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The Government of the Turkish Republic takes great effort to attract foreign investments and support small and medium-size businesses in view of the economic hardships that the world is going through at the moment. Both foreign investors and Turkish entrepreneurs are especially attracted by the Free Economic Zones in the country.
Free Economic Zones (FEZ) are legal offshore zones on the territory of Turkey. A non-resident is entitled to register a company in a FEZ, use tax benefits, and obtain citizenship of Turkey in a simpler manner. What is a FEZ, an OIZ, and a TDZ in Turkey? What benefits do they bring to foreign entrepreneurs? Please find the answers to these questions in the text below.
Industrial, technological, and free trade zones in Turkey
Turkey is a country with a beneficial tax system and a fantastic geographical location. It is a perfect country for those who would like to enter international markets without investing too much. There are numerous special zones in Turkey where resident companies find the most attractive conditions for doing business. The zones are of primary interest to foreign entrepreneurs who would like to launch business ventures right at the border of two huge markets – Europe and Asia.
Organized Industrial Zones (OIZ)
Currently, there are over 250 OIZ in Turkey that offer special tax benefits and social advantages. Besides, bank loans at reduced rates are available there and energy costs less than it does in mainland Turkey.
More than 40 thousand companies employing more than 1 million people are working in the Turkish IOZ today. The largest number of IOZ are found on the following territories: the Aegean coast, the Marmara Sea region, the Black Sea coast, Central Anatolia, the Mediterranean coastline, the eastern and the southeastern part of Anatolia.
The most profitable type of business operation that you could carry out in an OIZ is full-cycle manufacturing.
Technological development zones (TDZ)
Technological development zones are also often referred to as techno-parks in Turkey. There you can find hi-tech processing centers, R&D companies, and various innovators. There are more than 30 TDZ in Turkey today located in Ankara, Istanbul, Kocaeli, Izmir, Antalya, Bursa, Manis, Eskisehir, and other provinces. The company registration process in Antalya in particular is especially simple even if you establish a company on the mainland.
Why does it make good economic sense to start an LLC in one of the Turkish TDZ:
- Software developers and R&D companies enjoy tax breaks in TDZ;
- 50% of the social contributions payable by the resident companies are compensated for by the municipal Government.
If your business is connected to IT, innovations, or software development, you should certainly consider establishing a company in a Turkish TDZ. Thus you can gain access to various advantages of different kinds such as tax exemptions and tax breaks, bank accounts for international transactions, a legal residence permit in Turkey, and wonderful prospects for your business development.
Free economic zones (FEZ)
There are territories in Turkey that lie outside the country’s customs area. They have been created to attract export-oriented companies. Despite the fact that Free Economic Zones (or Free Trade Zones) are located on the territory of Turkey, they are considered foreign territories for tax purposes.
You can find FEZ in the port cities of Antalya, Izmir, Adan, Mardin, Istanbul, Mersin, and Trabzon. The Zones offer advanced infrastructure. In particular, manufacturing facilities, warehouses, and office buildings are readily available there. If you register an LLC or a Public Company in one of the Turkish FEZ, you will be able to enjoy tax deductions, access foreign markets, and make a good profit.
What business can you start in a Turkish FEZ?
Every FEZ in Turkey will suit a particular type of business activities. For example, the Zone in Mersin is perfect for processing agricultural products and doing other kinds of agriculture-related business. Antalya is great for registering a company that will build ships and boats. The FEZ in Izmir hosts a large number of companies working in telecommunication and electronics. The FEZ in Istanbul near Ataturk Airport will suit companies that make fashion clothes and manufacture electronic devices.
These are just a few examples, as companies registered in Turkish FEZ are engaged in all sorts of business. The key business areas include the following ones:
- Research and development;
- Manufacturing of any products;
- Software development;
- International trade;
- Warehousing and storage of goods;
- Logistics and cargo delivery;
- Banking and insurance.
The Turkish FEZ Act makes it possible for foreigners to register companies in Free Zones. You do not have to involve a Turkish citizen in company formation if you want to set up a company in a FEZ.
It is important to realize that FEZ in Turkey are similar to enclaves in the sense that the authorities of mainland Turkey do not interfere in the business processes going on inside the Zones. The FEZ offers fiscal and other advantages that cannot be found in mainland Turkey.
Advantages of registering a company in a Turkish FEZ
If you register a company in mainland Turkey, you will have to pay the taxes at regular rates. If you set up a company in a Free Zone, however, you can enjoy several benefits. The key benefits include the following ones:
- 100% exemption from customs duties;
- 100% exemption from the VAT and consumer tax;
- Companies that export at least 85% of their produce are exempted from the payroll tax;
- Affordable land prices inside FEZ;
- No currency control and free repatriation of capital to other countries
- The property located in a Turkish FEZ can be sold or transferred to any person or legal entity;
- Goods can be stored inside a FEZ for as long as needed;
- There are special import/ export sections inside Free Trade Zones that allow saving both time and money on customs formalities;
- There are no restrictions on investment capital in Turkish FEZ.
The geographical position of Turkey is simply superb. It has land borders with Georgia, Azerbaijan, Armenia, Iran, Iraq, Syria, Greece, and Bulgaria and it has sea borders with Russia, Ukraine, Cyprus, and Romania. Both European and Asian countries are easily accessible from Turkey.
Many European countries have free industrial and economic zones too but Turkish FEZ boast an advantage that Free Zones in most other countries do not have. Namely, a company domiciled in one of the FEZ in Turkey can trade both with foreign partners and with Turkish partners. In the latter case, a tax of 0.5% of the contract prices is charged.
Plainly speaking, you can register a company in a Turkish FEZ and do business with any partners regardless of their geographical location. You must agree that the tax rate of 0.5% does not look repelling at all.