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Turkey, strategically positioned at the crossroads of Europe and Asia, is rapidly emerging as a global economic powerhouse. A key ingredient in this success story is its network of free zones, special economic areas offering businesses a unique set of advantages to thrive in international trade.
From Seed to Tree: The Growth of Turkey’s Free Zones
The concept of free zones took root in Turkey in 1985 with the establishment of the first zone in Mersin. Since then, the number of free zones has steadily grown to 19, strategically scattered across the country. This expansion reflects Turkey’s commitment to nurturing its export potential and attracting foreign investment and advanced technology.
These zones are more than just tax havens; they are carefully curated ecosystems designed to foster growth and innovation. They offer companies:
A Toolbox of Incentives for Foreign Investors
- Tax Freedom: Enjoy exemption from customs duties and taxes on imported goods and equipment, significantly reducing operational costs.
- Streamlined Bureaucracy: Navigate a business environment where zone-specific procedures are simplified, while preparing for broader national challenges, as all investors in Turkey may face excessive bureaucracy, a slow judicial system, and frequent changes in the legal and regulatory environment.
- Financial Flexibility: Freely transfer profits generated within the zone abroad, giving investors greater control over their earnings.
- Level Playing Field: Enjoy the same rights and protections as local Turkish companies, ensuring a fair and inclusive business environment.
As of 2024, Turkey’s free zones host 2,970 active operating licenses, with 748 held by foreign-capital entities. The total trade volume reached $30.7 billion in 2023, after peaking at $32.8 billion in 2022, indicating recent growth and fluctuation.
Activities in Turkish Free Zones
In general, Turkish Free Zones allow for a wide range of activities, including:
- Manufacturing
- Research and Development (R&D)
- Software
- General trading
- Storing
- Packing
- Banking and insurance
- Assembly and disassembly
- Maintenance services
While investors are permitted to construct their own facilities, zones frequently offer favorable rental rates for office and warehouse space. Opportunities for joint ventures exist in every area of the economy for Turkish and foreign businesses.
Specialized Hubs for Growth: Sector-Specific Free Zones
Turkey’s free zones are not one-size-fits-all. They are tailored to cater to specific sectors, creating specialized hubs of expertise and innovation.
For example, the Bursa Free Zone is a powerhouse for the automotive and textile industries, while the Istanbul Leather and Industry Free Zone thrives on leather processing and related businesses. This sector-specific focus encourages collaboration, knowledge sharing, and supply chain efficiency, propelling these industries forward.
A Treasure Trove of Tax Incentives and Exemptions
The benefits don’t end there. Turkey’s free zones offer a generous package of tax incentives, making them even more attractive for businesses:
- 100% Corporate Income Tax Exemption: Manufacturing companies enjoy a complete exemption from corporate income tax, a significant financial advantage valid until Turkey achieves full membership in the European Union. This benefit is specifically targeted, as companies licensed for non-production activities after February 6, 2004, do not qualify.
- Reduced Labor Costs: Exporting companies can achieve a 100% income tax exemption on employees’ wages, a powerful incentive available to businesses that export at least 85% of the FOB value of the goods they produce within the free zones.
- Stamp Duty Relief: Transactions and documents related to free zone activities are exempt from stamp duties and fees, reducing the financial burden on companies.
A Network of Opportunity: Turkey’s Free Zone Locations
There are 19 operational free zones in Turkey, strategically located to access international trade routes., most of them are located near EU and Middle Eastern markets. FZs are strategically located near ports on the Mediterranean, Aegean, and Black Seas, allowing for easy access to international trade corridors.
- Mediterranean Region: Mersin (Where Mersin port is located), Antalya, and Adana-Yumurtalık Free Zones
- Aegean Region: Aegean (Izmir), Denizli, and Izmir Free Zones
- Marmara Region: Istanbul Atatürk Airport, Istanbul Industry and Trade, Istanbul Thracian, Europe, Kocaeli, Tübitak-Mam Technology, Bursa, and Sakarya İpekyolu Free Zones
- Black Sea Region: Trabzon, Rize, Samsun, and Filyos Free Zones
- Southeast Anatolian Region: Gaziantep, and Mardin Free Zones
- Central Anatolian Region: Kayseri Free Zoe
Tax Advantages for Turkish Free Zones
Free Zones in Turkey are a great opportunity for international investors and established companies.
- Customs Duty Exemption: Goods entering the free zones from abroad are completely exempt from customs duties and other ancillary charges.
- Corporate Tax Exemption for Manufacturers: Manufacturing businesses enjoy a 100% exemption from corporate income tax on their production-related earnings, an advantage that remains in effect until Turkey’s full membership in the European Union.
- VAT and Special Consumption Tax Exemption: Value-added tax (VAT) and special consumption tax are completely excluded from transactions within the zones.
- Stamp Duty Exemption: Stamp duty is completely waived on all relevant papers and documents related to free zone activities.
- Property Tax Exemption: The real estate tax is completely waived for buildings and land located within the free zones.
- VAT Exemption for Logistics: Logistical services provided from the free zones to third countries benefit from a full exemption from Value Added Tax (VAT).
- Income Tax Exemption on Wages: Unlock significant labor cost advantages, as employee wages are fully exempt from income tax for companies that export at least 85% of the FOB value of goods produced in the zones.
- Unlimited Storage: Goods may stay in FZs indefinitely, offering maximum logistical flexibility.
- Unrestricted Profit Transfer: Companies are permitted to freely transfer profits from FZs to other countries as well as to Turkey.
- Title Deed Fee Exemption: Benefit from an exemption from title deed costs for the acquisition and sale of real estate within the zones.
- VAT Exemption for Development: VAT exemption is applicable throughout the construction, design, settlement, and approval stages of your facility.
- Ready Infrastructure: Ready-to-use infrastructure is free from VAT and other taxes, reducing setup costs.
- Flexible Equipment Sourcing: Permits are available for the importation of second-hand, used machinery.
The Economic Engine: Incentives for Growth and Success
In addition to tax exemptions, Turkey’s free zones offer a comprehensive package of economic incentives to support business growth:
- Zero-Tax Imports: Goods entering the free zones are exempt from customs duties, VAT, and other fees, making it easier and more cost-effective to import raw materials and equipment.
- Reduced Utility Costs: Infrastructure services like electricity, water, and telecommunications are VAT-exempt, further reducing operating costs for businesses.
- Unrestricted Financial Flow: Profits and earnings generated within the free zones can be freely transferred to Turkey or abroad, providing businesses with greater financial flexibility.
The Future of Turkish Free Zones
Turkey’s free zones are not just a temporary advantage; they are a long-term strategy for achieving sustained economic growth and international competitiveness. As the country continues to develop its infrastructure and improve its business environment, these zones are poised to become even more attractive for foreign investment and innovation.
By creating a welcoming environment for foreign businesses, Turkey’s free zones are strategically positioning the country as a global leader in trade, manufacturing, and technological advancements. As the world looks for new opportunities, Turkey’s free zones stand as islands of opportunity, ready to welcome businesses from around the globe.
Free zones in Turkey are one of the best places that you can start your business in Turkey in.
Turkey has been using the Free Zone model as a way to attract foreign investments and revitalize its economy. Free zones allow companies to invest in Turkey without having to comply with all the regulatory requirements of the country.
