Incentive System

The New Incentive System began to be applied with the declaration no. 2012/1 concerning the Application of Decision about State Aids in Investments, which announces procedures and principles related to Decision no. 3305 About State Aids in Investments, entering into force on June 15th 2012, and the application of this decision.

The new Incentive System has been created by improving and revising the old incentive system, so that our country can achieve its goals for 2023 (to be one of the world's 10 largest economies, 500 billion $ in exports, 25.000 $ income per capita, to reduce dependence of manufacturing on exports and to meet amendment demands of private sector organizations and investors. In addition to this, the 4- stage regional map, used in 2009 was abandoned and according to the development levels of provinces; a new 6-stage regional map, which is based on The Order of Socio-economic Development of Provinces Study (2011) was prepared. Hatay, which is among the provinces of TR63 Region, is in the 4th place on this map.

The new Incentive System, from which the provinces in the 6th zone benefit the most advantageous support elements, consists of 4 different applications:

• General Incentive System
• Regional Incentive System
• Incentive for Large-Scale Investments
• Incentive for Strategic Investments

With the General Incentive System investments which are not among the investment issues (Decision-Annex 4) not to be promoted and meet minimum investment requirements (investments amounting to 1 million TL in the 1st and 2nd zones and over 500 thousand TL in the 3rd, 4th, 5th and 6th zones) benefit from VAT and customs duty exemption without region exception. 

In Regional Incentive Applications,  If they meet the terms of fixed investment amounts (Decision Annex 2), sectors selected from provinces will benefit from such support as;

• VAT Exemption
• Customs Duty Exemption
• Tax Reduction
• Employer's National Insurance Contribution Support
• Interest Subsidy (For the investments to be realized in 3rd, 4th, 5th and 6th zones)
• Allocation of Investment Location

Investment issues specified in Decision Annex-3 and which meet the requirements of minimum amount of fixed investment are characterized as large-scale investments and can benefit from supports such as

• VAT Exemption
• Customs Duty Exemption
• Tax Reduction
• Employer's National Insurance Contribution Support
• Allocation of Investment Location

Investments, concerning the manufacture of products with high imports dependence, providing that they meet all of the requirements in Article 8, are referred to as strategic investments and can benefit from such supports:

• VAT Exemption
• Customs Duty Exemption
• Tax Reduction
• Employer's National Insurance Contribution Support
• Interest Subsidy
• Allocation of Investment Location
• VAT return

An investment of approximately 10 billion TL was made with the 547 projects filing Incentive Application between 2009 and 2012 in the TR63 Region.

An investment of 1 billion and 600 million TL was made in the first 6 months of 2012 with 62 projects and 2 billion 430 million TL's worth of investments were made from June and in the 6-month period after the entry into force of the New Incentive System with 105 projects. Number of applications for the Incentive Certificate increased by 66%, compared to the first 6 months of 2012 in our region and the amount of fixed investment increased by 52%. Compared to the same periods, number of people expected to be employed has increased by 185% and become 3.494.

An Example of Incentive Certificate Application

Let's assume that a company in the furniture sector will make an investment as in the figure below and employ 20 people.

Land Expenses : 400 Thousand TL
Building-Construction Expenses : 300 Thousand TL
Machinery- Equipment Expenses : 200 Thousand TL
Total of Other Investment Expenditures : 100 Thousand TL
The Amount of Total Investment : TRY 1 Million

Because the said investment exceeds 1 million TL, it is entitled to benefit from regional incentive applications. 

In this case;

• The company doesn’t pay VAT or customs duty for machinery and equipment.
• It receives a corporate tax cut or income cut amounting 300 TL thousand, 30% of the total investment amount which is 1 million TL. The company pays the tax to be paid with a 70% discount until the amount of the discount reaches 300 thousand TL. For example; if the amount of the tax to be paid in the first period is 100.000 TL, it pays 30.000 TL and these discounts last until the end the 300.000 TL quota. Furthermore; the company can demand that 90.000 TL of its tax cut, which is 30% of 300.000 TL total, to be reduced from the taxes based on its ongoing(if available) activities, before the investment, subject to incentive certificate, is put into operation. In that case; 210 thousand TL of total 300 thousand TL tax cut can be obtained from the investments activities, subject to incentive certificate and 90.000 TL of it can be obtained from the tax based on the ongoing activities.
• The Company pays a certain amount of insurance premium per person, with the employment of 20 employees (200 TL per employee considering the salaries of employees on minimum wage basis) each month. The company doesn’t pay this premium for 6 years, until it reaches 250.000 TL, which is 25% of the total investment of 1 million TL. For example, the company doesn’t pay monthly premium of 10 employees is 2.000 TL, monthly, 24 thousand TL per year and it is a total of 144 thousand TL in 6 years. However; the most important point here is that no matter how much the amount of employees’ wage is, state pays the minimum wage of the employer's national insurance contribution.
• In the absence of plots in the organized industrial zones or industrial zones in the district in which the investment will be made, investment amount can be allocated provided that it is no less than 3 times the current market value of the property requested by investor.  Namely, a public property, whose current market value is 330 thousand TL maximum for an investment of 1 million TL can be requested.
• Company may benefit from an interest rate cut of 4 points in TL loans and 1 point in foreign-currency loans. The maximum amount in interest rate cut is 600.000TL. Namely; a maximum of TL 600, 000 of the interest, which is to be paid in return for the loan received, is paid by state. In this case; for a fixed investment of TL 1 million, TL 700,0000 of loan, 70% of this investment, can be used and a section corresponding to 4 points of the interest expense arising from this credit is paid by state.

For detailed information, please visit the web site (www.ekonomi.gov.tr) of the Ministry of Economy.