Turkey is an attractive destination for foreign investors due to its flexibility during the economic crisis that affected a lot of countries in Europe and Asia. Foreign direct investment (FDI) in Turkey decreased by 14% in 2011, while the FDI in Europe shrank by 21% one year later because of the recession. Despite the difficult economic situation, Turkey ranked among the 10 countries in Europe at FDI (12,5 billion $ in 2012).
Most foreign investors were attracted to open a company in Turkey due to the incentives offered by the authorities in order to encourage the foreign investments. The incentives are related to taxes for both intern and foreign investors. According to the type of business you want to develop in Turkey, there are many types of incentives: for general investments, regional, large investments (over 1 billion $), export and agriculture etc.
Turkey's top industries are agriculture and food, automotive, healthcare and pharmaceuticals, business services, electronics. A particular domain that has developed fast in the last years in Turkey is hair transplantation. This industry is worth about $250 million annually and attracts more than 15,000 people interested in these types of services.
Besides these incentives, the foreign investors can choose to set up a company in Turkey in the special investment zones.
1. Technology development zones can be chosen by investors interested in developing businesses in research and development field. In Turkey, there are 50 zones, but only 34 of them are available and the rest are under construction.
They are located in Ankara, Istanbul, Kocaeli, Izmir and other regions. The income of companies with activities in the software development, research and development are exempt from income and corporate taxes. This incentive is available until 2023, as well as the one for sales of application software produced in these technology development zones. These sales are exempt from VAT and other exemptions are applied to the taxes on salaries of a part of the employees in these zones.
2. Organized industrial zones are well-known for their good infrastructure and social facilities that encourages the foreign investors to open companies. Turkey offers 276 organized industrial zones, but only 181 are available and the rest are under construction. In these zones, the investors have important facilities for their activities: roads, communication, gas, electricity and almost everything they need for their economic activities.
The investors has to pay no VAT for land purchasing, they are exempt from real estate duty during the next five years after they build a plant and from the municipality tax. Besides these, they have low costs at utilities.
3. Free zones are created for encouraging the export businesses. In these zones, the normal regulations from economic fields are more flexible. Turkey has 20 free zones and 19 of them are operational and they are located near EU and Asia markets, close to important Turkish ports. The goal of free zones is to encourage investments for exports and to attract foreign capital.
The investors in these zones are exempt from paying custom duties, corporate income tax (if it is a manufacturing company), VAT, income tax on salaries of the employees (in certain situations). Besides these, the firms can take profits and transfer them to their parent companies abroad.