The fundamentals of the New Incentive Regime for Turkey was declared by H. E. Prime Minister of Turkey Recep Tayyip ERDOĞAN on 05.04.2012, followed by the announcement of H. E. Minister of Economy Zafer ÇAĞLAYAN about the details of the new scheme on 06.04.2012.

The new incentive regime for Turkey, effective from 01.01.2012, aims at the current account deficit, as well as at contributing to the structural reformation of Turkey’s industrial sector and balancing the economic disparities between the regions.

The new regime has four main pillars:
1- General investment incentive scheme
2- Regional investment incentive scheme
3- Large-scale investment incentive scheme
4- Strategic investment incentive scheme

Incentives for the corresponding schemes are presented in the table below:

* Only for the investments located in the 6th region
** For the regional investment incentive regime, investments located in the 3rd, 4th, 5th and 6th region are eligible for the interest support.

According to the new regime, provinces are ranked in terms of social-economic development and divided into six groups in terms of priority of incentives. The provinces in the sixth group, mostly consisting of poorer eastern and southeastern provinces, will receive the highest support. The new incentives turn the sixth group into the most competitive region in terms of labor cost.

Investments in an Organized Industrial Zone will receive more advantageous rates and terms for the tax reduction and employer’s social security contribution support incentives.

An incentive reform brought by the new regime is that investors can benefit from tax reduction within the investment period and apply tax reduction support to all the revenues obtained during the period of the supported investment. In other words, investors can deduct a certain percentage of the cost of an investment from “revenues obtained in any other businesses”, hence gaining additonal financial source for the investment.

The new investment incentive regime gives priority to investments in industries such as defense, pharmaceuticals, education, tourism, mining, rail/sea transportation and test facilities for automotive/space industry. Investments in these prioritized sectors will benefit from terms and rates of the support measures of Region 5 even they are made in Regions 1, 2, 3 and 4.

In the new scheme, minimum investment requirements for large scale investments such as production of chemicals, production of motorvehicles, investments on seaports and port services, investments on electronic industry and production of pharmaceutical products has decreased remarkably.

Strategic investment incentive scheme has been introduced as a new scheme and strategic investments are defined as investments to be made for production of intermediate or final products of which more than 50% are supplied by imports. Within this scheme, a minimum investment of 50 million TL is required to qualify for the incentives.