Investment Incentives Program of Turkey, 2012

1. REPUBLIC OF TURKEY
MINISTRY OF ECONOMY
GENERAL DIRECTORATE FOR
FOREIGN DIRECT INVESTMENT AND
INCENTIVES & FOREIGN INVESTMENT
INVESTMENT INCENTIVES IN TURKEY
INVESTMENT CLIMATE AND THE NEW
INCENTIVE SYSTEM IN TURKEY
MURAT ALICI
DEPUTY DIRECTOR GENERAL,
GENERAL DIRECTORATE OF INCENTIVES AND FOREIGN INVESTMENT
July, 2012 TOKYO
For further inquiries: tesvik@ekonomi.gov.tr

2. Turkey: One of the Eight Growth Markets of Future
Growth
Markets
Brazil
Russia
India
China
Mexico
Korea
Turkey
Indonesia
Source: Goldman Sachs Asset Management, 2011
For further inquiries: tesvik@ekonomi.gov.tr

3. Investing in Turkey = Doing Business in the Region
4 - Hour
For further inquiries: tesvik@ekonomi.gov.tr 3

4. Policies to bring together international capital with Turkey’s assets
FDI Regime
• National treatment
• No pre-entry screening /minimum capital requirements
• Right to acquire real estate
• Guarantee to transfer proceeds
• Right to employ key expatriate staff
• Right to access international dispute settlement
• Bilateral Investment Treaties with 84 countries
• Double Taxation Agreements with 76 countries
• Customs Union with the EU
• Free Trade Agreements with 19 countries
Improving investment climate : Moving target for the government since 2002
• Streamlining procedures for investments and eliminating administrative and
bureaucratic hurdles in line with changing priorities and needs of business
• Political ownership
• Making full use of public-private dialogue through permanent platforms
(Coordination Council for Improvement of Investment Climate, Investment Advisory Council)
For further inquiries: tesvik@ekonomi.gov.tr 4

5. Improvement of the Investment Environment in Turkey
COUNCIL OF MINISTERS
Coordination Council for the
Improvement of Investment
Environment (YOIKK) Investment Advisory
Council (IAC)
Monitoring
Steering Committee
Working Groups for
Assesment and
Evaluation
TECHNICAL COMMITTEES
Company registration and Input Supply Strategy (GITES) Land for investment, environmental Taxes and
Employment and zoning permits
corporate governance and Sectoral Licensing Incentives
Foreign Trade and Intellectual Property Legislation of
Customs Access to Finance Infrastructure
Rights and R&D Investment Climate
For more information http://www.yoikk.gov.tr/eng
For further inquiries: tesvik@ekonomi.gov.tr

6. Improvement of the Investment Environment in Turkey
Investment Advisory Council
Executives of leading multinational
firms,
Heads of international institutions
(IMF, World Bank, European Investment
Bank) and
Heads of TOBB, TUSIAD, YASED, TIM.
Investment Advisory Council of Turkey had 7 meetings since 2004.
For further inquiries: tesvik@ekonomi.gov.tr & Foreign Investment
General Directorate for Incentives

7. New trend : Turkey as a regional headquaters for multinationals
For further inquiries: tesvik@ekonomi.gov.tr 7

8. FDI Figures
FDI inflows (cumulative) Companies with Intr.Capital (cumulative)
• 1923-2002 : 15 billion USD 6.000
• 2003-2011 : 110 billion USD 30.000
A.T. Kearney FDI Confidence Index Rankings
• 2010 23
• 2012 13
25
USD Billion
22,0
20,2
19,5
20
15,9
15
10,0
10 8,4 9,0
6,5
5 3,4
2,8
1,1 1,7
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Jan-May
Source: Ministry of Economy, 2012 June
For further inquiries: tesvik@ekonomi.gov.tr 8

9. New investment incentive system
The New Investment Incentives Program
General
General Regional
Regional Large Scale
Large Scale Strategic
Strategic
Investment
Investment Investment
Investment Investment
Investment Investment
Investment
Incentive Scheme
Incentive Scheme Incentive Scheme
Incentive Scheme Incentive Scheme
Incentive Scheme Incentive Scheme
Incentive Scheme
Customs Duty
Customs Duty Customs Duty
Customs Duty Customs Duty
Customs Duty Customs Duty
Customs Duty
Exemption
Exemption Exemption
Exemption Exemption
Exemption Exemption
Exemption
VAT Exemption
VAT Exemption VAT Exemption
VAT Exemption VAT Exemption
VAT Exemption VAT Exemption
VAT Exemption
Tax Reduction
Tax Reduction Tax Reduction
Tax Reduction Tax Reduction
Tax Reduction
Social Security
Social Security Social Security
Social Security Social Security
Social Security
Premium Support
Premium Support Premium Support
Premium Support Premium Support
Premium Support
(Employer’s Share)
(Employer’s Share) (Employer’s Share)
(Employer’s Share) (Employer’s Share)
(Employer’s Share)
Land Allocation
Land Allocation Land Allocation
Land Allocation Land Allocation
Land Allocation
Interest Support
Interest Support Interest Support
Interest Support
VAT Refund
VAT Refund
Moreover, investments in Region 6 are eligible for income tax withholding allowance and social security
premium support (Employee’s share).
For further inquiries: tesvik@ekonomi.gov.tr

10. The New Investment Incentives Program
GENERAL REGIONAL LARGE SCALE STRATEGIC
INVESTMENT INVESTMENT INVESTMENT INVESTMENT
INCENTIVE SCHEME INCENTIVE SCHEME INCENTIVE SCHEME INCENTIVE SCHEME
For further inquiries: tesvik@ekonomi.gov.tr

11. New investment incentives : Diversified regional opportunities
For further inquiries: tesvik@ekonomi.gov.tr 11

12. Support Measures
VAT Exemption for the machinery and equipment within the scope of the
investment. (around 18%)
Customs Duty Exemption: Customs duty is not paid for the imported
machinery and equipment within the scope of the investment. (around 2%)
Tax Reduction: Reduced income/ corporate tax rate (50-90 %) until the total
deduction reaches to the rate of contribution. (15-60 %)
Loan Interest Support: For the credits used by the company, a certain portion
of the interest share will be covered by the Ministry. (3-5% for TL credits, 1-2%
for foreign currency credits) (500K-900K TL limits)
Land Allocation: Limited amount of lands are allocated to the investments
taking account of the importance of investments.
VAT Refund: VAT payments for the building & construction expenses will be
rebated . (only for strategic investments which costs at least 500 Million TL)
For further inquiries: tesvik@ekonomi.gov.tr

13. Support Measures
for the additional employment generated by the investment
Social Security Premium Employer’s Share, on portions of labor wages
corresponding to amount of legal minimum wage, will be covered by the
Ministry.
Social Security Premium Employee’s Share, on portions of labor wages
corresponding to amount of legal minimum wage, will be covered by the
Ministry. (only for Region 6)
Income Tax Withholding will provide exemption from income tax withholding.
(only for Region 6)
For further inquiries: tesvik@ekonomi.gov.tr

14. SUMMARY TABLE
REGIONAL INVESTMENT INCENTIVE SCHEME
Incentives Region 1 Region 2 Region 3 Region 4 Region 5 Region 6
VAT Exemption
Customs Duty Exemption
Tax Reduction out of OIZ 15 20 25 30 40 50
“Rate of Contribution
to Investment” (%) in OIZ 20 25 30 40 50 55
10
Social Security out of OIZ 2 years 3 years 5 years 6 years 7 years
years
Premium Support
(Employer’s Share) in OIZ 12
3 years 5 years 6 years 7 years 10years
years
Land Allocation
Interest Support N/A N/A
10
Income Tax Withholding N/A N/A N/A N/A N/A
years
Social Security Premium 10
N/A N/A N/A N/A N/A
Support (Employee’s Share) years
For further inquiries: tesvik@ekonomi.gov.tr

15. Priority Investments
PRIORITY INVESTMENTS
Following priority investments will benefit from terms and rates of the
support measures of Region 5 even they take place in Regions 1 to 4.
Tourism investments in Cultural and Touristic Preservation and Development Regions
determined by the Council of Ministers Decree.
Mining investments
Railroad and maritime transportation investments
Specific pharmaceutical investments and Defense Industry investments with minimum
investment amount of 20 Million TL
Test facilities, wind tunnel and similar investments made for automotive, space or defense
industries
International fairground investments with a minimum covered area of 50.000 m2
Primary, Middle and High School investments by private sector
Investments made to produce products developed by an R&D Project which is supported by
Ministry of Science, Industry and Technology
For further inquiries: tesvik@ekonomi.gov.tr

16. The New Investment Incentives Program
GENERAL REGIONAL LARGE SCALE STRATEGIC
INVESTMENT INVESTMENT INVESTMENT INVESTMENT
INCENTIVE SCHEME INCENTIVE SCHEME INCENTIVE SCHEME INCENTIVE SCHEME
For further inquiries: tesvik@ekonomi.gov.tr

17. Large Scale Investments
Goals of the Scheme:
To improve technology and R&D capacity
To provide a global competitive advantage
Incentive measures available for Large Scale Investments:
VAT Exemption,
Customs Duty Exemption,
Tax Reduction,
Social Security Premium Support
Land Allocation
For further inquiries: tesvik@ekonomi.gov.tr

18. Large Scale Investments
Minimum Investment
Investment Subjects Amount (Million ¨)
(Million
1 Refined Petroleum Products 1000
2 Chemical Products 200
3 Harbours and Harbour Services 200
4 Automotive OEM and Autoparts
4-a Automotive OEM Investments 200
4-b Autoparts 50
5 Railway and Tram Locomotives and/or Railway Cars 50
6 Transit Pipe Line Transportation Services 50
7 Electronics 50
8 Medical, High Precision and Optical Equipment 50
9 Pharmaceuticals 50
10 Aircraft and Space Vehicles and/or Parts 50
Machinery (including Electrical Machines And
11 50
Equipments)
12 Integrated Metal Production 50
For further inquiries: tesvik@ekonomi.gov.tr

19. Large Scale Investments
Large Scale Investment Incentives
Support Measures I II III IV V VI
VAT Exemption
Customs Duty Exemption
Tax Reduction out of OIZ 25 30 35 40 50 60
Investment Contribution
Rate (%) within OIZ 30 35 40 50 60 65
Social Security out of OIZ 2 3 5 6 7 10
Premium Support
(Duration years) within OIZ 3 5 6 7 10 12
Land Allocation
Interest Support N/A N/A N/A N/A N/A N/A
Income Tax Withholding (Years) N/A N/A N/A N/A N/A 10
Social Security Employee Share
N/A N/A N/A N/A N/A 10
Support (Years)
For further inquiries: tesvik@ekonomi.gov.tr

20. The New Investment Incentives Program
GENERAL REGIONAL LARGE SCALE STRATEGIC
INVESTMENT INVESTMENT INVESTMENT INVESTMENT
INCENTIVE SCHEME INCENTIVE SCHEME INCENTIVE SCHEME INCENTIVE SCHEME
For further inquiries: tesvik@ekonomi.gov.tr

21. Strategic Investments
Strategic Investments
– An investment for the production of intermediate or final products of which more
than 50% of the country demand is supplied by imports.
– Energy investments for exclusive use of such strategic investments
Goals of the scheme
– On the basis of the “Input Supply Strategy”, this scheme aims at supporting
production of intermediate and final products with high import dependence with a
view to reduce current account deficit.
– It also targets encouraging high-tech and high value added investments with a
potential of strengthening Turkey’s international competitiveness
For further inquiries: tesvik@ekonomi.gov.tr

22. Strategic Investments
Eligibility Criteria
riteria
For the production of intermediate and final products
• with high import depedence
• of which more than 50% are supplied by imports
With a minimum investment amount of 50 Million TL and a minimum 40%
local value added
With an import figure of at least 50 Million $ in the previous year (This
condition will not be applied for goods with no domestic production)
For further inquiries: tesvik@ekonomi.gov.tr

23. Strategic Investments
Strategic Investment Incentive Scheme
Incentives All Regions
VAT Exemption
Customs Duty Exemption
Rate of Contribution 50% (50% of the contribution can be benefited
Tax Reduction
to Investment (%) before the investment is completed)
Social Security Premium Support
(Employer’s Share) 7 Years (10 years for Region 6 )
(Term of Support)
Land Allocation
The building and construction costs of investments
VAT Refund
of more than 500 Million TL
Limited to 5% of total investment amount and
Interest Payment Support
with a cap of 50 Million TL
Income Tax Deduction Support 10 years only for Region 6
Social Security Premium Support -
10 years only for Region 6
Employee’s Share (Term Of Support)
For further inquiries: tesvik@ekonomi.gov.tr