Turkey’s regulatory environment is extremely business-friendly. Irrespective of nationality or place of residence, a person can establish a business in a single day. According to the World Bank “Doing Business Database, 2007”, Turkey ranks well ahead of all its competitors such as Poland, Czech Republic, Hungary, Italy, Spain as well as the OECD average.

Turkey has one of the most liberal legal systems for FDI among all OECD countries. The new FDI Law focuses mainly on the protection of investors’ rights.

The main principles are as follows:

• Equal Treatment for domestic and foreign capital companies
• No pre-entry or pre-establishment screening requirements
• No need to notify to the Undersecretariat of Treasury
• No obligation to choose a specific company name
• Unrestricted foreign ownership

Rights of International Investors :

• Free Transfer of Funds
• Acquisition of real estate
• Dispute settlement either in local courts or international arbitration bodies.
• Valuation of non-cash capital
• Work permits for expatriates
• Opening a liaison Office

Turkey has one of the most competitive corporate tax rates in the OECD region.

There are 3 types of tax:

• Taxes on Income
  Corporate Income Tax
  Withholding Tax on Certain Payments of resident corporations
  Withholding Tax on Certain Payments of non-resident corporations
  Individual Income Tax
  Social Security Premiums
• Taxes on Expenditure
  Value Added Tax
  Stamp Tax
  Customs Duty
• Taxes on Wealth  

Turkey’s strategic location is very attractive for investors. It has a relatively new and highly developed technological infrastructure in transportation, telecommunications, and energy. 

Turkey offers investors competitive labor costs with a workforce of over 24.6 million young, talented, motivated and skilled people. The Turkish cultures’ devotion to work, flexible working hours and a low absenteeism rate has allowed Turkey to reach remarkable productivity levels.

Labor and social security laws contribute to the formation of an investor friendly environment. Expatriates from countries that have bilateral social security agreements with Turkey have the choice to stay within their own national social security schemes. 

The Turkish government provides incentives to encourage, support and orient investments which are in-line with international commitments.

Generally, there is a blend of tax and non-tax incentives which are granted equally to domestic and foreign investors. This equal treatment is guaranteed and reaffirmed by the FDI Law.

The investment incentives in Turkey can be classified mainly under the following headings:

• General Investment Incentive Program
• Incentives for Priority Development Regions
• Incentives granted to SME’s
• Research and Development Support
• State incentives for export and for agricultural activities 

-Technology Development Zones

• Technology Development Zones are areas designed to support R&D activities and attract investments in high technology fields.
• There are 14 operational TDZ’s and 8 new TDZ’s which have been approved for construction.

Advantages of Technology Development Zones:

• Offices ready to rent and infrastructure facilities provided.
• Profits derived from software and R&D activities are exempt from income and corporate taxes until December 31, 2013.
• Deliveries of application software produced exclusively in TDZ’s are exempt from VAT until December 31, 2013. Examples include software for systems management, data management, business applications, different business sectors, Internet, mobile phones and military command control.
• Wages of researchers, software and R&D personnel employed in the zone are exempt from all taxes until December 31, 2013.
• A VAT exemption during the exemption period of income and corporate taxes is provided for IT specific sectors.
• Exemption from customs and duties as well as fund levies.
• Academic staff is encouraged to establish companies, participate in a recognized company or join its executive boards as well as conduct research in the zones.  

-Organized Industrial Zones

Organized Industrial Zones are designed in a way that allow companies which provide goods and services to operate within approved boundaries with the necessary infrastructure, techno parks and social facilities.

• The infrastructure provided in the zones includes roads, water, natural gas, electricity, communications, waste treatment and other services.
• There are 93 OIZ’s in 81 provinces with a completed infrastructure. Another 151 OIZ’s are currently under construction throughout Turkey.
  Industrial Zones

Number of Organized Industrial Zones in Turkey:

• Marmara Region (57)
• Aegean Region (44)
• Mediterranean Region (17)
• Central Anatolia Region (42)
• Black Sea Region (33)
• Eastern Anatolia Region (20)
• South Eastern Anatolia Region (13)

Advantages of Industrial Zones in Turkey

Investors operating in the zones located in 54 selected provinces benefit from the following advantages:

• 100% exemption from income tax for employed workers.
• 100% exemption from the employer’s share of social security costs.
• Free land allocation.
• Up to 50% support for electricity costs.
• Exemption from real estate tax, waste water charges, building construction duties and the use-of-building. 

-Indistrial Zones

• Industrial Zones are designed to provide sites suitable for large scale and technology intensive investments.
• The Council of Ministers approves the Industrial Zones after the evaluation of the investment sites by the Ministry of Industry and Trade.
• The investments carried out in an Industrial Zone should be in a high technology sector and have an investment site of a minimum of 1,500 m2.
• Industrial Zones benefit from all of the same advantages provided to OIZ’s.  

-Free Zones

• Free Zones are special sites considered outside the customs area although they are within the political borders of the country. These zones are designed to increase the number of export-focused investments.
• Legal and administrative regulations on commercial, financial and economic fields which are applicable within the customs area are either not implemented or partially implemented in the Free Zones.
• There are 20 Free Zones in Turkey which operate close to EU and Middle East markets; are adjacent to major Turkish ports on the Mediterranean, Aegean and Black Seas; and which have easy access to international trade routes. 

Advantages of Free Zones

• %100 exemption from custom duties and other assorted duties
• %100 exemption from corporate income tax for production companies
• %100 exemption from the value added tax (VAT) and special consumption taxes
• Goods can remain in Free Zones for an unlimited period; earnings and revenues generates in Free Zones can be freely transferred to any country, including Turkey, without any prior permission.
• Goods in free circulation can be sent to Turkey or to EU countries from the Free Zones without any customs duty. Moreover, no customs duty is applied to goods of a third country origin at the entrance to the Free Zones or exit to third countries.
• Companies are free to transfer profits from Free Zones abroad as well as to Turkey without restrictions.  

Turkey joined the Customs Union with the EU on January 1st, 1996 and has amended its customs code and legislation in line with those of the EU Customs Code. Since then Turkish Customs laws have been harmonized with those of EU customs practices.

Tariff and non-tariff barriers have been removed between the two parties with the establishment of the Customs Union for industrial and processed agricultural products. Turkey adopted the EU's Common Customs Tariff for imports from third countries.

Turkey offers 2 advantages to the international manufacturing and trade investors:

• Turkish Free Zones
  There are 20 free zones in Turkey which operate close to EU and Middle East markets, are adjacent to major Turkish ports on the Mediterranean, Aegean and Black Seas, and have easy access to international trade routes.
  Free zones serve as investment centers with their advanced infrastructure and low rental and sale rates.
• Inward Processing Regime
  The aim of the Inward Processing regime is to enable exporters to supply materials for the production of their exports without being subject to customs duties, including VAT.