What is a State Incentive?
State Incentive is an incentive policy that is enacted by a governmental force focusing on encouraging foreign/domestic investors to invest in the country. As well as investors, state incentives aim to promote existing business to enlarge. State incentives manage to create an attractive field for possible investors due to the highly profitable and low-risk opportunities they provided. The main benefits of state incentives are being able to derive from foreign direct investments, while such investments open up job possibilities for the locals as well. Not limited to foreign investors, local investors also can benefit from state incentives. Usually, state incentives are enacted by developing countries promising a bright future in particular sectors for investing. In these countries, investments benefit both the investor with potential profit and the country with an additional economic boost, job openings and much more. State incentives vary from financial incentives, fiscal incentives and other incentives such as market expansion, regulatory arrangements, etc.
State Incentives in Turkey
Turkey is a country without limitless possibilities. With its highly populated cities and cultural diversity, Turkey proves to be one of the most promising developing countries to invest in. Elements that make Turkey unique for investors all around the globe are efficient industrial zones, tourism, historical value, fertile soil, and many more appreciated features. In order to make the best of these, the Turkish government tries its best to create conditions suitable for every investor. With low operating costs, local industrial power, high consumption and potential markets, the country presents countless possibilities. Being one of the exceptional countries in the world that do not take double tax for foreign investors, Turkey continues its expansion on the economic scale. Statistically speaking, these advancements led to the establishment of more than 6500 global companies in Turkey in the first half of 2019. Let us take a close look at Turkey’s state incentive policies.
General Investment Incentives
On the topic of state incentives, Turkey is divided into regions. While more developed regions offer fewer incentives, less developed regions provide more incentives. Turkey provides state incentives such as financial support, VAT exemption, customs duty exemption and income tax withholding if requirements are met in the fields of the agricultural sectors, manufacturing, energy, mining, and services industry.
Regional Investment Incentives
Organized within their development and socio-economic aspects, Turkey offers regional investment incentives in six different regions for specific fields of work mentioned before. These state incentives provide a different set of exemptions according to the economic development of the mentioned region. In essence, the investment incentive that an investor will get for the same amount of investment in the first region is less than the fifth region. In addition to general investment incentives, regional investments offer more land allocation and interest rate support in accordance with the region.
Priority Investments Incentives
By the Turkish government’s policies, some investments are considered to have a priority. These high-priority investments are subject to the same rate of investment incentives regardless of their region. Wherever the location of prioritized investment is, regional investment incentive has the same value for the five regions, except the sixth. Even though it is decided by the government what is prioritized investment, generally investments of this kind are in the fields of mining, motorized land vehicles industry, production of electricity from natural sources, production of government’s scientific and industrial designs, defense industry, railroad and maritime transportation.
Large Scale Investments Incentives
Meeting minimal investment value determined by the Turkish government, investors are able to take advantage of higher rates of investment incentives. All large-scale investment incentives are subject to regional incentives as well, with advantageous higher rates.
Strategic Investments Incentives
One of the most supported incentives supported by the government is strategic investment incentives, aiming to increase the production of materials and products that Turkey lacks to satisfy demand. Not having an exclusive list of strategic investments, any investment that fulfills the criteria for the purposes of policy is within the incentive regulations. Strategic investments require a minimum amount of fixed investment worth 50 million Turkish Liras, and they offer excellent rates of tax deduction, financial support, VAT exemption and many more supports in various ways.
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