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Legal Alerts

Turkey to provide further clarification for the new project-based incentives for eligible investments

Legal Alerts

Recent Development

As you may remember from our legal alert regarding Law on Supporting Investments on Project Basis and Amending Certain Laws and Decree Laws No. 6745 (“Law“), which was published in the Official Gazette on September  7, 2016, the Council of Ministers was authorized to provide tax incentives, support or donations on a project basis for investments that meet certain qualifications.

The Council of Ministers, through its Decision No. 2016/9495 published in the Official Gazette No. 29900 dated 26 November 2016 (“Decision“), has now provided the principles and procedures to apply to new project-based incentives for eligible investments.

What the Decision says

The Council of Ministers may grant one or more of the tax incentives and support set out below for investment projects with a minimum fixed investment amount of USD 100 million depending on the characteristics of the investment project, upon evaluation by the Ministry of Economy.

  • Customs tax exemption
  • VAT exemption
  • VAT refund
  • Corporate income tax reduction and exemption
  • Social security premium support for employer’s share support
  • Income tax withholding support
  • Qualified personnel support
  • Donation or interest rate support
  • Capital contribution
  • Energy supply support
  • Public procurement guarantee
  • Land allocation
  • Infrastructure support
  • Exemption or procedural relieves for permission, assignment, license, registrations and other restrictive provisions imposed by other laws for project-based investments

The Ministry of Economy may convoke one or more companies or make an announcement of the investment topics that are in line with the purposes of the Law. Upon the invitation or announcement of the Ministry of Economy, the investors that wish to benefit from the abovementioned incentives may apply to the Ministry of Economy, provided they have information and documentation regarding: (i) its corporate details; (ii) the characteristics of the project; (iii) the feasibility and impact analysis of the project. The Ministry of Economy has the discretion to request other information and documents.

The Ministry of Economy will first evaluate the investment projects by taking into account the criteria set out below and will then submit the investment projects that it approves to the Council of Ministers.

  • Address Turkey’s critical current and prospective needs
  • Ensure security of supply for the products of which the production capacity is insufficient in Turkey
  • Develop technological capacity in areas where a technological gap exists
  • Reduce foreign dependency in areas where foreign trade deficit occurs
  • Bring high added value
  • Provide production by way of using new technologies
  • Foster competitiveness in various sectors
  • Accelerate technological change in sectors where the project is involved and provide positive externalities for these sectors
  • Are innovative and R&D-supportive
  • Relate to the production of manufactured goods with high added value in sectors that negatively impact current accounts balance and suffer raw material shortage
  • Relate to integrated productions that provide the opportunity to utilize Turkey’s raw material potential

If a project is approved, the Council of Ministers will issue a Support Decision and an investment incentive certificate, which set forth the supports that are granted and the investment starting and ending dates for the eligible investment project.

Transfer of the investment or shares

The transfer of the investment is subject to the permission of the Council of Ministers and the approval of the Prime Minister within the scope of the duration and conditions determined in the Support Decision. If approved, the transferee company may benefit from the same benefits and exemptions, provided that it fulfills the investment project’s required qualifications and commitments.

Except for cases where the shares are sold on Borsa Istanbul through a public offering, the transfer of the investor company’s shares is subject to the permission of the Council of Ministers.

Incompliance and supervision

Apart from cases relating to public issues, investor is responsible to complete the investment project in due time determined in Support Decision. If the investor does not fulfill its obligations under the Support Decision, all taxes that cannot be collected on time due to reduced corporate income tax application, tax exemption and income tax withholding support will be collected with delayed interest without being subject to any tax loss penalty. Other incentives granted will be revoked within the scope of the Law on Collection Procedure of Public Assets.

Taxpayers who avail of the Decision for their investment projects cannot benefit from the incentives and support provided by other public institutions. Similarly, investments projects that benefit from the incentives and support provided by other public institutions cannot apply to the Ministry of Economy for the incentives granted under the Decision.

The Council of Ministers is entitled to conduct inspections in order to examine whether the conditions specified in the investment incentive certificate are fulfilled. Moreover, investors benefiting from the incentives should also submit a certified public accounting report showing the incentive amounts that were availed by the investor company and details proving that the undertakings made under the Support Decision are being fulfilled every January and July throughout the investment period determined in the Support Decision.


Affected taxpayers who wish to carry out new investment projects should be aware of the new tax reliefs and support provided in the Decision.