electronics||1.0|
|3. Turbine tower||0.6|
|4- All of the mechanical equipment in rotor and nacelle groups (excluding payments made for the blade group and the generator and power electronics.)||1.3|
|Photovoltaic solar power based production facility||1. PV panel integration and solar structural mechanics production||0.8|
|2. PV modules||1.3|
|3. Cells forming the PV module||3.5|
|5. Material focusing the solar rays onto the PV module||0.5|
|Intensified solar power-based production facility||1. Radiation collection tube||2.4|
|2. Reflective surface plate||0.6|
|3. Sun tracking system||0.6|
|4. Mechanical accessories of the heat energy storage system||1.3|
|5. Mechanical accessories of steam production system that collects the sun rays on the tower||2.4|
|6. Stirling engine||1.3|
|7. Panel integration and solar panel structural mechanics||0.6|
|Biomass power-based production facility||1. Fluid bed steam tank||0.8|
|2. Liquid or gas fuel steam tank||0.4|
|3. Gasification and gas cleaning group||0.6|
|4. Steam or gas turbine||2.0|
|5. Internal combustion engine or stirling engine||0.9|
|6. Generator and power electronics||0.5|
|7. Cogeneration system||0.4|
|Geothermal power-based production facility||1. Steam or gas turbine||1.3|
|2. Generator and power electronics||0.7|
|3. Steam injector or vacuum compressor||0.7|