What is a Free Zone? (FreeZone)
In general, free zones; These are the places where the legal and administrative regulations regarding the commercial, financial and economic fields valid in the country are not applied or partially implemented, wider incentives for industrial and commercial activities are recognized, and they are physically separated from other parts of the country.
Where are the Free Zones in Turkey?
There are a total of 18 Free Zones in Turkey. In some of these regions, companies from all sectors can find a working area, while in others, companies in special areas of specialization can find a working area.
What are the Application Stages to Operate in the Free Zone?
In order to operate in Free Zones in Turkey, it is necessary to obtain an Operating License or Warehouse Usage Certificate with a duly applied application. At the application stage;
- The Activity License Application form is filled,
- Project activity report is prepared,
- The authorization certificate and signature declaration of the signatory and the circular are attached,
- Trade Registry Gazette and Chamber registration (records in their own country for foreigners) are attached,
- The balance sheet of the company for the last 3 years, the profit and loss statement are added,
- An application fee of $5,000 is paid, and
- An application is made to the Free Zone Directorate with a parent petition.
What are the objectives of free zones?
➢ To encourage export-oriented investment and production
➢ Accelerating foreign direct investments
➢ Accelerating technology entry
➢ Directing businesses to export
➢ To improve international trade
What are the principles of working in free zones?
Institutions and individuals working in the free zone are subject to the provisions of the labor legislation of the Republic of Turkey. A Foreign Personnel Work Certificate must be obtained for foreign personnel who will work in the region.
Which currency is used in free zone activities?
In free zone activities, all kinds of payments are made in foreign currency. However, it may be decided that payments will be made in Turkish Lira. However, the cost of goods and services during investment in the region, as well as workers’ wages and rents, can be paid in Turkish lira.
Can activities in the free zone be stopped?
User; In cases where the user does not comply with the warning to be made in case of damaging activities or does not compensate for the damage, does not comply with the provisions of the lease and sales contract, carries out activities to disrupt the order of the region, does not notify the changes in the issues declared and undertaken, the free zone transaction forms regarding the user’s goods exits from the free zone are not processed for 3 months.
Is trade from the free zone to other parts of Turkey subject to the foreign trade regime?
Trade from the region to other parts of Turkey is subject to the foreign trade regime. However, goods shipped from Turkey to the region are also subject to this regime. As a party, some goods originating from Turkey, which are brought to the region with the approval of the Regional Directorate, with a total invoice value not exceeding 5,000 USD or equivalent Turkish lira, and sent to be consumed or used in free zones without a direct production input, may not be subject to export optionally.
What do you need to know about employee-employer relations in free zones?
The activities of the users in the Region can be carried out by establishing the principal employer-subcontractor relationship within the framework of the provisions of the Labor Legislation. The subcontractor is not required to be a user. Subcontractors and employees who are not users must also comply with the working and safety principles of the Region.
What happens to the superstructures built by the investor after the free zone activities?
In the free zones established on the Treasury land, the superstructures built by the investors are transferred to the Treasury at the end of the usage period. During this period, it is also possible to transfer to another natural or legal person approved by the General Directorate. In free zones built on private land, immovables owned by investors can be sold or leased to real or legal persons deemed appropriate by the General Directorate.
B. What are the Advantages of Free Zones?
Which taxes are free zone activities exempt from?
- 100% exemption from customs duty and other taxes of the same type.
The owner of the activity does not have to pay customs duties on goods entering the free zone.
- 100% exemption from corporate tax for manufacturing companies.
The earnings of free zone users operating within the scope of the Production-related Activity License from the sale of the products they manufacture are exempt from Income or Corporate Tax until the end of the taxation period of the year in which Turkey’s European Union membership will take place.
- 100% exemption from VAT and special consumption tax.
Pursuant to Articles 11 and 12 of the Value Added Tax Law, goods sold from Turkey to the free zone are subject to the export regime and are exempt from VAT. Again, pursuant to Article 16 of the Value Added Tax Law, the delivery of goods to which the provisions of the free zone apply is also exempt from value added tax.
However, goods to which the provisions of the free zone apply are also exempt from SCT. In general, these goods are goods brought from abroad to the free zone and goods delivered within the free zone or from one free zone to another free zone.
- 100% exemption from stamp duty applied to the documents to be issued.
It is aimed to exempt the transactions and papers issued by the companies operating in the free zone established in accordance with the Free Zones Law No. 3218 from fees and stamp tax.
- Within the framework of the Specialized Free Zones project, which was initiated to encourage high added value, R&D-oriented and advanced technology production, the following supports are offered with the Decision No. 2635 on the Supports to be Provided in Specialized Free Zones:
- Employment support: Support is provided at the rate of 50% of the monthly gross wages of up to 10 qualified personnel, up to a maximum of USD 1,250 per employee per month, and up to a maximum of USD 15,000 per year in total.
Rent support: Rental expenditures for land and buildings are supported at a rate of 50%, with a maximum of USD 75,000 per year.
- 100% exemption from property tax.
According to the regulations made in Law No. 7013, buildings located in organized industrial zones, free zones, industrial zones, technology development zones and industrial sites are permanently exempted from real estate tax in order to reduce the investment costs of enterprises.
- 100% exemption from income tax on employee salary (for companies that export at least 85% of the FOB value of the products they produce in free zones).
Wages paid to the employed personnel are exempted from income tax, provided that at least 85% of the amount obtained by dividing the total FOB price of the products produced in the zones, that is, the total amount of sales of the goods sold, by the amount of products sold by the taxpayers operating in the free zones, is exported abroad.
- Privilege in the transfer of profits
Earnings and revenues from free zone activities can be transferred abroad or to Turkey as desired without being subject to any permission.
- Investors’ properties can stay in the free zone without a time limit.
- Free zones are especially for companies that produce for export, intermediate goods
and in the supply of raw materials, it offers uninterrupted supply opportunities with world prices and conditions.
Can the profit from free zone activities be transferred abroad?
They are free to transfer their capital related to cash, real and intangible rights that they bring to the region in foreign currency, and all kinds of earnings and revenues obtained from them, sales and/or liquidation fees, to other parts of Turkey and abroad when they wish. However, these persons are obliged to notify the Regional Directorate of the assets they will transfer and to prove the belonging of these assets to them.
What do you need to know about incentives for free zones?
In addition to the exemption of free zone activities from various taxes, incentives are provided with advantages such as the use of cheap energy without VAT, the absence of time limits on the retention of goods, the absence of any restrictions on the sale of goods to Turkey, and the free transfer of profits obtained.
Who benefits from incentives and advantages in free zones?
All domestic and foreign companies benefit equally from the incentives and advantages provided in the free zone. This practice is referred to as the principle of equality.
C. License and Document Information for Free Zones
How long is the validity period of the free zone operating license?
The validity period of the free zone operating license is 45 years for investors in production activities and 20 years for tenants; It is 30 years for investors and 15 years for tenants in buying and selling activities.
Is the Duration of the Free Zone Operating License Extended?
There is no application such as extending the period of free zone activity licenses. However, a new activity report can be issued upon the application of users who want to continue their activities without interruption before their licenses expire.
What documents are required from companies residing abroad to operate in the free zone?
Companies that have a trade registry record in their own country can apply to the General Directorate of Free Zones by submitting their registration record. The operating license they will receive allows them to operate only within the boundaries of the free zone
What are the Criteria Considered in the Application for an Operating License?
- It is essential that the activity is in the nature of a production activity and is mostly export-oriented.
- The activity subject to the application does not threaten human and public health and does not cover sensitive products to be determined by the general directorate.
- The activity is of a nature to create employment
- The physical and infrastructure facilities of the region are suitable for the activity in question.
